A bank charter is a legal authorization that allows an entity to operate as a bank. Alternative bank charters have been used for years to promote new kinds of financial inclusion, business cooperatives and community benefit sharing. The Global Alliance for Banking on Values (GABV) manages a global membership of these humanitarian and development-friendly financial institutions. If the GABV network embraced a new international charter dedicated to responsible management of the global commons, could they seed a process that consumers could opt into in order to support global commons compliance? Market surveys report that 67% of consumers prefer to purchase products that promote sustainability and that broadly they are willing to pay 9.7% more as a sustainability premium. These numbers could drive bankers to compete for environmentally friendly governance bragging rights.
In addition to opting in for green branded banks, consumers have also shown a willingness to opt in for transaction fees that advance humanitarian goals. The American Express Red credit card, created in 2006 as part of Product Red with U2 frontman Bono, donated a small portion of its transaction fees to fighting poverty. The Red campaign has mobilized over $785 million to date.
In debates about financing international public goods and global governance, transaction fees have a long history. In 1972, economist James Tobin proposed a tax on international currency transactions. By the late 1990s, the Tobin tax concept was promoted as a solution for many different kinds of international development financing. Many other transaction fee solutions have been proposed since, such as a Robin Hood tax and a Financial Transaction Tax. Some countries already have them. Since 2011, France has had a financial transaction tax to fund international development, and since 2023 has supported the Global Solidarity Levies Task Force to advocate for such efforts globally. Until 2007, Brazil managed a Provisional Contribution on Financial Transactions or CPMF tax on electronic transactions to generate revenue for diverse programs. The experiences from Brazil, France and elsewhere show that it is possible for minuscule transaction fees to function in a national-scale financial system without creating market disruptions. Even the US government maintains a small transaction fee on most stock trades.
Transaction fees are also a proven solution in the private sector. Such fees are prevalent in the cryptocurrency market. Known as “gas” fees, most cryptocurrencies charge a small fee for each transaction to reward the validator nodes that manage the currency electronically. Credit card transaction fees are ubiquitous as well, averaging between 1.5% and 3.5% around the world. The debit card transactions of large banks are regulated with an interchange fee that cannot exceed 0.05% + $0.21, with a $0.01 fraud-prevention adjustment. Considering that customer acquisition costs range from $80 to $1000, credit card providers could profitably attract and retain new globally minded clients by offering global-commons-compliant credit cards that charge lower fees than competitors, while still supporting a global commons fund.
The inevitability of global currencies, the current regulatory power of payment networks, and the prevalence of transaction fees suggest a possible multi-step pathway for addressing global governance issues. Consumers demand socially branded credit cards and bank accounts. Banks update their charters with transaction fees to pay into a global commons fund and showcase it to differentiate themselves. Payment networks follow suit and adopt global commons policy recommendations to punish and reward vendors according to the risk levels assigned by their new ISO 18245 Merchant Category Codes that are informed by global citizen deliberation processes.
What are the possibilities? It’s time to begin this conversation as a global community to find out.
| The authors of this paper are not aware of any grantmakers that are explicitly focused on bank charters and transaction fees. However, a 2019 article from the William and Mary Law Review offers guidance on modernizing bank charters. In addition, related to transactions, a 2021 report from the Haslam School of Business highlights the trends of point-of-sale donation campaigns that are made at the checkout counter. Such campaigns mobilized nearly $750 million for charities in 2022. |