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17 posts from May 2007

Prepaid in Europe

By davebirch posted May 14 2007 at 12:42 PM

[Dave Birch] I gave a talk about prepaid cards recently and it was very clear from the questions I got afterwards that they are central to many organisations strategies.  I wasn't surprised when MasterCard Europe released some new figures estimating that spending on prepaid payment "cards" (my quotes, because by 2010 some of the prepaid transactions will via phones, keyfobs, watches and goodness knows what else) will reach $164 billion in three year's time.  The research they commissioned shows that the UK will be the biggest single market for prepaid cards and the Russia and Poland will have the highest prepaid penetration (at 13-14%, compared to 8% for Germany).  One of the reasons for the bullish prediction is the increasing use of prepaid cards by governments to pay benefits.  Note that for comparison, the US market is predicted to be $296 billion, Japan $59 billion and the UK $34 billion at the same time (which means it will be the fourth largest market).

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Underdeveloped markets

By davebirch posted May 10 2007 at 6:33 AM

[Dave Birch] Payments News points me to a new research report from the CFSI (not to be confused with our own CSFI: the US one is the Center for Financial Services Innovation, our UK friends are the Centre for the Study of Financial Innovation) called "Mobile Financial Services and the Underbanked: Opportunities and Challenges for Mbanking and Mpayments".  We often discuss the use of the mobile phone to provide financial and payment services to developing markets (a technology-driven strategy so obvious that even management consultants recommend it) -- and the overlap with other developing market financial trends such as microfinance -- but sometimes forget that there are a great many people in developed markets who are not served by current finance and payment institutions.  I thought it might be useful to look at the specific financial services highlighted in the report.

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Transport tales

By davebirch posted May 8 2007 at 4:35 PM

[Dave Birch] I was on a train, in the UK today, and I was in the line at the buffet car trying to buy a couple of coffees.  The guy in front me bought a drink and a pastry, which came to 2.10 and all he had was a ten pound note.  The guy serving didn't want to take the note because it would use up all of his change, so he asked the customer to pay by card instead.  Which he did.  And he signed for it, because it wasn't a chip and PIN terminal, even though it was clearly working off line.  How much easier life would have been if the customer had used one of these new "contactless" credit cards that I heard about on the BBC this morning while I was getting ready.  The supreme irony, of course, is that I paid my 2.90 with the exact change.

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Rewarded at last

By davebirch posted May 5 2007 at 4:02 PM

[Dave Birch] I got a nice surprise in my inbox: someone sent me an e-mail telling me that my guru rating just went up substantially.  I followed the link and found something fun.  It goes back to when I made a presentation to a client, a couple of years ago, that included a mock-up of a Blizzard Entertainment Visa card with World of Warcraft rewards instead of "real" world rewards, suggesting that this might be a good first step toward linking real and virtual world strategies.  Well, guess what.  It just happened.  Naturally, I won't be publicising any of my really bad ideas.  To be honest, nine-tenths of guruhood is hindsight bias anyway.  But on this one, I expect to dine out for some time.

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The e-selfish gene

By davebirch posted May 3 2007 at 7:38 AM

[Dave Birch] It looks like more of our attitude to money may be down to DNA than we might think.  I rather enjoyed the story in many of the papers yesterday concerning the discovery that the experience of losing money is processed by the brain in a similar fashion to pain and fear, which may well explain the reasonably well-known phenomenon that people dread financial misfortune more deeply than they value gains.  Perhaps it's time to add a new category to the blog, "neuroscience.

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More from the war on cash

By davebirch posted May 2 2007 at 5:46 PM

[Dave Birch] Linkdump pointed me at McKinsey's "golden rules" for the "war on cash". These are:

 

  • The stakeholders must agree that substituting debit cards for cash is beneficial to society (This consensus will be hard to reach, as the parties involved do not agree on the true costs of cash and the other payment instruments involved).
  • The debit product must be enhanced.
  • Acceptance of debit cards must be vigorously promoted, both in terms of personal acceptance of cards and in the world of remote commerce (mail and telephone order, e- and m-commerce).
  • Banks must develop segmented card offerings.
  • Cash needs to be priced appropriately.  The fact is that, today, the pricing of cash is not in line with its costs. Consumers and merchants in most countries do not pay the real cost of cash, and so merchants and consumers have no reason to reduce their use of cash.  One problem is that there is no clear ownership of cash. Another is that governments often position cash as a public good -- to be offered free by banks -- thereby inhibiting an economic debate on cash versus other instruments.
  • Finally, we will need to see significant targeted marketing efforts to promote debit over cash.

If by "debit" they mean debit products, pre-authorised debit products and prepaid products, then I think I agree with all of these points, especially the ones about segmentation and costs.

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Phones are better than cards

By davebirch posted May 1 2007 at 9:40 PM

[Dave Birch] The Visa U.S.A. President  John Philip Coghlan has said that wallet phones are "inevitable".  And he's right, as I have consistently insisted.  As a mechanism for retail payment, mobile phones have it over plastic cards: a card is merely a receptacle for the consumer's data, whereas a phone can initiate a payment or accept on, can act as a channel for the customer and can manage payment-related data.  Bob Egan, Research Director for Emerging Technologies at TowerGroup (which is owned by MasterCard Worldwide) says that m-payments "will do for debit and credit card transactions what the iPod did for music": I think he means that they will make credit and debit card transactions available to all and easy to use rather than they will make credit and debit cards proprietary, under the distribution control of a third-party and unusable by older persons.

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