Square might be a first step towards cashlessness

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[Dave Birch] Remember way back when, over a year ago (that’s a decade in internet years), Square came align with their cute little device to save you from having to type card details into your iPhone…

Square, an application that turns a smartphone into a mobile cash register, is open for business.
Created by Twitter co-founder Jack Dorsey, Square uses a free download and plastic card reader to let users accept credit card payments.

[From� Mobile-phone cash register Square open for business - CNN.com]

Square has gone through the roof. It’s real innovation wasn’t that you could read the cards with a smartphone (other people make excellent devices for that:� Verifone and� Intuit for example) but that you didn’t need a merchant account with a bank. You could just sign up and start taking payments. This opened up a whole new market, especially for SMEs, micro enterprises and individuals.

Businesses with many small transactions should look at Square closely, while businesses with high average ticket size should get a competitive merchant account with interchange plus pricing.

[From� Should small businesses use Square? | VentureBeat]

Surely this is only part of the comparison though. The school fete cake stand can’t have a merchant acquiring account, whatever their transaction mix. Just trying call your bank and asking them “hey I’ve been asked to run the lemonade stand at the village fair on Saturday and I’d like to accept card payments, can you send over a POS device” to see how far you get. Anyway, customers reveal preferences tell the story.

Square’s Keith Rabois also revealed a number of growth statistics for the company, including that the payments service is now processing $2 billion in payments volume per year. To date, Square has been activated by 800,000 merchants

[From� Square Processing $2B In Payments Per Year, Has Signed Up 800K Merchants | TechCrunch]

I was reading a story about Square on the web the other day and I found the comments quite interesting, because they tell you what the consumer users think about it rather than what people like me think about it.

I use my Square reader all the time to get reimbursed for utilities in the house I share with three other guys; the small hit I take for the fees is nothing to get the cash right away (and not have to mess with checks).

[From� Square ditches $1,000 per week limits, has 800,000 merchants processing $2 billion per year—Engadget]

It’s these kinds of prosaic applications that have taken Square into all sorts of interesting new areas. In retrospect, it’s easy to see that the demand was there and not met.

On Saturday, I was at the Middle School, manning the snack booth for the regional band competition. I did pretty well – over 50 sales! But what fascinated me was that three people asked, somewhat plaintively, if I took debit cards… They were all young moms.

[From� Maybe Cash Really Is Going Away? — Payments Views from Glenbrook Partners]

I may not be in the same demographic, but I’m certainly of the same sentiment. In fact, I’d go a bit further. When I was buying something to eat at one of the stands at Waterloo station the other day, I was positively annoyed when I couldn’t pay for a £4.95 snack by just tapping my contactless credit card but instead had to insert the card, enter the PIN and wait for authorisation. Who has the time?

He said that his entire cab fleet converted to Square at the request of the company’s owner. After four months of use, he loves the device. “It’s a lot quicker and easier,” Mabyae said. He also noted that relative to their old way of accepting credit cards, it seems more secure for passengers.

[From� Square, the iPhone Credit Card Machine, Goes Mainstream - Alexis Madrigal - Technology - The Atlantic]

Secure, convenient, affordable and able to pass the most severe of cash replacement tests, the cab driver. That’s pretty impressive! I take my hat off to them, but I would also note at the same time that Square isn’t really that radical. It runs on the existing rails. It makes them better, but it doesn’t make them cheaper or more flexible. There’s an argument that says that the incumbents will only allow in competitors who do not disrupt the existing infrastructure.

Square, a payments company that is a media darling frequently cited as a leading innovator, does not disrupt the financial infrastructure in any way. In fact, Visa just invested in Square directly because it does such a good job of propagating the status quo.

[From� In Fifty Days, Payments Innovation Wi… by Aaron Greenspan - Quora]

So Square almost certainly isn’t the end game because there’s plenty more disruption to come. But it is plausible to postulate that Square is a first step into making cash seem inconvenient. insecure and expensive? What if people really didn’t want to take cash unless they absolutely had to? What if using cash became seen as being socially irresponsible, like drunk driving? Well, what if that were true?

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Operation Mervyn

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[Dave Birch] A few weeks ago I mentioned the interesting story of� Hitler’s attempt to destroy the British economy by printing £5 notes and thus causing inflation. His plan was called “Operation Bernhard”.

