Digital Money

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

Can contactless save content?

[Dave Birch] I've always been interested in the potential for micropayments and the idea of a metaphorical "red button" on a keyboard that means "pay the owner of the web page I'm looking at 10 pence" or something similar. There are many times when I've come across an interesting or useful blog post, link to a magazine article or something and I would have happily paid a small amount for more detail, more links, more references. I certainly can't be bothered to type in usernames and passwords, credit card details or to take out subscriptions though. So I have the sense -- despite all of the reservations about micropayments, which I understand fully -- that there is a market out there and a synergistic link between an effective low-value online payment system and a vigorous and innovative sort-of-content but also sort-of-relationship set of businesses on top of it. This view has been a minority view for some time, because the advertising-supported model came to dominate the content space. Yet, as I said last year, that model is not obviously the best solution, nor is it an immutable law of the web:

Therefore, while it is true to say that there is little demand for new micropayment mechanisms to support paid content at this time, I would not rule out a resurgence of interest in more sophisticated micropayment schemes in the future.

[From Digital Money Forum: Microebb and microflows]

While watching Jon Stewart's Daily Show the other night, my interest was re-kindled by his interview with Walter Isaacson of the Aspen Institute. Many years ago I used to be one of the lecturers/facilitators for the European branch of that august body, the then Nortel Aspen Institute, so he caught my ear (so to speak) when he started talking about paid content, journalism and the future of news. A quick google revealed that he'd actually written a story about this for Time magazine, in which he referred to the odd paradox of content that has been noted here before.

Thus we have a world in which phone companies have accustomed kids to paying up to 20 cents when they send a text message but it seems technologically and psychologically impossible to get people to pay 10 cents for a magazine, newspaper or newscast

[From How to Save Your Newspaper - TIME]

There are some immediate explanations that spring to mind: perhaps people ultimately value communications more than content (which I believe to be true to a great extent) or perhaps the content isn't actually worth 10 cents (which I also believe to be true to some extent, especially since I'm writing this on a train, having finished reading the free newspaper given to make at the station) or perhaps people just won't pay for news but that means nothing for content in general (entirely plausible. But the technological determinist in me is drawn to another explanation: people won't pay 10 cents for stuff on the Internet because they can't, whereas they will spend $2 for a stupid ringtone on their phone because they can. Perhaps the technology is to blame. Isaacson goes on to say just that.

We need something like digital coins or an E-ZPass digital wallet — a one-click system with a really simple interface that will permit impulse purchases of a newspaper, magazine, article, blog or video for a penny, nickel, dime or whatever the creator chooses to charge.

[From How to Save Your Newspaper - TIME]

Put the news part of this to one side and ask why don't we have this? It's not like micromint, hashcash, millicent et al didn't work. In fact many of them had very good technology inside them and many of them had some great ideas built in (I always liked the way that millicent, for example, changed the cursor to a "$" sign when you moved the mouse over a link that you would have to pay for). And it's not like no-one has a working micropayment system: on my iPhone I pay for data, for voice, for applications, for text and I make 59p micropayments for music all the time. But can the iTunes example tell us any more? Clay Shirky, who has been consistently sceptical about micropayments asks a very specific question about this:

small payments survive in the absence of a market for other legal options. What’s interesting about ITMS, though, it that it contains other content that illustrates the dilemma of the journalists most sharply: podcasts. Apple has the machinery in place to charge for podcasts. Why don’t they?

[From Why Small Payments Won’t Save Publishers « Clay Shirky]

This is a good point, but is Clay right? I already do pay for podcasts -- I support the Conversations Network -- and, oddly, there is a lot of podcast content that I would pay for that is actually free -- some of my favourite podcasts, for example, such as Dan Carlin's Hardcore History or Skeptoid -- despite the existence of a working payment system through my iPhone, so clearly there is another business model emerging as well, one that was sagely summarised many years ago by Esther Dyson as "content is an advertisement for a relationship" and it's the relationship that is going to be monetised, not the content at all. But let's focus on paid content for a moment. Some of the responses to Isaacson's piece have been rather negative, and there's no doubt that the relationship between content, journalism and the net is a complex one.

I'm not saying that problem is insoluble. Just that, as far as I know, no one has solved it yet

[From Poynter Online - Romenesko]

We can begin to look for solutions by narrowing down the options. I suppose I start from the general perspective that "proper" news is a good thing and that we ought to have some of it instead of the musing of the celebretariat.

