This is a subsection of A Citizens Dividend. It explains how the operations of A Citizens Dividend are put together, so this is the open source section of A Citizens Dividend. It also explains some basic financial concepts to the novice.

21st Century automated finance a.k.a. FinTech

Other than providing a new buzz-word, FinTech, which stands for Financial Technology, does make a world of difference. Unfortunately, most fellow citizens do not grasp finance, nor technology, let alone the combination of the two domains. Alas. But. Following A Citizens Dividend I can present you at a very practical level some of the fortunes FinTech brings us, and show you how A Citizens Dividend makes use of it to the benefit of all of us.

It can even be said that before/without modern FinTech, A Citizens Dividend would not have been possible at all. Before FinTech it was not possible to invest into small business loans, unless you were a financial expert yourself or were wealthy enough to hire one. Nowadays, every citizens who holds a banking account can join a wide variety of crowdfunding platforms. Lets have a closer look at banking as well as at crowdfunding.

Banking

Modern banking systems offer all kind of services to clients to manage banking accounts. Services impossible before the age of internet. Nowadays, even with the help of App’s on smartphones, we manage our banking accounts from almost anywhere, as long as we are on-line. Furthermore, services are provided to automate recurring tasks, such as periodic payments. Therefor A Citizens Dividend is blessed with the possibilities to automate its processes to a very high degree and to make use of checks and balances in very effective and efficient ways.

The Dutch bank Knab offers all that A Citizens Dividend could wish for. It provides a very user friendly App that manages both payment as well as savings accounts. Once a client account has been established, one can create new payment and savings accounts in a few clicks. Each new payment/savings account can be given a name of free choice to help identify each account. In order to service A Citizens Dividend, I created private payment account ‘A Citizens Dividend’ as well as private savings account ‘A Citizens Dividend – Golden Pods’.

As private savings account ‘A Citizens Dividend – Golden Pods’ yields a yearly interest (as is in the nature of a savings account), It is highly recommendable to keep the highest possible debit balance on this account and to keep a zero balance on private payment account ‘A Citizens Dividend’. As I did not request for a credit limit (you can go ‘short’ on your payments account, i.e. the bank lends you money) on the payment account, it is not possible to create a credit balance (lend money) on the payment account. A credit balance would immediately create high costs as high interest rates are usually calculated. At this point, some explanation is needed as the terms ‘credit’ and ‘debit’ can be used intertwined and depend on the perspective of who is talking about it. You may understand better considering the following:

• If I owe you money, I have to pay you. Then I am a debtor to you, and you are a creditor to me. E.g. I borrowed money from you (and you lent it to me), or I bought something from you and still have to pay you.
• If you owe me money, now you have to pay me the money. Then I am a creditor to you, and you are a debtor to me. E.g. I lent you money (and you borrowed it from me), or I sold you something and you still have to pay me.
• Both rules above are opposite sites of the same medal. You only have to remember one rule of thumb, the other rule follows as the opposite. You can check this by swapping ‘I’ and ‘you’, and creditor/debtor (as well as credit/debit) will swap along among the two rules above. Just remember: when a party bears a debt, that party is debtor to the other party it owes the debt to.

 

The bank can lend you money from your payment account at the bank. And then you go short (-, in the red) on your payment account. The bank always will put a limit here, and the bank calls it a ‘credit limit’ as the bank is creditor in this to you. But the bank calls it a debit balance on your account as you go short on your payment account that results into you being debtor to the bank. If you apply for a credit limit, the bank will ask you a lot about your ability to pay back within a certain period and set the credit limit (and sometimes the period you are allowed to be short) accordingly. If you do not apply for a credit limit, the credit limit remains zero, in which case the automated processes of the bank do not allow you to go short on your payment account. A savings account can never go short by nature. So a savings account always holds a credit or zero balance seen from the bank’s perspective. From the perspective of A Citizens Dividend this is always a debit balance, as the bank is debtor to A Citizens Dividend: the bank owes money to A Citizens Dividend. Exactly the amount that A Citizens Dividend has deposited on the savings account. Plus the debit balance on the payment account, but that balance is kept zero.

The total debit balance generated by all incoming and outgoing payments during the day on ‘A Citizens Dividend’ (payment account), I book on ‘A Citizens Dividend – Golden Pods’ (savings account) at the end of each day. Because the debit balance on ‘A Citizens Dividend – Golden Pods’ yields interest. The higher this debit balance, the higher the interest. Also, the interest is calculated by the number of nights the debit balance exists. Or, to put it otherwise: The debit balance at the end of the day yields an interest amount during the following night. During a whole year, all ‘nightly’ yielded interest amounts are added up to a total pending interest amount and booked on the savings account on top of the existing debit balance at some fixed day in the year. Knab offers to have booked this pending total interest amount immediately on the savings account by a single manual click, and it always shows the pending total interest amount not booked yet (‘Opgebouwde rente’).

The deposit at the end of each day from payment to savings can be automated, but requires the Knab ‘Plus’ banking package at a monthly charge of € 5,00. I make use of the ‘Basic’ package without any charge. Mind you: the bank offers this to attract new customers and provide access to their saving services. So it still makes money, no need to feel sorry for the bank (did you ever? ;-). As of yet, A Citizens Dividend receives only a few payments during a whole month. And both accounts can be monitored very easily by the banking App at the end of each day. So I prefer to deposit these rare payments manually by the App into savings. Easy and free of charge.

Outgoing payments on the other hand, are always initiated by myself, and can be automated free of charge. This is a service all banks offer free of charge on any private(!) account. As A Citizens Dividend makes monthly payments of € 0,01 (yet) to fellow EU citizens (donations to the beneficiaries), it only takes a one time manual task to initiate a monthly recurring payment. As all the credit balance is kept on ‘A Citizens Dividend – Golden Pods’ (savings) I always make two kinds of bookings for these outgoing payments:

1. Book the total daily amount needed to make the payments of one day from ‘A Citizens Dividend – Golden Pods’ (savings) on ‘A Citizens Dividend’ (payment). I make one recurring booking for each day in the month, no ending date. I only change this recurring booking in case more or less monthly payments are to be made on the same day each month.
2. Book the monthly payments from ‘A Citizens Dividend’ (payment) on the banking account of each beneficiary. These are also monthly recurring bookings without ending date.

 

There is one other kind of outgoing payments I have to manage. These are the payments to the crowdfunding platform to seed into the small business loans. This can be automated by granting the platform a debt collection authorization. But my preferred platform does not (yet) make use of this. So this remains on my wish list. No problem, these payments are also rare as they are needed only once, just before the start of each small business loan. On the other hand, my preferred crowdfunding platform Kapitaal op Maat uniquely provides services that support a high degree of automation on the other processes involved!

The Netherlands are worldwide famous for an excellent payment system in between banking clients and the banks. In the year 1986 the first promo was broadcasted to introduce ‘Thuisbankieren’ (Homebanking) among private clients. It encouraged Dutch citizens into booking money from one’s own private payment account on the account of the recipient, instead of paying cash. Here we see the birth of FinTech 0.0. Of course, banks are eager to promote all about the good, especially where and when it serves their own interests. You might wanna learn more about ‘Thuisbankieren’ in the full length of your own interests. Have a look at Workshop Thuisbankieren 2.0 (Dutch).

Crowdfunding

The main principle of funding is as old as humankind. But until the start of the 21st century it was only accessible to a very limited group of wealthy citizens, and entrepreneurs who had access to them.

{Fully operational, but description under construction. Please bear patience}

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.