Credit Card Society

I recently came across a PBS video presentation: The Card Game, which shows how financial institutions came up with the ideas of 0% balance transfers for credit cards, the ever increasing credit card interest rates and opportunities for further revenues through debit card overdraft fees and the idea behind free checking accounts.  An hour long presentation is worth a watch. 

We all know that credit cards make money when their customers do not or cannot make payments in full, and while I don’t agree with all the tactics used by these institutions in increasing their revenue, I do understand that they are a business and need to be paid for their services; What I do believe and have come to realise is the difference between cultures who feel it is ok to carry debt and those of us who until recently didn’t use plastics to pay for anything.

For those who don’t know me, I come from Tanzania; a politically sound and beautiful country in East Africa; I moved to Toronto in 2002 and prior to that, I didn’t know any other way of paying for goods and services but by cash.  I was told when growing up that I could only buy what I can afford, because if I didn’t, I will run out of money and will have to sacrifice somewhere else.  However, I see a contrast on this side of the planet, where the majority swipe their plastics only to find out at the end of the month that they cannot afford those purchases, ending up paying interest rates close to 20%. 

The argument from the consumer is that there is little or no governance on these institutions raising interest rates and dealing with consumers, and I agree with that statement; however, I believe it is everyone’s responsibility (and not the banks) to manage their own finances.  If you know you cannot afford to spend more than $1000 a month then why purchase more than what you can afford.  In today’s society we have come to believe that we are entitled to certain free things – free banking, free cell phone minutes, free online access to your whatever accounts; if all these services are free, who is paying for them? The service providers are in business and need to make a buck to pay the same employees who in-turn are consumers expecting free things.  As the saying goes, there are no free lunches; if you are not paying for it someone else is.

Does this mean I don’t use a credit card? I swipe my card for pretty much every purchase I make; banks don’t want customers like me; I use a no fee credit card which gives me points that I fully utilize and pay my balance in full, banks don’t make a single penny off me; I’m more of an expense to them when I call customer service.  Basically, my fees are covered by the majority of the population who carry a balance.  One thing to ponder on is, if everyone started to pay off their balances each month, the service providers will make no money, and eventually start charging for the use of their cards.  Unfortunately, the society we live in, I strongly believe it has become a norm for carrying a balance and not worrying too much about it, and as long as this trend continues, consumers like myself will enjoy not paying for these services and the banks would ripe 20% interests for their services.

While I agree and understand times are tough, and it is becoming difficult to put aside for a rainy day, one needs to look at his finances and make sound decisions.  Over the years, many of our wants have turned to needs which we think we cannot get by without; those +200 TV channels, cell phone data plans, extra features on your home phone and so much more.  It is time to look at many of these extras in our lives and ask do we really need them?

Electronic Shelf Labels (ESL): Is this the way to go?

Electronic Shelf Labels, also known by the acronym ESL is a wireless system used by retails for displaying prices for their products.  On average, typical chain retailer makes 10,000 to 12,000 price changes a week, and the widely used process of printing paper labels and replacing it can take several hours; not to mention errors, which can  further result in giving away products for less than the original price (for those participating in Scanner Price Accuracy Voluntary Code).   The benefits are clear – savings in labour and no free-giveaways. 

Although ESL has been around for more than 25 years, the associated costs have kept many retailers at bay.  In 2002, per label price reported by RFID Journal was between $6 and $8; however in 2006, W5 ESL System was selling for $3.50 a label.  Altierre, another ESL solution has been implemented by two grocery chains in the US, installing two RFID readers to control 25,000 labels across 50,000 sq ft. of sales floor, at the cost of $5 a label with the need to replace them every five years.  Progressive Grocer’s December ’09 edition reports yet another success story of ESL; this time by ZBD, a UK based ESL solution provider.  ZBD’s epop solution is dust and water ingress safe and can integrate with various database systems. 

Is ESL the right way to go?  Retailers in Australia and Europe are piloting with much enthusiasm and so are some chains in the US.  Having worked at the store level, in theory this is a wonderful technology that can save labour hours and increase price accuracy, however we need to determine the total cost of ownership before jumping on the bandwagon.  Many of these ESL are waterproof and claim to withstand the store conditions but what about when a customer rams their buggy in the shelf?, power outages, the capability or incapability of incorporating in-store specials. 

Being in the technology field and having worked at the store for one of the largest retail chains, I do see the benefits of this technology, however, there needs to be a thorough cost-benefit, risk analysis and a long-term sustainability to be considered before venturing in this direction.

What are your thoughts? Do you see hurdles and/or benefits from this approach? Will this be the future of signage in the retail industry?

To new beginnings and feeling the waves

Once again I’ve fallen back on the updates here, and as mentioned last time; I’m back and I’m busy.

