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Islamic e-payments

By davebirch posted Mar 22 2007 at 4:30 PM

[Dave Birch] Islamic finance seems to be growth area generally, so I wouldn't be at all surprised to see Islamic payments growing similarly, even if I'm not entirely sure what that would mean.  But with the first Islamic chip & PIN card now in the market, issued by the Kuwait Finance House in Bahrain, it might a good time for digital money thinkers to look at the area in more detail.

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I've consistently thought that there might be an opportunity here.  As I wrote some time ago, once an e-payments infrastructure is in place so that the currency of the transaction becomes immaterial, then consumers might want to transact in Manchester United pounds (they already use credit cards and savings accounts) or Microsoft dollars or Islamic gold e-dinars or Cornish e-tin for reasons that have nothing to do with the drivers for the use of traditional means of exchange (eg, liquidity, stability and so on).  Once brand arrives in the world of currency, who knows where it might go.

The Islamic e-gold is a special case, though.  Given the desire to transact with the convenience of a card but in a non-interest bearing currency, it would seem to be a straightforward proposition to offer a gold card that is actually denominated in gold.  An Islamic person tenders their chip & PIN gold card in Oxford Street to buy a pair of shoes: to the system it's just another foreign currency transaction that is translated into grams of gold on the statement.  If, at the end of the month, the person has used more gold than they have in their account then they can use some of the bank's gold for a time at a fee.  Hey presto, no interest.  And if said Islamic person wants their gold then they can, in principle, go to the relevant depository and draw it out (minus a handling fee, naturally).  Would interested credit card issuers form an orderly queue, please?

Incidentally, old digital money hands will remember Douglas Jackson of e-gold, who presented his internet-based gold payment system to us some years ago, so using precious metal as an medium of exchange but in an electronic context is hardly new, but it may be that the Islamic market provides the space for it to really grow.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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