I bought lunch for a colleague yesterday, and left the restaurant without paying. Or at least, to an untrained eye, it would seem that I had done so. Rather, I had of course paid by means of a credit card. The restaurant, in other words, trusted the credit card company, which in turn trusted me, to pay up. None of this required that I have any cash at all in my pocket, nor even that I have money in my bank account. All that it required was trust rooted in knowledge of financial capacity. The financial capacity part, of course, was up to me. But all the capacity in the world would not have been enough without the relevant institutional mechanisms to verify it.
Such trust-based transactions happen billions of times each day. They are so much a part of everyday life that we take entirely for granted just how remarkable, and just how essential, they really are. This is probably the most important function of financial institutions. They make possible the wide range of commercial transactions that permit our modern standard of living. And that is what makes this next story worth reading.
Bloomberg reports that Visa has “agreed to help develop Rwanda’s payments system and connect the African nation’s 11 million citizens to the global economy….”
And Rwanda is a country deeply in need of increased commerce, both domestic and international. In, 2010 the country ranked 165th in the world in terms of per capita GDP. (Not coincidentally, Rwanda also ranks among the worst countries in the world for infant mortality.) Giving its consumers and businesses a greater range of ways in which to receive and make payments is a step in the right direction.
The financial industry has received more bad press than good lately. But on the face of it, at least, this particular story seems like good news.
It’s no exaggeration to say that trust is the foundation of all commerce. Any company that gives people a mechanism that promotes trust, and hence facilitates commerce, is doing a genuine public service. But what are the chances that devotees of Corporate Social Responsibility will see this move by Visa as an example of that?