Hitler hoped the £134million of counterfeit notes he produced in ‘Operation Bernhard’ would force a huge hike in inflation and spark a cash crisis

[From� Adolf Hitler’s fake British bank notes expected to fetch £2k at auction | Mail Online]

I’m hoping to buy one of these fake notes – I’ve seen a couple for sale near Charing Cross already – but that wasn’t why I was thinking about this story again. It was because, as I mentioned on Twitter, I happened to ask someone who works at McDonalds how the use of contactless payments is going, since they are one of the retailers that has gone for a national roll out.

Fast-food restaurant chain, McDonald’s, will roll out contactless payments in all of its 1,200 UK stores by the end of October.

[From� McDonald’s to roll out contactless payments in 1,200 UK stores - 1/24/2011 - Computer Weekly]

My source told me that they saw more people trying to buy their burgers with counterfeit £50 notes than with contactless cards. Are there a lot of counterfeit £50s or not very many contactless cards? Perhaps it’s the former!

In addition, the Bank revealed, some 300,000 counterfeit notes with a face value of £5.9m were taken out of circulation – a 48pc improvement on the previous year.

[From� Bank of England pays 82 people more than £100,000 - Telegraph]

Of course, these are a very tiny fraction of the increasingly worthless banknotes being printed round-the-clock by the Bank of England anyway. According to the Bank of England’s statistical release for June 2011, the narrow money supply (M0) comprising the notes and coins in circulation is currently 2.74% of the broad money supply (M4). This is actually up slightly on this time last year, which I believe is a reflection of the number of £50 notes going into “circulation”. Since a great many of these are apparently fake, the Bank is today launching a new version.

One of these features, called Motion Thread, includes semi-translucent windows woven into the note that show the £ symbol and the number 50 when held up to the light.

[From� New £50 note released with increased security features - Telegraph]

There’s always been, and will always be, an arms race between the Bank and the counterfeiters and its hardly likely to end here. In fact, as has been discussed for many years, the next step will almost certainly involved chips and printed electronics rather than conventional printing and paper manufacture.

Some of you may remember Paul Makin’s super presentation about “E-ink and smart banknotes” at the 13th Digital Money Forum in London back in March 2010. The presentation was based on some work that Consult Hyperion had been doing with the Bill & Melinda Gates Foundation.

[From� Digital Money: Smart art]

This sort of technology is improving all the time. It won’t be too long before some of the apparently crazy ideas discussed at the Forum in recent years – ranging from banknotes that change their value to banknotes that display the Facebook profiles of their owners – will be entirely feasible.

Modern banknotes contain up to 50 anti-counterfeiting features, but adding electronic circuits programmed to confirm the note’s authenticity is perhaps the ultimate deterrent, and would also help to simplify banknote tracking.  Silicon-based electronic circuits are clearly too thick to be incorporated into thin and fragile banknotes, but semiconducting organic molecules might be a viable alternative… A team of German and Japanese researchers created arrays of thin-film transistors (TFTs) by carefully depositing gold, aluminium oxide and organic molecules directly onto the notes through a patterned mask, building up the TFTs layer by layer.

[From� Banknotes go electric to outwit counterfeiters - tech - 21 December 2010 - New Scientist]

Whether they are desirable or not is another matter. Personally, I would have thought that a better security feature would be stop printing the damn things altogether. What is the point of them?

When was the last time you had a £50 note in your pocket? Can’t remember? You may be surprised to learn that, according to the Bank of England, there are 212 million £50 notes in circulation valued at £10.6bn. That is 84% higher than seven years ago.

[From� Launch of the new £50 - a history of banknotes - Personal Finance Newsroom | HSBC Bank UK]

I simply couldn’t tell you when I last had a £50 note. Thinking about it, I’m not sure I’ve ever had one. But since I don’t sell drugs, dodgy scrap metal or improper influence, I’ve never had the need for one. I can’t help but wonder if the new £50 note isn’t another nail in the coffin of cash, but if you see anybody with one then you will automatically assume that they are tax evader or engaged in a criminal conspiracy of some kind.

The integrity of the banknote industry is at stake; if central banks and the wider public lose confidence in their banknotes and suppliers, cashless payments will undoubtedly gain further momentum.

[From� Industry in Crisis? — Counting On Currency]

So it’s not all bad news then.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Friends with things

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[Dave Birch] I enjoyed the presentation that Christophe Langlois (Visible Banking) gave to the Financial Services Club in London and particularly the enjoyed the question and answer session afterwards. Christophe was talking about banks’ use of social media and was comparing and contrasting some different approaches that explored further in his new book “Customer Experiences without Borders” (which I won a signed copy of at the event, hurrah!). During the question and answer session, I made the point about the mismatch in the use of social media.

