Bartering Takes On Banking

Sun Herald

Sunday January 29, 1995

By MARTIN CHULOV

MORE than 8,500 small businesses have shunned cash and the banks by returning to the most primitive form of enterprise: barter.

In fact the centralised bartering scheme has been so successful that Bartercard is negotiating franchises in Sri Lanka, Singapore and Hong Kong.

The idea is like trading beads and blankets, except with a twist. Those who sign up for Bartercard do business with each other, swapping goods and services. But they use imaginary trade dollars instead of cash. A tally is kept in a centralised office and members are in effect charged or credited with points to their accounts.

It is a club where members trade with each other before they look to outsiders. The 8,500 members are listed in a national directory, not unlike a Yellow Pages phone book, and claim to have increased sales.

Ari Mogy from Mogy Tools said the bartering had increased business by 20 per cent in the year since he joined.

Mr Mogy says the fee he paid to join the network is far outweighed by the benefits he has received from being a member.

"It brings in extra business," he said. "A whole new range of people that I haven't sold to in 18 years are now coming into my store.

"I'm also getting business from interstate that I wasn't getting before," he added.

"With this concept you have an opportunity to get income which is not available in the cash system. The refreshing part about this is not being in the banking system," Mr Mogy said.

Although the scheme is outside the banking system, it is not a black economy. The Tax Office treats the accounts as normal income.

Businesses listed range from child care to clothing and from food to funeral services and give many small businesses their only opportunity to reach a national market.

Dollars and cents may not play a big part in everyday business at Bartercard, but, like any enterprise, they are an integral part of the balance sheet.

Last year Bartercard Limited saw a record turnover of more than $100 million. There are believed to be about nine Bartercard type schemes around the country. Merchants pay a one-off $695 fee to join the system and are charged 5pc of the value of each transaction, which somewhat paradoxically, is paid in cash. This compares with merchant fees on credit cards such as Bankcard and Visa of 1.5 to 3.5 pc.

Many employers on the Bartercard index pay a large part of an employee's wages in trade dollars, although there is still a need for some cash to pay ever-present bills.

Michel Germani from Germani Jewellers said: "Before bartering was done by contra, where if I bought a computer off someone he would have to buy some jewellery off me, but with this system you don't need to do that.

"You are diverting your selling to other people and it does give you extra clients of course, in my case maybe about 10pc.

"We made the money we paid for the fee in the first week." Trade dollars are not redeemable into cash unless the business leaves the network.