Digital Money Forum

Michael Marx, Visa USA

[Dave Birch] As Visa USA's VP of Research Services, Michael Marx provides market research, competitive intelligence and consumer trends data to financial institutions issuing Visa-branded cards and major retailers who accept Visa payments. In this podcast, he shares a couple of the key trends that the payment industry will be looking at over the next generation.

Technorati Tags: credit cards, debit cards, forum, payments, podcast

Greens back

[Dave Birch] Payments, just like every other business, are acquiring a green tinge as the marketing folk get to grips with the low carbon economy. There have been some efforts before -- some of you may remember that "Visa Swap" earlier in the year -- and I'm sure there will be more of these (rather limited) initiatives to come. It's not transparently obvious to me that this sort of thing makes much of a difference to consumer behaviour but I'm sure every little helps. Consumer research from PricewaterhouseCoopers found that more than half of respondents would be likely to replace their existing credit card with a 'green' credit card if it helped them tackle their carbon footprint and two in five said they would give up an existing loyalty programme or cash reward card in favour of a green alternative. I know consumers' revealed preferences may be at variance with their environmental aspirations but you can see the trend building. Surely, a truly green credit card would be one that allowed you to buy organic tomatoes but not a flight to Spain. We haven't got that far yet, but Barclays has launched a carbon-offset corporate card. Barclaycard Business manages the process on behalf of corporate customers by providing them with commission-free access to the Certified Emission Reduction Market via Barclays Capital’s Emissions Trading Desk. So Barclaycard tell you how much your employees have been spending on air travel and then you can buy carbon offsets to match them and assuage your environmental guilt at allowing them to fly so much.

Technorati Tags: cashless, green, payments

In a goldmine, the medium of exchange is the pickaxe

[Dave Birch] The title of this post comes from a book that I'm reading at the moment. No, not a scholarly treatise on the nature of money or the history of transactional commerce, but "Making Money", the latest of the Terry Pratchett Discworld novels. I can't say I'm a particular fan of Pratchett, but it is easy to read and it potters along at sufficient pace to make it a tolerable diversion. I read a couple of the Discworld books many years ago and found them mildly amusing in places but not compelling. I realise I'm risking opprobrium by advertising my indifference, since Terry's fans are legion and dedicated, but there you go: it should not put you off reading the book. I was the only person in Britain who didn't like the Harry Potter books either, but who am I against so many? No. 1 son, on the other hand, rather likes the Discworld series so it seemed only fair to allow him to present an alternative opinion, to whit:

I think that the discworld novels are very good because they are well written with a lot of imagination and are very funny. One of my favorite parts of ‘the light fantastic’ is when he describes the great a’tuin ( the giant turtle on which discworld rests ) as very intelligent, and as the humans found it easy to read it’s mind, they also took ages to get information, because, although smart, with neurons the size of roads, thought would generally be quite slow. This was one of the funniest parts of the book, in my opinion. One of the parts with the most imagination was when Pratchett described one witch, because he noted that she had two bodies- she was not two people, just one person with an extra body. I thought that this was extremely clever.

Technorati Tags: banking, money

Future imperfect

[Dave Birch] I went to Dublin for a client of ours to give a talk about the future of payments. One of my favourite sites for helping me to think about such things is Paleo Future. It's a super blog all about past views of the future, if you see what I mean. Not only is it fun, but it contains some tremendously relevant information that ought to help us (by which I mean people trying to understand the relationship between technology and business) improve and refine our own views of the future A great example was the recent posting about a New York Times Magazine advertisement from 24th May 1964 about the "credit card ring". It's actually an advertisement for Sheaffer Pens, but it features a ring that projects and American Express card. The gist of the advertisement is that your credit card of the future may not actually be a physical card any more, but you will still need to sign for it. It's fascinating to reflect on how wrong this is: my credit card still looks like a credit card, but I haven't signed for it in a couple of years (except in, if I remember correctly, Tunisia and the USA: no, wait, the hotel in Tunisia had an EMV terminal).

Technorati Tags: credit cards, future

Sectioned

[Dave Birch] One of the reasons why I always -- and I mean always -- use one of my credit cards both online and offline (and remain mystified about the growth in debit card usage) is because of the Consumer Credit Act (1974). In particular, it's because of Section 75 of that Act. For those of you unfamiliar with the details of our credit regulations, "s.75" is the part of the Act that says to me as a consumer that (in essence) if shit happens, it's bank's problem and not mine. So if I buy a holiday from a travel agent who subsequently goes bust, I get my money back. If I buy a dishwasher from a web site and the dishwasher doesn't show up, I get my money back. This isn't a universal right (it's limited to transactions between 100 and 30,000 Sterling) , but it covers most of the important transactions I ever make. Naturally, banks have been complaining about it, as I would if I was a bank since s.75 has an element of moral hazard about it: as a consumer, there's no need for me to take any care in checking out the web merchant I'm dealing with because I'm not liable.