I don’t want to be friends with my bank—after all, I’m a typical consumer so I hate banks—but I do want to be friends with my bank account. Why can’t Barclays let me friend my current account so I can see its status updates like “Premium card fee £10.00”, “Direct Debit British Gas £37.85” and “Counter Credit £5.00” and so forth?

[From� Friends and relations]

This is a point that I amplified in Retail Banker Interactive, finishing up with plea.

So a plea to my account, card and service providers: I don’t want to be friends with you, because you are corporations and not mates, but I do want to be friends with my stuff: my money, my cards, my phone. How hard can it be?

[From� Social media is not just another communication channel - Blogs - Retail Banker Interactive]

A discussion about this continued over drinks, and I am indebted to David Harris from� salesforce.com for bringing a fascinating example to my attention. Apparently, Toyota are going to have a system whereby you can be friends with your car, which is a great idea.

For example, if an EV or PHV is running low on battery power, Toyota Friend would notify the driver to re-charge in the form of a “tweet”-like alert. In addition, while Toyota Friend will be a private social network, customers can choose to extend their communication to family, friends, and others through public social networks such as Twitter and Facebook.

[From� Toyota USA Newsroom | Salesforce.com and Toyota Form Strategic Alliance to Build ‘Toyota Friend’ Social Network for Toyota Customers and Their Cars]

So your friends could be friends with your car too. You might wonder why anyone would want to do this, but consider this: my sister has borrowed my wife’s car for a couple of days while she goes looking for another car, so it would be great if my sister could be friends with my wife’s car (and it would make sense for me to be friends with my wife’s car and vice versa) for a time.

What I’m not sure about is if I would want these connections to be in my hilariously-entitled “real name” or via a network like Facebook. I’m not paranoid, but I don’t want to be bombarded with crap all the time because Facebook has noticed that one of my brake pads is wearing a little thin and has sold this information to a hundred different brake pad companies around the world. And I’m sure it will only be a matter of time before some guy tracks down and murders his ex-girlfriend because she forget he was friends with her car so knows where she is.

There’s a layer of infrastructure missing here and I hope that the Cabinet Office’s Identity Assurance Programme that we were discussing yesterday is going to take this into account. They’ve finally got a budget so I hope that some of the input from the Working Groups can now be acted on.

Cabinet Office minister Francis Maude has earmarked £10m for implementation of the government’s Identity Assurance (IDA) programme,

[From� Government earmarks £10m for Identity Assurance and targets over £500m savings - 10/31/2011 - Computer Weekly]

So what has being friends with my bank account got to do with the Cabinet Office? We need an identity infrastructure for things as well as for people. I need to delegate permission to access my wife’s car to my sister just as I need to give permission for my sister to be friends with my wife’s car for a while. Right now, there’s precious little security around people, but even less around things, largely because the “internet of things” wasn’t designed with security in mind.

Typically, the person who designs the embedded software system for a car or a power grid system or a generating system are engineers who learn programming maybe as part of their engineering course, but they are not trained computer scientists or computer engineers. The point is that someone whose primary job is understanding control theory is not someone who knows anything about software vulnerabilities.

[From� The internet of things | Interviews | Opinion, News, Analysis | BCS - The Chartered Institute for IT]

If this sounds esoteric, it isn’t. It’s a real issue that should be taken seriously as input to the deployment of devices right now. Here’s a straightforward example from Rob Bratby.

The deployment of smart meters is one of the most significant deployments of what is often described as ‘the internet of things’, but its linkage to subscriber accounts and individual homes, and the increasing prevalence of data ‘mash-ups’ (cross-referencing of multiple databases) will require these issues to be thought about in a more sophisticated and nuanced way.

[From� Watching the connectives | A lawyer’s insight into telecoms and technology]

So I should be able to make friends with my electricity meter and under some circumstances I might need to be friends with my father’s electricity meter but I don’t want burglars and ne’erdowells to be friends with it. It seems to me that we already sort of know how to do this sort of thing: we understand public / private key pairs, tamper-resistant stores for private keys, certificates, selective disclosure and everything else. But we’re going to end up using Facebook Connect, because it’s all too complicated for the marketing people to understand and we haven’t yet found a way of explaining it to them.

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers


These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.