Digital Money Forum

Transports of delight

[Dave Birch] As we have often discussed, transit is turning out to be the key battleground for mobile, contactless and mobile contactless technologies. In a city such as London, where several million people use contactless cards every day, the relationship between transit and payments is actually shaping the evolution of payment products. I read today, for example, that London continues to be in the vanguard of the transport revolution and next year people will be able use bicycles. OK, so bicycles were invented some time ago, but these will be bicycles with smart cards (hence of interest to yours truly).

By May 2010, Londoners will be using contactless smart cards to access a new public bicycle sharing program. The project will include 431 bicycle docking stations installed in nine of London’s boroughs and parks.

[From ContactlessNews | London to adopt bicycle sharing program in spring]

Unfortunately, you won't be able to use any of the contactless cards that you already have (eg, your Oyster card or your EMV card) because in the great British tradition of transport-related foresight and interoperability, the system is going have its own new contactless scheme. However, the London interoperability news is far from bleak, because Transport for London have already said that their new gates, to be introduced in 2011, will read EMV cards as well as Oyster cards and both Visa and MasterCard are working on extensions to the EMV specification so that terminals can write small amounts of service provider data back to cards (I imagine other retailers will want to take advantage of this in the future, not only transit operators). Their joint (and rather appealing vision) is that when visitors come to London in the future then they can use their bank cards to ride on the tube and the buses instead of having to get an Oyster card. If only TfL were to extend Oyster in the other direction as well, so that you could use your Oyster card in shops...

Where there is more direct competition between transit payment products and bank payment products, one might expect to see more competition and more innovation. I think an interesting case study right now is Singapore, where the government helped to co-ordinate the development of a common electronic money standard to be used by all sectors (the Common Electronic Purse Specification for Singapore, or CEPSS) and consumers can now use either card in any terminals.

COMMUTERS will now have two payment cards to choose from to use on buses and trains, to pay for road tolls and carparks, and to make purchases from stores, eateries and entertainment outlets. On Friday, Nets (the Network For Electronic Transfers) launched its long-awaited multi-purpose contactless card, the first to break EZ-Link's longtime stranglehold on the $1.3 billion transit market. Like ez-link [which has 4.6m cards], the Nets Flashpay card has multiple uses, giving consumers wider modes of payment at a greater range of outlets. In November, local banks UOB and OCBC will come on board, followed by DBS next March, to offer bank debit cards that also double as Flashpay cards. This means customers can top up their cards directly from their bank accounts.

[From Nets, more uses than one]

Meanwhile, in a related tale, imagine my shock when I got on the bus this morning and discovered that it is making the transition directly from the 19th century to the 21st: you can't use cards, but now you can use mobile! Hurrah! The bus is my bellwether for cash replacement, and I particularly hate having to scrabble round the house in the morning trying to find change on the days when I am riding the bus into town. I'd prefer it if I could use my Oyster card, frankly, because then all of incidental travel would be going on to one card, but no matter: the future has arrived!

Customers across Arriva’s regional bus businesses in England, Scotland and Wales, will be able to buy daily, weekly and four-weekly tickets via their mobile phones following the national launch of Arriva’s m-ticketing service on Tuesday, 17 November.

[From ARRIVA - Bus users get mobile with Arriva m-ticketing launch - News - Arriva buses]

I asked the bus driver if this technological revolution were exant, or if it existed only on someone's Powerpoint somewhere, and he told me that yes, indeed, you could now use your mobile phone to get to Woking Station. He did point out that he might not let me on the bus, though, because he wasn't told by the company what "colour each day was". I had no idea what he was talking about. But it turns out that it's something to do with the barcodes that are displayed on the phone by the ticketing application.

Anyway, when I got home I rushed to sign up and... found out that the mobile ticketing system doesn't work with my iPhone. Oh well.

