Digital Money

Cards aren't just about payments

[Dave Birch] There was an interesting development in the world of payments and cards recently when the Utah Transit Authority went live with a new ticketing system that accepts contactless payment cards as well as contactless tickets: not as a pilot or trial but as a live system supporting the three main brands.

UTA's new EFC system accepts major contactless credit and debit cards such as Visa payWave, MasterCard PayPass and American Express expresspay for a single adult cash fare on more than 600 buses and a fleet of light rail and commuter rail trains.

[From Utah Transit Authority Showcases Open Payment System - Government Technology]

Mass transit has become a focus of activity and innovation in the contactless world, not just because of the scale of mass transit systems but because of two intersecting drivers that lead to a win-win. From the transit side, many operators don't actually want to run ticketing systems if someone else can provide a working payment solution.

The MD of London Underground Tim O'Toole said the ability to use near field communication-enabled phones and other next-gen ticketing tech on London's public transport will be enabled by the new deal.

[From Oyster deal lights touchpaper for new tech makeover - Financial Services - Breaking Business and Technology News at silicon.com]

There has been one interesting barrier to the integration of payments and transit in certain markets, and that is that the ISO-based contactless interfaces and the Felica-based contactless interfaces have required separate chips. This has now changed, as the Moversa joint venture between NXP and Sony starts to bear fruit.

Moversa will unveil the capabilities of its latest security chip – the Universal Secure Access Module (U-SAM) – at this year’s Mobile World Congress. The chip manages contactless smart card applications, regardless of protocols and operating systems, in Near Field Communication (NFC)-enabled mobile devices... Moversa’s U-SAM supports two of the most widely installed contactless smart card technologies in the world, NXP’s MIFARE™ and Sony’s FeliCa™ systems, as well as a number of other contactless operating systems and applications. The chip will enable mobile device manufacturers to design products which are interoperable with existing contactless infrastructures.

[From MOVERSA - PRODUCT NEWS FROM MOVERSA]

It's a terrific time to be looking at the future of cards in that space, as mobile and contactless technology continue to revolutionise the customer experience.

mobile, prize, retail, transit

Grey areas

[Dave Birch] I've been reading John Cooley's book on counterfeiting Currency Wars, which is about various attempts to destabilise countries by forging their currencies. He talks a lot about North Korea's "superdollar" forgeries and the like. He says at one point that there is a grey area between actual counterfeiting and the deliberate over-issue of fiat currency. This led me to reflect that the quantitative easing policy of the British government is likely to be reduce (by inflation) the value of the pound Sterling far more effectively than Hitler's plans to bring Britain to its knee through counterfeiting in the Second World War:

Operation Bernhard was the name of a secret German plan devised during the Second World War to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes. It is the largest counterfeiting operation in history.

[From Operation Bernhard - Wikipedia, the free encyclopedia]

As an aside, one of my sons went on a school trip to Germany earlier in the year and actually visited the scene of this dastardly plot to sabotage Sterling, the Sachsenhausen concentration camp. If you are at all interested in this story, there's an excellent film about it, The Counterfeiters. Now, think what the modern version of this might be: not counterfeiting physical money, but creating electronic money. What would Operation Berhard look like in 2009?

banking and finance, bugs and mistakes, money

Harry Clarke, RingGo

[Dave Birch] Following his army career and MBA at Cranfield with stints at Mercury Communications and the Automobile Association, Harry Clarke was one of the founders of automated transaction handling company Cobalt Telephone Technologies. Started in a portakabin in 1997 with just £20k of largely redundancy money, Cobalt today cites Manchester United, four UK airlines and Ten London Boroughs as clients and has processed well over £250M of parking ticket payments. Under Harry’s leadership Cobalt has, since 2005, been heavily focussed on the commercial development of RingGo, a mobile phone parking payment service. RingGo has now established itself as the UK’s leading brand of phone parking with a dominant presence in London, in Western England and also South Central England in particular. In this podcast, he talks about growing a real cash replacement business and discusses where it might go in the future.

Listen here in either [Podcast MPEG4] or [Sound-only MP3] format.

Free!

[Dave Birch] Well, now I've got your attention here's a quick reminder that next week is the 12th annual Digital Money Forum and we still have a few places left. They're not free, but they're well worth the almost insignificant delegate fee considering the incredible range of expertise and experience on offer. You can view the full agenda online over at the Digital Money Forum or you can download it here (248.3K). The Forum is now in its twelfth year, and once again promises the combination of discussion and debate, learning and fun, that has earned it the reputation as the place to be for people interested in the future of retail electronic payments. It continues to be a unique event, where interaction and invention replace product announcements and “death by Powerpoint” sales pitches.   As you may know, this is a not-for-profit event that supports a variety of charities. This year we are supporting BUFFER (which provides specialist diagnostic equipment for breast cancer), Action Medical Research and Jubilee Action which helps children worldwide. This years Forum is made possible by the kindness of our sponsors Visa Europe, Monetise, WebMoney and VoicePay with support from our charity tournament sponsor ACI Worldwide.