New beginnings in life can be both exciting and scary, and that is exactly how I am feeling; excited and a little scared while fully enthused about exploring the boundless opportunities life has to offer.

Six months ago I embarked on my new career with one of the largest retailers in Canada.  The program that I am part of allows me to experience different areas of the business while having me learn and deliver on new projects every three months.  This keeps the job very interesting; at the same time, it gives me a steep hurdle to overcome – a new learning curve.

The one thing that motivates me in life is a challenge; and many new things in life, like this job, is a challenge, and so I am motivated.  Motivated to learn, motivated to meet new people, motivated to prove my knowledge, and motivated to deliver on challenges that change how people work.  However this motivation brings out a side of me that I don’t like to admit but know it exists – the workaholic me.  I would go at lengths to meet head-on with these challenges; to deliver results, and if it means working twelve hours a day, I do it.  Does this affect other areas of my life? Sure it does; and so today I learn new ways of balancing.

We have all balanced in life before; between tough deadlines at school or work, accommodating friends and family, to time for ourselves.  I have done this before too.   However, with new beginnings, there also needs to be new balancing methods; some tweaks to your past method to balancing that would make you enjoy do whatever that is you do.  And I am in that zone; the zone of finding the right method that will help me take full advantage of the new opportunities while enjoying myself and my friends and family – the things I cherish most in life.

Frank Herbert once said,

“There is no secret to balance; you just have to feel the waves”;

…And I shall not give up and keep on feeling the waves till I get it right.

I’m back and I’m busy

It’s been a while since I last wrote; I have been juggling couple of things that has taken most of my time – completing assignments, preparing for finals, all while thinking about the new job I’m to start upon graduation.  Although I haven’t written anything I have been reading a few things, and while I cannot recall or have not tagged everything I read, below are some of interesting things I remember reading.

 

This post is about a mixture of readings for the past couple of days.  The readings range from a diamond robbery and America’s debt to Internet piracy and brand strategy; and I have written a little on what my thoughts are on them.  Although I would like to have some kind of picture up here, I am worried that eventually I will run out of free space and since I do not wish to pay for this service I don’t see myself moving a blog which makes me pay. Hope you enjoy these reads.

 

Ten Trillion and counting – news link

“In other words, there is $66 trillion of debt out there, and we don’t know how we’re going to pay for it. …The net worth of the United States is $44 trillion, so … we’re essentially bankrupt as a country even though we don’t admit to it”

 

If you have been following my other posts, you should know by now that I enjoy watching PBS Frontline.  It’s one of those broadcasts that really gets my attention in talking about what’s happening around the world.  This amazing piece and corresponding video talks about America’s debt, the cost of health care and peoples’ perception of what they are entitled to from their government. 

 

The Untold Story of the World’s Biggest Diamond Heist – news link

“The robbery was called the heist of the century, and even now the police can’t explain exactly how it was done.”

 

Reading this piece feels like reading fiction or watching a Hollywood movie; it fascinated me.  I would really like to know where the loot went and what the purpose of this robbery.

 

France Tries to Limit Internet Piracy – news link

“Nicolas D’Arcy, a spokesman for France’s ISP Association, the Association des Fournisseurs d’ Accès et de Services Internet, said Internet providers were hoping the law would not take effect”

 

For years, European governments have been far more proactive than their North American counterparts in keeping up with laws concerning technology.  While I do agree that the music and movie industry is loosing revenues over Internet piracy and something’s got to be done, I also agree with Cèdric Manara, a law professor at the Edhec Business School in Nice that this law would not protect the right to defend oneself.

 

Brand Strategy: Don’t go changing – news link

“We’ve learned in these times you have to stick to exactly who you are and make sure you don’t look desperate or out of character,” Larry Rosen, chairman & CEO of Harry Rosen Inc.

 

I found this small article that talks about sticking to your strategy in these economic times so as not to confuse your customers.  It also talks about the benefits of changing the strategy for those organizations for which it makes sense.

Linking compensation to performance

UPDATES:

March 16, 2009 AIG Faces Pressure From Obama, Subpoena From Cuomo on Bonuses

Main Story: 
American International Group Inc. (AIG) reported it is paying $165 million in “retention pay” and bonuses to its executives.  AIG claims that not paying this amount can lead to legal actions against them as these contracts were drawn in early 2008 prior to the financial meltdown.  The government has since agreed but asked AIG to look into its bonus pay structure.  AIG reported $61.7 billion loss for its fourth quarter last year; the biggest in its corporate history.  The insurer has also benefited from more than $170 billion from the US government.

What I am having a hard time understand, is how can an organization with supposedly so much talent can draw contracts without taking into consideration employee performance.  With all their expertise in HR and law, I find it difficult to believe AIG signed contracts basically saying to its employees that apart from your salary which is the compensation for your work, we will pay you millions of dollars for gracing us with your talent, and who cares if this talent leads us on the brink of bankruptcy. 

