Dear Bob,
Your article, “Technology, Cash Discounts May Become Barter Industry’s Major Challenges,” (see preceding post) inspired me to write the following.
Sincerely,
Thomas H. Greco, Jr.
www.reinventingmoney.com

(Editor’s note: Mr. Greco has, for more than 25 years, been working at the leading edge of economic and financial restructuring. He is the author of Money: Understanding and Creating Alternatives to Legal Tender. Chelsea Green Publishing Company, 2001.)

Technology’s Effect On Future Of Barter Industry

You warned that technology is becoming “another growing competitor” of the barter industry. This is a warning that must be taken seriously. Fortunately, technology is available to all (to be used) and the barter industry is better positioned than anyone to take advantage of the new technologies. How is that so?

The key lies in understanding that the financial advantages that can be offered to trade exchange members are ultimately far more valuable than the marketing advantages that (the barter industry has) heretofore been emphasizing.

Your article noted that “today’s typical exchange has a preponderance of service businesses as members.” The geographical limitations upon the delivery of services has up to now enabled trade exchanges, with their focus on local markets, to ignore the development of online markets, but that is about to change.

Citing technological and market developments such as Craigslist, eBay, and Google Base, with their new focus on local markets and the service sector, the article argues that “a major shift is underway in how consumers and small business owners shop for local services.” The truth of that observation is undeniable, and in fact, understates the case, which is further supported by considering such other market entrants as Matchbin.

One essential feature of Matchbin is its attention to local markets that are managed online and networked together. The Matchbin motto is, “locally focused while globally connected.”

Another distinguishing feature of Matchbin is its strategy of building customer base by soliciting groups that are already connected. Its ‘Buddybin” feature enables participants to create networking connections similar to Linkedin or Friendster. Matchbin describes itself as “a dating service for your stuff.”

Their recent partnering agreement with eBay gives Matchbin a reach into eBay’s huge established market, plus the credibility that goes with associating with a major recognized brand. In return, Matchbin promises to provide eBay with the localization that it has lacked up to now.

Clearly the future of marketing is online, and any trade exchange that does not soon extend its own marketplace into cyberspace will be left in the dust. But the most important point is this. Not only is technology changing “the way consumers and small business owners shop for local services,” it’s changing the way they PAY for both services and products, not just locally, but globally.

We’ve already seen the emergence of payment options like PayPal, but that is just a minor shift compared to what’s coming.

What’s coming is the use of trade credits that will be internally cleared within the exchange network itself. Credit clearing within their own realms is what barter companies have each been doing from the beginning, so they are well positioned to take cashless trading to the next level.

The Universal Currency utility that has been established by IRTA (International Reciprocal Trade Association) is a step in that direction in that it provides a means by which exchanges can trade with one another. The ultimate step, however, is to provide a means by which a member of one exchange can trade directly with a member of another exchange. What will it take to accomplish that?

The basic requirements are for each exchange to establish an open line of credit for each of its members. Those credit lines will be adequately secured and insured. Further, it is necessary for participating exchanges to expand their membership to include all levels of the supply chain from retailers to wholesalers to manufacturers to basic commodity producers to consumers and workers, so that every member is able to pay their suppliers with trade credit.

Finally, each participating exchange must agree to adhere to an appropriate set of standard procedures and protocols relating to the allocation of credit lines and the management of internal operations. A small fee collected on each transaction will provide huge profits for those that can efficiently clear account balances and quickly ramp up the scale of their operations.

Editor’s note: A set of standards (standard procedures & protocols) as alluded to by Greco has been a topic of discussion at the last two International Reciprocal Trade Association conventions.

Space for reader’s comments is below.

This entry was posted on Friday, June 29th, 2007 at 12:51 pm and is filed under Tom Greco. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.