Today The Verge is reporting that MIcrosoft may be phasing out their Points system by the end of the year.

http://www.theverge.com/microsoft/2012/1/24/2729395/microsoft-points-rumor-discontinue-2012

The company will replace that system with cold hard cash.

MS is no strange to criticism with the points system as it has always been rather confusing. 80 MS points = $1.00 USD. Okay, that doesn't make any sense. PSN and Wii have used much easier systems. PSN uses real money while the Wii uses a 1 to 1 relationship. $1.00 = 100 points. Those are simple. So why did MS take this strange path?

I think there were two reasons. First to get around some tax loop hole. I know it sounds weird but the company said straight up that there was some kind of credit card tax issue that they couldn't make the value 1-to-1. After speaking with my father (who has been in banking for just over 40 years) he confirmed that there was a very strange loop hole where a company could get away with paying less in taxes and credit card process chargers if the amount the company was processing didn't totally match up with what the customer was given within a specific kind of service. That loop hole has since been closed.

The other reason I believe is that Microsoft was purposefully trying to confuse the customer. Actually confuse isn't the right word. They have been doing what retailers have been doing for years. Playing with our minds. Think about it. If a product is $14.99 most folks think that the product is 14 dollars rather than 15 dollars. It's a simply psychic barrier. Not lying, but not telling the truth either. I think the points work similarly. We think we are paying less points for a product when really, we are spending more than we think we are.

Ultimately I think that the points system has just grown stale and MS wants to move away from it simply because Joe consumer doesn't understand it. It's not super simple for the everyday consumer. And with the direction Microsoft is move towards the general consumer is their bread basket.