What doesn’t make more sense is that a large part of these “retention pays” are going to the same department that is primarily responsible for AIG’s downfall.  It is these same employees that made wrong decisions that are being rewarded.  And I will not be surprised if other multibillion dollar corporations are doing the same and have lost sight of the big picture; Merrill Lynch & Co. paid $3.6 billion in bonuses shortly before being acquired by Bank of America.

 

Somewhere between those HR courses at school to the executive’s office, the simple HR principles are lost; tying compensation to performance, and not just at individual level, but team and corporate level.  It is upsetting to see how these simple principles have been forgotten leading to corporations dispensing large sums of money for under-performance of their employees – money that now is coming from the tax payers’ pockets.

 

Maybe it is time we looked at the basics while also understanding how actions in one area can affect other parts of the organization; once again, after decades, we talk of removing silos and treating an organization as one unit. Although in AIG’s case even looking at the department, it doesn’t make sense for them to receive any bonuses.  AIG as a business has failed, and the only reason for their survival is their sheer size and integration into multiple areas, and after Lehman’s, the government could not afford another disaster – thus the bailout.  It is time for AIG and others to restructure their compensation packages to reflect the organization’s progress.

 

Let’s return to the basics again.

 

Source: Bloomberg.com; Photo by ABC News.

It hurts

I’m a die-hard Manchester United fan; and today we were beaten by our arch-rivals Liverpool by 4-1.

 

I am hurting not because of the loss (well partly) but mostly because Liverpool didn’t have to play their best football to win at Old Trafford.  With a formidable defence all season, it was painful seeing United make poor individual decisions most of which led to Liverpool goals.

 

This game was about key moments – from Raina’s poor decision leading to a penalty to a string of United’s defensive errors.  Today the strongest defence in the league was breached; Vidic, Evra, Ferdinand and the versatile O’shea, producing poor passing and lack of judgement.  At the other end, United lacked their killer instincts, and could not produce that final ball.  I wouldn’t single out a player but United as a team were a mess today, and that hurts.

 

The presence of Torres, the heart of Gerard and the resilience of Mascherano were enough to keep United at bay.  Aurelio’s beautifully curled free-kick and Dossena’s wonderfully taken goal were great finishes.

 

I could get into the discussion that United had a day less to rest from their European triumph against Inter Milan, and that might have spurred these errors from fatigue, but what difference does it make.  The game is played on the field, and although Liverpool did not play their best, they beat us fair and square.

 

United’s lead at the top of the table is cut down to four points, and by the end of the weekend it might as well be three depending on Chelsea’s result. However, United have one game in hand and winning that will extend the gap.  United are still in pole position to win the league and today’s disappointment can only spur them on – although this psychological blow could see them slump, but I don’t see that happening.  I’m sure the gaffer’s words will put them straight today.

 

Although it hurts, I’m sure lifting that league trophy is the ultimate goal and I can see United do that come May.

 

Have a nice weekend.

The party is over – the financial meltdown

Over the past six months, we have all seen how the market’s been tanking – bankruptcies, nationalization and job lost make up the headlines everyday.  It is astonishing how values of many corporations have sliced into half; large organizations have either gone under or been taken over by the government. 

 

So the question is, how did it all start?

 

I am no financial guru, and all I knew like many others I’m sure, is this being a result of toxic mortgages – banks lending to home buyers who did not have sufficient means of paying back their loans.  And that one downfall caused another and before we knew it, everything was falling apart.  Well yes, this is the gist of it, but not all of it.

 

Recently, I came across a video presentation by PBS Frontline – “inside the meltdown”; giving insights into how it all began, it was an hour well spent.  The presentation explains to an average man, what led to the fall of multibillion dollar corporations.

 

Since the past two months, I’ve become a fan of PBS Frontline.  I’ve watched amazing videos on various issues in our daily lives.  Going forward, as I come across presentations like these, I will post them here.

 

Enjoy the video presentation.

(Photo by Scott Olson/Getty Images)

I chose to blog…again

Once again I see myself creating a blog, only this time hoping not to please anyone but myself. In blogs prior to this, I tried to give people what they wanted, not anymore, this space is about what I observe and learn in life…its a place where I publish my experiences, good and bad.  Hoping to post at least three to four times a week, this space will serve as an outlet for all aspects of life.

 

I read a lot, mostly about business and technology, and this blog will be a place where I can share with you some of the interesting things I learn.  I don’t know of anyone who doesn’t want to know…I believe we are species that crave knowing about something or someone, and this blog will be a place where I report interesting things that I encounter on a daily basis.

 

This space will also include some personal experiences without being too personal.  Sports interests, my recent cooking spree and encounters that I might want to share with you.  One thing I like about blogging is that I control what I write, and I assure you, nothing will be too personal.

 

With that I take your leave for now.