In the context of the financial turmoil of the Middle Ages, in around 1355, Nicholas Oresme, a French scholastic philosopher, wrote his visionary Treatise on the origin, nature, law and alterations of moneyii in which he asserted that the currency does not belong to the “prince” but to the people, and therefore should not be manipulated. But it took several more centuries for trust in money to be "dematerialised": to move from trust in a physical medium - gold and silver, and metallic currencies - to trust in an institution. The 19th century, with the industrial revolution, saw the  Page 4 sur 10 expansion of banking and finance, and the creation of many central banks. It was a first decisive step: a dedicated guardian was put in charge of issuing banknotes, as a first “immaterial” currency. The second decisive step, mainly from late 20th century, was to make central banks independent from political power: in the 1980s and 1990s most central banks enshrined their independence in their statutes, including the Eurosystem in order to ensure the stability of the single currency. The Eurosystem also defined a target for inflation, as did the Fed in 2012, a few years after Ben Bernanke strongly advocated for it. But independence – which I cherish – does not mean isolation.
The total cost is even higher when we take into account the cost incurred by the payer and payee in delivering and depositing cheques. It is estimated that cheque processing cost Malaysia about RM768 million5 per year. This amount is huge and a sheer wastage. Correcting distortion between paper-based and electronic payments Despite the cost incurred in processing cheques, cheques have not been priced directly to reflect its costs except for the stamp duty of 15 sen per cheque. On the contrary, electronic payment services such as the Interbank GIRO (IBG) are priced above cost at about RM2 per transaction. Such price distortion does not incentivize the adoption of the more efficient electronic payments on a mass scale. In advanced countries such as Australia, Norway and Sweden, electronic payment services are priced lower than cheques consistent with their respective cost of production. The correct price signals that reflect the real cost of cheques and electronic payments had facilitated a broad shift from the use of cheques to the use of electronic payments. We need to correct this price distortion between cheques and electronic payment services, Bank Negara Malaysia has announced a new pricing strategy for payment services in March this year where the price of IBG and cheques are aligned closer to their cost of production. With effect from 2 May 2013, the transaction fee for IBG conducted via internet and mobile banking was reduced to 10 sen from RM2 previously.