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  Issue No 10 Official Organ of LaborNet 23 April 1999  

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Guest Report

Chris Connolly on the e-commerce Monster


Don't call me a luddite. I hate that. I may be outspoken when it comes to the impact of technology on society, but I don't want to smash the machinery. What I do want is to encourage humans to win back control of technology - to fight for technology that we want, that helps us rather than
hinders us.

Or shall we just become slaves to technology?

The social impact of technological change is often misunderstood, and nearly always underestimated. My research is primarily in the field of the impact of new technology on consumers of financial services - banking, superannuation, insurance and electronic commerce. In this field, technology moves rapidly. Paper based systems are being replaced by the electronic exchange of information. Human interaction (for example between a bank teller and a customer) is replaced by mechanised interaction. What is the result for consumers?

For some consumers, there are obvious gains. Those people who can understand the new technology, and who have access to it, can now take advantage of electronic systems which meet their needs 24 hours a day, seven days a week.

Services like banking and online share trading may also be less expensive for these people than if they used traditional methods.

However, for other consumers, understanding the new technology can be difficult. Older consumers rarely receive training or education about Internet banking or telephone banking. People from non English speaking backgrounds, people with disabilities and people with literacy difficulties may find interacting with machines more difficult than dealing with human beings. Consumers in remote and regional areas rarely have adequate access to electronic communication systems (although their access to human systems is also poor).

These groups will certainly find that they pay more for financial services. For example, over-the counter fees are the highest of any bank fees. It is one of the great paradoxes of banking that those who are least able to afford bank fees pay the bulk of them. Wealthy people have access to cheaper Internet banking. They also receive discounts and rebates simply for being wealthy - for having loans or term deposits with the bank, or the ability to keep a high minimum balance in their account and avoid monthly fees.

There is a great deal of mythology about new technology financial services. Claims that we are moving towards the cashless society are common - but the Reserve Bank notes that there is more cash in circulation now than at any other time, and demand for cash continues to grow.

There are also claims that new technology will cut overall costs, and that these savings will filter through to all consumers. This too, has proved elusive. The only area of financial services that has become cheaper is mortgage lending, and the reasons for that are closely tied to economic conditions and the entrance of new competitors. Older people, social security recipients and low income consumers all miss out on these gains.

In truth, new technologies are slow to deliver cost savings. The banks may believe in migration (consumers 'migrate' from old delivery channels, like branches, to new ones, like the Internet), but there is emerging evidence that institutions will be left with an abundance of parallel systems.

Consider bill payments: It was not that long ago that you could only pay your electricity bill by sending a cheque, or visiting a branch. These were expensive systems for the electricity provider, but at least they were the only systems. Today, you can still pay by these methods - they have not been removed. You can also pay by credit card over the telephone. By 'Bpay'. By cheque, cash, credit card or EFT at a post office. By direct debit. Via the Internet. Perhaps soon by smart card. All of these systems cost money.

Migration from expensive systems to cheaper ones is slow, and the overall costs of providing this multiplicity of payment options is expensive. When will the savings arise?

My favourite claim is that banks and financial institutions are delivering technologies that consumers actually want. I doubt very much that there is a high demand for Internet banking and smart cards. Even ATM and telephone banking is partly driven by fee structures. If the banks would like to deliver the technology consumers actually want, they would provide cheques that clear in one day, instead of seven days.

It is uncanny that in the age of the Internet and the fax machine, a cheque can still take seven days to clear.

By far the biggest social impact of new technology in financial services has been the downgrading of traditional services. The closure of branches, the reduction of human contact, the staggering increases in fees and charges for those who still rely on counter services, are all bringing society close to a vital point - the point where society splits into two uneven halves. There will be the information rich, with access to full service electronic banking. And then there will be the information poor, the unbanked.

But it is not too late to act. Technology is our slave, not our master. Let's look beyond the hype and mythology. We can fight for the services that we want - that meet the needs of all society, not just the wealthy.

Chris Connolly is the Director of the Financial Services Consumer Policy Centre and General Editor of the Internet Law Bulletin


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*   Issue 10 contents

In this issue
Features
*  Interview: Latham: Leading With The Chin
Labor's heretical voice talks about trade unions and how they'll survive in the land of the Third Way.
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*  Unions: Nursing the Numbers
Active members are the key to recruitment for one of the state's strongest unions, the NSW Nurses Association. We talk to some of the star recruiters.
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*  History: A Sense of Community
Historian Greg Patmore looks at labour-community coalitions in the Lithgow Valley between 1900 and 1932.
*
*  International: Labor Council Official to Dili Front Line
Labor Council�s Chris Christodoulou will be one of the first foreign unionists to head to East Timor in the leadup to independence.
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*  Review: When Billy Met Lindsay
What happens when a British political popster meets with an Australian political thinker?
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*  Legal: CyberPorn in the Workplace
A new protocol in the NSW public service is setting the benchmark for acceptable use of the internet.
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News
»  Vizard Offers Unions Cheap Computers, But Is It a Pup?
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»  Y2K Crashes Bank Holidays
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»  Carr Says Thank You To Union Movement
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»  Crew Saved by Message in a Bottle
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»  Unions to take on Qantas Over Foreign Jobs
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»  No Training on Coat-Hanger Sparks Job Fears
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»  Council's Hypocrisy Sparks Green Ban Call
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»  Shoddy Editor Sparks May Day Confusion
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»  STOP PRESS: Employers Bid to Scrap ANZAC Day Fails. For Now
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Columns
»  Guest Report
*
»  Sport
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»  Trades Hall
*
»  Piers Watch
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Letters to the editor
»  Not So Wild About Bragg
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»  Faction Talk Must Be Broader
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»  A Bouquet from the Bush
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»  Help a Student Pass!
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