Some come and join our experts from the World Bank, Financial Services Authority, The Economist, European Payments Council, Transport for London, Nationwide, Barclays, Royal Bank of Scotland, Sidley & Austin, O2, The Guardian, Innovaro, Masabi, EAT, ABI, Finextra, Disruptive Analysis and the Free University of Brussels at the 12th annual Digital Money Forum in London on 31st March and 1st April at the Guoman Charing Cross hotel and come away with the kinds of new concepts, new friends and new business ideas that many of you have come to expect from this unique event. All delegates will receive a copy of our popular Digital Money Blook (the most interesting posts from this blog over the last year) and Larry H. White's "Free Banking in Britain" along with "The Nudge Factor".

Thanks for reading that. Now for the details of two terrific -- and absolutely FREE -- events on Monday 30th March in London. If you are interested in the future of electronic payments, you have the opportunity the spend a relaxing lunchtime and afternoon in the company of an assembly experts rare on these shores.

future, innovation, money

Virtual washing machines

[Dave Birch] I have from time to time expressed some concern that the cost of complying with money laundering laws, policies and regulations increases the net welfare because, as far as I can see, there is just as much money laundering going on in the world now as there was before. But I may be wrong because I don't have access to any exact figures for how much money is being laundered. Except in the UK, where we know the precise amount:

In other words, we have over £82,000 of money laundering where notes were accidentally washed through washing machines;

[From The Financial Services Club's Blog: Sorry sir, the dog ate my lunch money]

Yet another problem with notes and coins duly recorded.

crime and fraud, bugs and mistakes, notes and coins

Coining it

[Dave Birch] What a coincidence! George Selgin's book arrived a few days ago. I put it on my next-to-the-sofa pile, looking forward to starting to read it over the weekend sometime. It reminded me that I'd seen an article of his in the Wall Street Journal a little while ago. I'd put it to one side because it was about the current coin shortage situation in Argentina, which relates also to the period of British history covered in his book. It's hard to imagine a time when trade and industry were held back because there were too few coins in circulation, but that's exactly what the situation was in England during the industrial revolution. Employers needed coins to pay wages and couldn't get any, customers couldn't pay in shops, and the economy suffered. What does this have to do with Argentina? Well, there's a coin shortage there at the moment.

Argentina's central bank blames it on "speculators," meaning everyone from ordinary citizens, who stockpile coins, to Maco, the private cash-transport company (think of Brinks) that repackages change gathered from bus companies to resell at an 8% premium. But those explanations ring false. "Black marketeering" would not exist if coins were easy to get in the first place. After all, Argentines could just as easily hoard razor blades or matchbooks. Yet there's no shortage of those. What's so special about coins? The answer is that coins are supplied by the government alone. "Put the federal government in charge of the Sahara desert," Milton Friedman said, "and in five years there'd be a sand shortage." If Argentina wants to end the coin shortage, it ought to give up its monopoly.

[From Opinion: Argentina Is Short of Cash - WSJ.com]

This is a point well made and because we're going to be discussing the apparently crazy idea of private-sector currency at the CSFI at the end of the month I've been keeping an eye out for stories to bring up at the round table. If you have any more, do send me the links.

notes and coins

London calling

[Dave Birch] I'm a technologist so in a peverse way I rather like recessions, because (as The Economist pointed out a while back) a recession is when you see real innovation. Many successful companies got their start during hard times:

The list includes household names like Burger King, FedEx, Microsoft, Wikipedia and G.E.

[From How Will the Recession Affect Innovation? - Economix Blog - NYTimes.com]

Why is this? When things are pottering along splendidly, profits are high, no-one in a bank (or any other company) is going to invest much in anything new. The markets for innovative products are too small and the money to be made is insignficant.

Companies with overly deep pockets can flood a bad idea with money. Overly patient companies can let bad ideas linger for years.

[From Innovation During The Great Disruption - Forbes.com]

But when there's a bit of a downturn, some companies see it as an opportunity to grab some business while competitors are retrenching to the core. This is why, I think, our payments-related work has been holding up in these difficult times. But businesses still need some inspiration to take the plunge and redirect resources away from core business. This is why that an exciting event like the London Olympics is such fun, because it serves as a spur to innovation, setting some targets for British industry to reach and make the Olympics a showcase for innovation. Oh wait...