There’s no guarantee that private demand will produce the socially optimal quantity of investigative political reporting.

[From A Voucher System for Investigative Reporting - Freakonomics Blog - NYTimes.com]

If a free press is a public good that cannot be satisfied by private demand, then it doesn't matter one way or the other whether we use micropayments or not: we will have to come up with more radical solutions to the problem of news provision (as opposed to the narrower problem of how to save newspapers).

Newspaper readers have never paid for the content (words and photos). What they have paid for is the paper that content is printed on.

[From Op-Ed Contributor - You Can’t Sell News by the Slice - NYTimes.com]

So it may well be that news is a very special case of content and that it needs very special solutions. Indeed, I will be chairing a seminar on this topic at the Free University in Brussels on 19th March 2009 (for the Fleet project) and hope to develop my opinions further there.

contactless and nfc, internet, micropayments, mobile, stickers

BarCampBank biometrics

[Dave Birch] I'd never been to a BankCarCamp before so I wasn't sure what to expect at the BarCampBank London last week. I needn't have worried: as well as Forum friends such as Chris Skinner, Stephen Mason and James Gardner, there were both old pals and new acquaintances. The discussions were open and fluid and the combination of views did its job in generating new thinking. I was only sorry that I had to leave at lunch time to get over to OpenTech. One of the groups that I took part in was looking at the use of biometrics at retail POS and I tried to write up some notes to report on the key issues, as I thought blog readers would find them interesting. The discussion ranged over three fairly distinct areas: the drivers for biometrics at POS, the technologies and the business case. So far as the drivers go, the CHYP position has been reported before:

Biometrics work well in controlled environments such as ATMs, it's true. But it's not clear -- despite a number of roll-outs -- whether they offer a realistic alternative to cards at POS because, as we have consistently advised our clients, biometrics at POS are driven by convenience, not by security.

[From Digital Money Forum: Fingering suspects]

I think it's fair to say that most people felt the same way, although there was some discussion on whether POS fraud is high enough to demand more security but the consensus was that it was not. As for the issue of technology, framed by the debate about convenience, it was not clear to me that the example often used, the fingerprint, has much role to play going forward. It doesn't provide a particularly good trade-off between convenience and security, for one thing, and to many people it has connotations of criminality. Nevertheless, the technology is moving along and standardisation will help it:

“I think that ISO 19092:2008 will certainly be the kick start that biometric security needs, as it will provide the financial industry with some fantastic guidelines to enable them to implement both the architectural and policy/procedural changes required,” says Jason Pearce, director of sales engineering in Asia-Pacific for RSA, the security division of EMC.

[From Vendor Articles: 4/7/2008 Biometrics usage to pick up with new ISO standard?]

There are plenty of other biometrics to choose from, but surely we will end up using voice, for the straightforward reason that it can function in both local and remote environment, unlike biometrics such as fingerprints (because a remote service provider couldn't tell if you were really putting your finger on the reader or replaying someone else's. But for the purposes of the discussion, we can assume that the technology is there (provided it's main purpose is convenience rather than security). A couple of people mentioned the combination of biometrics and mobile phones as being a promising avenue for exploration and I must agree. The mobile phone is clearly going to be the key device in the consumer space, so for biometrics to go with the grain they have to embrace the mobile from the start.

The business case discussion naturally focused on fraud and the relationship between biometrics and other technologies (eg, contactless) at point of sale. I can't say that this part of the discussion came to any particular conclusions (if it did, they're not in my notes) but the fact is that the chip and PIN migration has led to substantial reductions in POS fraud (and substantial increases in CNP fraud) so there's no desperate need for another technology at POS, especially when the retailers and banks are already engaged in rolling out contactless.

Back to biometrics

[Dave Birch] I was surprised that the first item on the BBC news yesterday was again about card fraud (which they insist on calling chip & PIN fraud when it is only the PIN that is compromised).  The main part of the report was entirely about petrol stations -- and even claimed, I think somewhat imaginatively -- that motorists are starting to use cash instead of cards.  I wonder if the extent of the reporting of the fraud, if not the fraud itself, will genuinely cause a backlash against card use for fuel?  And if it does, will people really go back to cash or will they instead prefer to move to a biometric solution such as the PayByTouch system installed at the Stop 'n Save gas and convenience stores in Colorado, some of the 2,000 U.S. retailers that use the technology.  Of these, Piggly Wiggly has the best name, in my opinion.

Technorati Tags: ATM, banking, biometrics, credit cards, debit cards, fraud, security