Friday, December 7, 2012

Transparency, no -- people might know they're being screwed

By way of Money Science, I had to read this twice just to believe I hadn't misread it. The argument is that transaction charges on credit cards should NOT be transparent to the customer because the customer might then feel cheated, become angry and upset, etc. Better if those charges were lumped into the bulk price of the purchase so the buyer won't know what the bank is charging. Don't upset people with things like this:
...the card operators and issuers are ripping off customers by taking percentage fees opaquely.  These fees are applied throughout the process, and the lack of visibility of charging means that customers don’t know they’re being ripped off.
The solution: more transparency.
Now I can see the argument and solution rationale, but I fundamentally disagree with it.
The reason I disagree is that customers are not rational when it comes to money.
They will happily pay fees to ATM operators, currency exchanges, PayPal and more if it is convenient and supports instant gratification.
I should know, as I’m one of them.
Do I count the fees and the breakdown of costs for every transaction?
Do I object when I see the cost of a transaction?
Take the example of booking an airline ticket and you see that there is £4.50 ($6) charge for booking the ticket using a credit card.
Do we get upset with the airline?
Are we pissed off with the card company and the bank?
Or take the example of my own bank who recently started itemising cross-border transactions with the charge per transaction.
Do I appreciate the transparency?
Do I object to the fee per transaction?
Of course I do.
In other words, customers would far rather prefer everything bundled into one charge where the bank fees are hidden, rather than seeing the fees per transaction itemised explicitly.

Uh, no, actually, I'd rather see the fees made explicit. That way I think the company charging the fee might think twice about my reaction to it. What do others think?


  1. It's beyond parody.The only way one can respond is to encourage the author defending opacity to watch Fascinating Aida's song "Cheap Flights" about hidden charges. Anyone who chooses (and most of us do choose for reasons they are transparently cheaper up front than competitors) to fly on a certain Irish airline will understand it certainly isn't the bank or credit card company passenger are upset with.

  2. I think he has a point. Like it is well known too much choice makes people miserable, too much in your face itemisation probably does as well. Plus itemisation is obsfucation in that the actionable metric to make choices is the all inclusive price, how your vendor gets there is not really something you're interested in, and having strawman information in the way is frustrating. In an open market the vendor should minimise all inputs to get a competitive all inclusive price.

    This is not even exclusive with transparency for geeks: put the itemisation on the website, but don't shove it down the customer's throat.

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