But risk management is at the core of the IT implementation, so Pennell will maintain a conservative approach and favour proven technology, which will be customised for the Games’ purposes.

[From 2012 CIO hits the ground running - vnunet.com]

What's the proven technology that he's talking about? Steam engines? Television? Contactless smart cards? Well, it doesn't appear to be the latter...

The same cautious approach applies to innovations such as contactless payments, despite the efforts of banks such as Lloyds TSB to push the idea of making the Games a cash-free environment. “Contactless is an interesting concept and we have had a few conversations around that, but my suspicion is that it isn’t something we are likely to do,” said Pennell.

[From 2012 CIO hits the ground running - vnunet.com]

So that's that then. I hope LBG have some other innovations to excite the public with and make their 80 million pound sponsorship worthwhile. It's just as well that their sponsorship manager says that LBG staff are inspired by Olympic history, because the Olympic future looks rather uninspiring. My prediction that London 2012 will more closely resemble London 1948 than Bejing 2008 is coming true. There's still time for the government to re-introduce rationing to finish the effect (my Mum and Dad would love that, by the way).

innovation, smart cards

Prime directive

[Dave Birch] Thanks to the generosity of our sponsor, the StoLPan project, Consult Hyperion and city lawyers Sidley Austin will be running an free afternoon seminar on the Payment Services Directive (PSD) at the Guoman Charing Cross Hotel in London on 30th March 2009.

The seminar will comprise three sessions:

• An overview of the PSD by William Long from Sidley Austin
• National implementations in members states by William Long from Sidley Austin, and then after tea
• A roundtable discussion (led by me) on the business impact featuring a couple of companies in the field.

Some observers think that for banks, the PSD represents cost with little benefit, but for some non-banks, the PSD represents an opportunity to get into the payment business. Why not come along and make up your own mind by discussing the directive with other experts in the field?

SEPA and PSD

Olga Morawczynski, University of Edinburgh

[Dave Birch] Olga Morawczynski is a Ph.D candidate at Edinburgh University where she is researching... She has been living in Kenya, conducting ethnographic research on the M-PESA money transfer scheme. In this podcast she shares her observations on the scheme and discusses some ideas about the future.

Listen here in either [Podcast MPEG4] or [Sound-only MP3] format.

cash and cashlessness, mobile, podcast

Some real mobile, nfc and payment stuff in the UK

[Dave Birch] It would be silly to pretend that all is well in the world of mobile proximity payment. I'm a big, big fan of the technology -- particularly because I have seen at first hand the very positive consumer reaction to it -- but I have been open about some of the challenges and honest about the reality. Some of our clients have decided to develop a consensus between sectors whereas others have decided to go it alone: horses for courses. In the UK, it has to be said, we're some way away from the Japanese situation where mobile proximity is already a mass market even if penetration is not 100%. As I pointed out last year

About 89% of the DoCoMo phones sold have the mobile wallet (the Nokia phones do not have it), about 50% of au by KDDI phones have it and 46% of the Softbank phones have it. In total, although 43% of subscribers have the mobile wallet, only a third of them (14% of the total subscriber base) are currently using the mobile wallet function

[From 15Mb: another blog from David G.W. Birch]

In other words, about a sixth of Japanese mobile phone users already use mobile proximity. Meanwhile in the UK there are currently 0% of phones with mobile wallets! It's going to take some bold moves to get the market moving. The first example of this has been unveiled with the public launch of a product that Consult Hyperion has been working on for some time for Barclays:

Mobile operator Orange UK and credit card company Barclaycard have announced a long-term strategic partnership to develop m-payments technology including mobile wallet handsets.

[From Barclaycard, Orange share a mobile wallet - Financial Services - Breaking Business and Technology News at silicon.com]

Barclays chose CHYP to assemble product requirements into an initial specification, help to develop the functional specification for the product provisioning and management across the NFC ecosystem and to develop working prototypes to demonstrate concepts. I'm really looking forward to seeing the first fruits of this partnership -- an Orange phone that has a Barclays MasterCard built in to it -- arrive in the shops in the not-too-distant future, building on Barclays' rapid transition to contactless technology in the card space.

[Barclays] will deliver the new contactless cards to customers when their current cards need to be replaced. New customers signing up to a Barclays current account will also receive the new type of card. The bank estimates that up to three million customers will be using contactless debit cards by the end of the year [and] the majority of Barclays debit card customers will have contactless cards by 2011.

[From The Paypers. Insights in payments.]

This is a great time to be in payments!

mobile