Bear market

[Dave Birch] Russia is looking like a pretty interesting market for e-payments. The management consultants keep telling us to focus on the BRIC (Brazil, Russia, India and China) for our next growth markets, but it's important to understand that their mass, retail, e-payment markets are just not going to be like ours, partly because of industry structures, partly because of government direction and partly because of the technology starting point.

Russian central authorities are reportedly considering plans to set up an electronic payments network... The main objective of the prospective electronic payment system would be to challenge the dominance of established brands such as MasterCard and Visa, which currently hold around 85 percent of the Russian cards market. The plans for a Russian-operated electronic payment network come after in June 2008, Russia’s two largest banks – Sberbank and VTB Group – have teamed up to create the United Russian Payment System (URPS).

[From The Paypers. Insights in payments.]

What might the Russian "third scheme" look like, compared to a European "third scheme" (eg, PayFair)? Well, one reasonable prediction might be that the lack of infrastructure in Russia (Russia is a very big place) means that their third scheme might well jump ahead of the European third scheme in terms of its technology platform. Indeed, there are already strong indications that mobile and contactless technologies will be moving ahead quite quickly in that environment.

The head of Russia's largest bank briefed the country's President Dmitry Medvedev on the concept of mobile contactless payments last week — and explained that he is looking to launch a non-contact mobile payments system by 2011/12.

[From Russia looks to introduce mobile contactless in two to three years • Near Field Communications World]

A national contactless purse (perhaps a bit like NETS in Singapore or Touch n'Go in Malaysia) in a country the size of Russia would be a really interesting development. Singapore has shown that some judicious government steering can help to migrate to a contactless environment that is convenient for consumers who will...

...now have two payment cards to choose from to use on buses and trains, to pay for road tolls and carparks, and to make purchases from stores, eateries and entertainment outlets. On Friday, Nets (the Network For Electronic Transfers) launched its long-awaited multi-purpose contactless card... EZ-Link launched a similar contactless multi-purpose card in January.

[From Nets, more uses than one]

Transit is the vanguard, as always, but the point here is that competition to provide interoperable e-purses is at least a good step forwards.

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.

Murdo Munro, Paytekh

[Dave Birch] Murdo Munro of Paytekh is an experienced payment systems product / program director with a track record in successfully identifying, developing and deploying chip, mobile and internet based propositions for MasterCard. In this podcast, he shares some of his ideas formed while working on PayPass and raises some issues around contactless and prepaid.

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

Transit at the summit

[Dave Birch] I had a lovely day out in London at The Economist's Digital Money Summit. We had a really good set of speakers coming at the subject from a number of different directions, and I thought that the combination of speakers that they had chosen (me included, of course) worked together very well. I found the case studies provided by the transit operators to be particularly interesting, so I thought I would pick on them to pass on what I thought were a few key points from the day. I came away thinking that the fact that digital money is on the Economist's agenda together with the excellent feedback I received from the event means that, despite the credit crunch, improvements in retail and electronic payment systems are of interest to a variety of businesses and personally I'm looking forward to helping some of them innovate their way through recession.

Small change we can believe in

[Dave Birch] You can't accuse this blog of not keeping up with change in current events. For example, I notice in my Daily Telegraph that there has been an election in the United States and there's going to be a change of President. At these times of great change, I turn to economists to inform us as to the key monetary and fiscal changes that the new leader of the free world should adopt. I heartily endorse these two important policies concerning change:

# Get rid of pennies.
# Replace the dollar bills by dollar coins.

[From Economic Logic: Change I can believe in]

Hear, hear. I cannot understand the attachment to the dollar bill, even taking on board the inherent conservatism of people towards money. My American wife, who suffers taxation without representation here in the Mother Country, tells me that the issue is psychological. A dollar coin would make people feel that a dollar isn't worth very much any more. Which it isn't: it's worth literally a fraction of what it was worth when it was first issued as a note.

Not really a classic

[Dave Birch] The ramifications of the MiFare classic shenanigans that we have discussed here before continue to widen.