Technorati Tags: credit cards, payments, regulation

Jack Selby, Clarium Capital

[Dave Birch] Jack R. Selby is a Managing Director at Clarium Capital Management LLC. Prior to Clarium, Jack was as a Corporate Officer and Senior Vice President of PayPal, Inc. Jack has been a great friend to Digital Money and introduced members to Paypal at the Fifth Forum. As an original member of the founding PayPal team, Jack's experiences and perspectives will be of interest to anyone interested in the subject of launching new electronic payment systems.

Technorati Tags: p2p, podcast, rfid

Zig zag

[Dave Birch] Contactless and RFID aren't the only new local wireless interfaces out there that should be of interest to payment innovators. There's ZigBee, for example. The ZigBee Alliance, a global collection of companies creating wireless solutions for use in energy, residential, commercial and industrial applications, has already announced its expansion into the telecommunications market with an initiative extending mobile networks while providing new capabilities for phone users. The new ZigBee Telecom Profile will feature secure mobile payment, information delivery, health care monitoring, peer-to-peer small data sharing and other location-based services and features. If you're not familiar with it, ZigBee a suite of communication protocols that use small, low-power digital radios based on the IEEE 802.15.4 standard for wireless personal area networks (WPANs). The technology is intended to be simpler and cheaper than other WPANs, such as Bluetooth. ZigBee is targeted at contactless applications that require a low data rate, long battery life, and secure networking: sensors in the home, for example.

Technorati Tags: contactless, identity, mobile, payments

Bank of England pal

[Dave Birch] I've been reflecting on a very thought-provoking post on Linkdump. It concerns the attempts by some governments to stop 'unlawful betting practices' by demanding that the banks that execute the payments block them. Now, obviously, I don't want to get into the moral or political aspects of this issue (which are not the concern of the Forum or this blog) but I do want to draw your attention to Linkdump's perspective:

Well, if we go down this road and allow our governments to dictate which payments which customers may send/acccept (and instruct our banks to act accordingly), we may as well make the Treasuries our single national payment institution. This is what in my view will happen.

Interesting idea. And once we have smart national ID cards, is may become an irresistible attractor for government. If there was something like PayPal (say UKPal or Bank of England Pal) so that everyone in the U.K. had an automatic account of the form "idnumber@ukpal.co.uk", then the overall cost of the national payment infrastructure would surely fall? Nevermind BACS or FPS, if I wanted to send my brother fifity quid then I'd securely log in to Bank of England Pal using my ID card and instruct an instant transfer. What's not to like?

Technorati Tags: e-purse, payments, privacy

I don't care too much for money...

[Dave Birch] Ah, a title that's amusing on so many levels means that this tragic (in the sense of inevitable) post must be written. I have no choice. It's all because iPhone fever swept the nation last night. People had been queueing outside Apple's flagship Regent Street store for some time. At precisely 6.02pm, the hordes were empowered to exchange wonga for widget. The guy who was first in the queue, after spending time in freezing cold and lashing rain, proudly grabbed his trophy telecommunicator and ran down the stairs to the checkout. But he couldn't pay, because the Apple store doesn't take cash. So the guy who was second in line actually became the first person in Britain to buy an iPhone. Seems like cash can be something of a disadvantage in a high-tech economy as some bankers across the Irish Sea have noticed.

Technorati Tags: cashless, retail

We're no. 1

[Dave Birch] According to recent APACS figures, total card fraud losses on U.K. issued cards went up by a quarter in the first half of this year. This increase has been driven by a 126 per cent rise in fraud on U.K.-issued cards being used overseas (U.K. retail losses were down 11 per cent, U.K. cash machine losses down 57 per cent). The U.K. has long been Europe's biggest exporter of card fraud, so it's good to see that our smooth and successful EMV transition has helped us to remain the league leaders. Losses from online, phone and mail order shopping fraud have continued to increase year-on-year but the fraud to turnover ratio on online card transactions has continued to fall. In the U.K. it's now down to 50 basis points. For comparison purposes, total fraud in a typical card portfolio is about 6 basis points and bad debt is about 600 basis points.

Technorati Tags: ATM, fraud, payments

Fingering suspects

[Dave Birch] Biometrics continue to advance in Japan with the news that Hitachi is teaming with Japanese issuer JCB to develop a biometric payment system based on its finger vein authentication technology that can be used as an alternative to cards and cash at the point of sale. Hitachi is set to begin testing the system with 200 employees in September to determine whether the technology is commercially viable for introduction in banks and shops. The system identifies the veins on a person's finger when it is held over a scanner and matches the image with customer data already stored in the application. The vein authentication system has been available in the Japanese market since October 2006 and has already been deployed by Sumitomo Mitsui Banking Corporation as the user ID system for ATMs located in am/pm convenience stores throughout Japan, which is why I thought the technology deserved its own podcast. Japan isn't the only place where biometrics are being rolled out in this way. Banks in India are looking at deploying biometric ATMs targeted to reach the unbanked population in rural India. Using thumbprint and voice guidance in ATMs reduces literacy requirements to a considerable extent. Thus, establishing the identity of a rural depositor through biometrics makes it possible for illiterate or barely literate people to become part of the banking user community.

