Subject: Re: Motivating support contracts
From: shap@eros.cis.upenn.edu
Date: Tue, 15 Sep 1998 13:34:38 -0400

In message <199809152005.NAA12212@toad.com>, John Gilmore writes:
> > A while back, a company called American Information Exchange looked
> > into use crediting people's credit cards as a way to pay them.  It
> > proves that this cannot be done.
> 
> The first statement does not even attempt to prove the second.  What
> did you mean to say?
> 
> 	John

Thanks, John.  That was indeed execrable word choice.  

Instead of ``It proves'' I should have said ``It turned out that''.

Specifically, VISA and AMEX would not permit them to apply credits to
people's cards unless these credits were associated with returns of
goods previously purchased on the corresponding card.  The customer
can overpay their credit card bill, but apparently the vendor is not
permitted to contribute to the customer's account using the credit
processing mechanism.  This was a real shame, as the credit processing
mechanism was all wired up to do this electronically.

You'ld think that the merchant could have a credit arrangement with
VISA, and that either party (merchant or customer) could then freely
transfer money to the other up to the limit of the transmitter's
credit.

The issue from VISA's perspective, if memory serves me, was that a
credit associated with a return is really a reduction to accounts
payable.  It never ends up on the accounts receivable side of the
ledger.  If credits from a vendor were ever allowed to exceed payments
to that vendor, VISA would have needed to rebuild all of their
collections handling to ensure that they could actually collect the
money from the vendor.

Adding this facility, however, would probably double the outstanding
float due to credit transactions seen at the end of the day by the
member banks.  In the US, the end of day float of a typical bank today
is typically 10 times their liquidity.  Given this, I can understand
that introducing more disparity might be viewed askance, especially
when bidirectionality added to credit offers new and creative
opportunities for cons based on pyramid float schemes.  The interbank
clearance systems, both in the US and abroad, are worrisomely
delicate.

In any case, no broader claim was intended by ``proves.''  Apologies
for any confusion.


shap