NXP said that the decision meant that affected parties such as system integrators and operators using MIFARE chips would likely want to review their systems, but that October was not long enough to deal with the problem properly.

[From Oyster card ‘free travel’ hack to be released | IT PRO]

NXP were right to point out that not every single card everywhere in the world needs to be replaced instantly, but our original conclusion that many schemes would need to start planning their upgrade route right away has turned out to be entirely justified. The story is a salutary parable about the benefits of "open" versus "closed" security, with a dash of hubris thrown in, and the need for long-term planning with these kinds of secure transaction systems. You might, by the way, be interested in this Channel 4 News segment on the Oyster card in London, which includes interviews with our friends from Royal Holloway and The Smart Card Group.

Reasons to go contactless, part 97

[Dave Birch] Does anyone know if this story is true? Apparently, In 1997, to mark the handover of Hong Kong, coins bearing the Queen's head were replaced with coins engraved with a bauhinia flower. Passionate speculators, Hongkongers began hoarding the old coins, convinced they would be worth something. By the end of the year, when the Octopus card was launched, there was a serious coin shortage. Convenience stores began giving change in kind - either as chewing gum or other small items - or simply insisted on the correct money. Anyone trying to buy tickets from machines taking coins had a problem, unless they had the time to queue up at the bank to get their (carefully rationed) coin supply. So when buses and minibuses, which had taken coins, began accepting Octopus cards, it was not hard to persuade people to get them.

The key role of transit

[Dave Birch] At a couple of events I've been too recently, the key role of transit applications in the NFC world has been reinforced. In some markets, it may well be transit rather than payment that is the initial driving application for NFC handset rollout, which means that the payments guys need to work with the transit guys (both at the simple level of auto-topup but also with more complex value-added services, such as transit-based rewards) to bring the customers on board. Yesterday, another transit-centric NFC pilot was announced yesterday, this time in San Francisco.

Beginning today, pre-selected trial participants will exchange their existing mobile phones for the Sprint trial phones embedded with the NFC enabled smart chip - a chip that will allow them to securely pay for both their fares and their fries. “In BART's case, a participant will initially have a stored value of $48 worth of BART rides loaded onto their NFC enabled mobile phone,“ BART Director James Fang said. “Once the stored value drops below $10 the NFC technology automatically reloads the phone “˜over the air' with another $48 worth of rides and the customer will automatically receive our high-value discount, so they will only be charged $45.“

[From => BART Trial First to Use Mobile Phones to Pay for Fares & Food <=]

In case you're interested, here's one of the phones that I was playing around with in our office:

Many, many years ago I used to work at BART, so I couldn't resist posting a picture over on one of my other cyberdens. If you want to see some truly shocking behaviour in the Bay Area in the 1980s, have a look over on my personal work blog.

Japanese lessons

[Dave Birch] Back looking at Japan again, but this time thinking about the non-bank entrants to the payment space, other than DoCoMo of course.  There was a detailed story in Card Technology covering the transit side of things.  Mobile Suica, the mobile version of the JR East Suica transit card, has got off to a slow start.  There are 19 million of the contactless transit cards in circulation but after its first year only 350,000 people signed up for the mobile version.  In addition to the mobile implementation, JR East have started to extend the e-purse usage to retailer, but there are only 10,000 POS locations in Tokyo where it can be used.  Not for long, though, because JR East, DoCoMo, JCB and bitWallet have announced that they have agreed to share a common platform so that all of the payment brands (Suica, iD, QUICPay and Edy) will work in the same POS.  There are currently about 100,000 contactless POS terminals in Japan.

Why the slow take up?  Akio Shiibashi, director of the Suica Systems Department at JR East is quoted saying that the registration process has been "difficult" for many prospective users.  Sounds like a common problem for "traditional" business moving into the mobile space: a generation accustomed to instant messaging and interactivity colliding with a multi-page application forms and postal services.

Technorati Tags: contactless, mobile, retail, transit