Technorati Tags: ATM, biometrics, payments

Changes to the card payments landscape in Europe

[Dave Birch] I've been chairing the International E-Payments Intensive in the City, which is how come I saw a typically excellent presentation by John Chaplin of First Data. I've known John since his Visa days and I've always found his experienced and measured perspective on the payments landscape of immense value. Once again, he really made me think. John was talking about the impact of the Payment Services Directive (PSD) on the European payments card landscape. One key point that he made, which I've been reflecting on, is that that landscape just hasn't changed that much in the last couple of decades. The market is not that open, particularly because the rules of the club favour the existing members. But all this is going to change because of the PSD. Isn't it? Well, there are plenty of major pressures for change that are nothing to do with the PSD. Banking consolidation in the Scandinavian and Benelux regions is showing how thinking might change from national to regional and subregional organisation and then to pan-European organisation at the time when the IT infrastructure (built in the 1980s) is up for renewal and SEPA is pressuring them to change. There are commercial pressures that are nothing to do with regulation. There are technology developments. All of these combine with PSD to create the potential for change. But might there be disruptive change?

Technorati Tags: credit cards, debit cards, regulation, SEPA

Pride in battle

[Dave Birch] Excellent, another excuse to mention the brightest star in the heavens that are the world of association football. Manchester City "might" extend their farsighted experiment with NFC phones from simple entry through turnstiles to enabling fans to buy food and other goods at half time, as well as making it easy to offer loyalty discounts to regular match-goers. Fans will be able to swipe their mobile phone at dedicated terminals or readers to make payments, in the same way that contactless cards are already being used for payments and in other contexts, like travel. Forum friend Duncan Martin, head of retail for The Blues, highlights one of the key advantages retailers get by persuading customers to use contactless payment technology instead of cash:

By linking this technology to our customer database, we will use this trial data to analyse customer demand, create more targeted campaigns for our most loyal fans and tackle wider issues such as ticket touting and crowd security. The net result will be a much richer matchday experience.

This illustrates a general point: shifting from cash to "cards" ought to provide merchants with valuable information. Incidentally, I read today that revised forecasts from Juniper Research now predict 52 million consumers will adopt new mobile technologies such as NFC and other physical mobile payment methods to pay for everyday goods and services by 2011. They also estimate that by 2011, around 12% of the total mobile phones in circulation will offer support for NFC payments (nearly half-a-billion handsets worldwide).

Technorati Tags: nfc, retail

The six main trends in European payments

[Dave Birch] In this month's excellent SPEED magazine, there is an article by Harry Leinonen. I know Harry from the conference circuit, where we occasionally fetch up together, but you probably know him as an advisor to the Bank of Finland and the Finnish representative on the Payment and Settlement System Committee with the Eurosystem. I always pay attention to his well-informed and well-thought out points. In the article he looks over the last decade's worth of statistics to highlight six main trends in European payments. I'll get on to those in a moment, but what I wanted to first draw attention to was this paragraph in Harry's piece:

Payment developments seem to be quite slow. Major changes in payment habits need five to ten years to be implemented. One reasons for the slow pace is probably the lack of transparent price and cost information.

I realise that I sound like a broken recordscratched CD on this topic, but it seems to me to be a question of rudimentary economics: no price information, no working market. If the European Commission wants to make the European payment market work better, they could do worse than start by actually turning it into a market in the first place by insisting on better price signaling. One inevitable consequence: the cost of cash will go up, the cost of cards will go down.

Technorati Tags: costs, payments, SEPA

Randy Vanderhoof, Smart Card Alliance

[Dave Birch] Randy Vanderhoof is the Executive Director of the Smart Card Alliance. He came to the Alliance in January, 2002 and became the interim director in March. He was named Executive Director in August, 2002. He also served as on the Executive Board for the Alliance as a corporate member from 1998–2001. Prior to joining the Smart Card Alliance, he was Senior Project Manager and Solutions Sales Manager for IBM Global Smart Card Solutions, an international product group supporting IBM’s smart card services to its global banking, healthcare, and government industry vertical teams. From 2000 to 2001, he was Vice President, Business Development, with First Access, Inc., a developer of contactless smart card technology for network access security and authentication. From 1995 to 2000, he worked at Schlumberger as Market Segment Manager, Campus Solutions, supporting the development and marketing of smart card-based identification and payment systems. That's why he's a good person to talk to about where contactless payment cards are going in the U.S., the subject of this week's podcast.

Technorati Tags: contactless, podcast, smart cards