CSFI Innovation in Payments

London is good place to try things out

[Dave Birch] There's an almost perfect storm coming in London. For those of us interested in technology and innovation that is, I don't know so much about the sport! The city will become the focus of the world's attention with the Olympics in the year 2012. This is obviously an opportunity to showcase the best of British technology. One area of great interest, given the nature of the event and Visa's sponsorship is payments. Here, London is in an interesting position because it is already home to some of the worlds most advanced retail payment technology. The UK banks launched contactless here and a very successful trial with Barclays, O2 and Transport for London (TfL) has already seen mobile proximity payment and ticketing in action. Britain as a whole has a very vigorous mobile industry with national networks competing for customers and service providers competing to deliver new products and services to those network customers. Mobile penetration is high and the inventiveness of the developers is part of British tradition of innovation around new technology.

Oyster cards could be turned into jewellery, or hidden away in a mobile phone's battery compartment, a student's project has revealed. Chris Woebken, a design student at the Royal College of Art put an Oyster card in a pot filled with nail varnish remover to dissolve the plastic and was left with the RFID tag and the coiled wire of the antenna. He then tried paying for his transport around London using the stripped down Oyster card and had no problems.

[From Oyster cards melted and made into jewellery - London News]

Imagine what this generation of designers to going to do to payments!

Contactless in London

[Dave Birch] The early evidence coming back from the retail pioneers is that contactless does, in fact, have the predicted impact on transactions in the relevant categories (ie, categories such as quick-server retail, where contactless ought to have an impact). It speeds transactions and simultaneously delivers an increase in average transaction size. Interestingly, it seems that the use of open (eg, Visa) contactless products delivers a transaction uplift over the closed stored-value cards used on many education, corporate and government campuses.

Greater success occurs with the complete replacement of aging stored value card systems, resulting in lifting cashless sales from less than 10 percent of total sales to an average of 38 percent with credit/debit cards;

[From Payments News: New Cashless Vending Research - September 11, 2008]

This, to me, reinforces the rather obvious link between contactless and prepaid: a contactless platform for a prepaid product would mean that the two were mutually reinforcing in the assault on cash for low-value transactions, because of the increase in convenience (at both levels) over conventional card products. A contactless offline transaction is the fastest possible to way to pay for something, faster even than getting coins out of your pocket and throwing them at the shopkeeper.

It seems to me that bringing together consumers' revealed preferences is straightforward: pre-paid payment products (or pre-authorised debit products) on contactless payment platforms look like a winning combination.

[From Finextra: comment - Is the e-purse coming back?]

That doesn't mean that implementing contactless interfaces, by itself, means that contactless pre-paid payments will automatically succeed. A rather obvious reason for this is that there's a link between the types of POS and retailers and the desirability or otherwise of the payment mechanism. if there are no contactless interfaces at the kinds of POS and in the kinds of retailers that are optimal, then contactless isn't particularly interesting. When I do my weekly shopping at Lidl, the time taken to carry out a chip and PIN transaction is a small fraction of the time it takes me to buy a trolley full of bargains. But if I run into EAT for a sandwich, then paying quickly is part of the proposition.

European goals

[Dave Birch] I blogged over on Digital Money that I happened to be at the recent Financial Services Club dinner with Charlie McCreavy, the EU Commissioner for the Internal Market and the man behind initiatives including MiFID, SEPA and the PSD. I can't report what he said, because the dinner was under Chatham House rules and we were asked to seek permission to use any quotes, which I can't be bothered to do. So without mentioning specifics, it was an opportunity for me to the general direction of regulation since it's likely that one of the outcomes of the current crisis in the financial sector will be more regulation of all financial services. If this is the case, I hope the regulation will have more concrete and explicit targets to that we can measure whether it is working or not. Suppose, to pick an obvious example, that the purpose of SEPA was to reduce the total social cost of payments in the eurozone from the current 0.5% to, say, 0.25% in a decade. Then we could decide for ourselves whether the costs incurred (which in this case are substantial) are, in the long run, justifiable. Not regulation for political purposes but regulation to increase the net welfare, which is how it should be. As it is, to an outside observer it must look as if nothing is happening, and at great expense.

Come that, that's what it looks like to an insider as well. Chris Skinner's typically blunt take on this tells the story...

For example, half way through, I asked the 100 or so delegates (mainly bankers and solutions providers) how different this year’s SEPA conference is to last years. The blunt question was: “has this conference shown any progress for the SEPA and PSD agenda over the last year?”... No-one thought there was anything new. I then asked how different next year’s conference will be. Do they think that much will have changed by this time next year? Less than 5% of the audience raised hands. In other words, no-one thinks that much has happened in the last year, and no-one believes much will happen in the next year, even with the PSD transpositions and implementation of SDDs.

[From swiftcommunity.net]

Given the huge expenditure, what was the point?

Announcing the 2009 Fellow

Visa Europe (Visa), the Centre for the Study of Financial Innovation (CSFI) and Consult Hyperion (CHYP) are pleased to announce that David Birch (Dave), one of the founders of Consult Hyperion is to be appointed the Visa Research Fellow in Payments at the CSFI for 2009.

Welcome

Welcome to the VRF blog that will report on the Visa Europe sponsored Research Fellowship in Payments at the Centre for the Study of Financial Innovation in London. the Fellow for 2009 will be David Birch, a Director of Consult Hyperion.