It is interesting to speculate on what will happen to the value chain when the euro-API is in place. Will the European Commission create a vigorous and dynamic financial services world, or replace its bogeymen (Visa and MasterCard) with bugaboos (Facebook and Google)?

The wonderful people at ECN invited me to Berlin to give the keynote at their Mobile Payments Innovation Opportunity and Risk conference. My presentation is up on Slideshare if you want to take a look, but I can tell you right now that it wasn’t the best presentation at the conference. That was made by Olivier Halluitte from Chappuis Halder & Cie, who gave a super overview of the new digital bank experience, delivered a fascinating case study around AXA’s “mobile first” bank Soon and handed out some insightful ideas around the model for services going forward. I’ll paraphrase what he said by saying that he saw the implementation of banking functions being hidden and accessed through an identity layer created and owned by Facebook, Apple, Google and such like. He is not alone in seeing a future role for banks as an API that delivers financial services. According to Perficient, and I’ve got no reason to disagree with them, this kind of “Connected Banking” is one of the top five trends in the financial technology world at the moment.

The use of APIs and integration to diversify and advance product offerings is the future of financial services. Innovators at some of the well-established financial institutions are extending access to banking services for developers and partners in today’s digital economy to deliver new products and services in the marketplace, personalize experiences, add new mobile services and protect people’s privacy through authentication.

[From Top 5 Financial Services Technology Trends – March 2014 | Perficient Financial Services Blog]

There is a danger that this “connected banking” model turns into a sort of “dumb pipe” model of banking, perhaps as is envisaged by the European Commission in their consultations around regulated third-party access to bank accounts (as discussed in part one of this API Blast). This was covered later in the day but our old friend Jean Allix from the Directorate GeneralCompetition (DGComp) and his colleague Philippe Pelle from Directorate General Internal Market (DGInt). Ulf Geismar from Edgar Dunn also referred to the “coming wave of regulation” and explained about the opportunities for new entrants to come into the payment space to compete in a fair playing field.

Here I am lobbying Jean Allix on your behalf.

I couldn’t resist asking, though, whether it really will be a fair playing field. Going back to the Olivier’s presentation, if the banks are essentially condemned to a future as utility pipes that are mandated to provide a “euro-API” for third parties (as discussed in part 2 of this API Blast), including the “OTTs” who have the relationship with the customer (and all the value-added services and profits) then they better have some plans to become operationally-efficient pipes otherwise they will be accumulated and agglomerated.

Naturally, this leads me to speculate what this will mean specifically for payments. If anyone can initiate payments through the API then won’t the fascist nature of monopoly capitalism shape the new business environment? How is opening up the market to competition going to help if the market is then dominated by (e.g.) Facebook and Apple instead of Visa and MasterCard? This cannot be what the Commission intends, but I am curious to know what other outcomes people are imagining. It could be that retailers and service providers take the initiative themselves and access bank account directly, for example.

I’m sure this won’t happen, of course, because I imagine that Visa and MasterCard are right now developing strategies for new push products that will sit on the euro-API and make it easy for merchants to accept new, lost-cost, hard-token, debit-lite payments.

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.

The post API Blast ends with part 3: euro-API, OTT, DGComp and DGInt appeared first on Tomorrow's Transactions.

I don’t understand why European policy makers continue to think about a “third scheme” for cards. The time has gone, so let’s move on.

In the winter 2013/2014 Journal of Payments Strategy & Systems (Vol. 7, No. 4, p. 344-358) there is an excellent paper by Ewald Judt and Malte Krueger called “A European card payments scheme: forever a phantom?” which is about the European so-called “third scheme”, otherwise known as the European Card Payment Scheme (ECPS), otherwise known (by me) as the EU Non-American Emergent Electronic Legacy Interchange Exclusion scheme, or the NEELIE for short.

The authors set out to try to understand why generations of European policymakers have failed to create a pan-European alternative to (in essence) Visa and MasterCard and conclude that (and I paraphrase) that there are three main reasons:

1. There are genuine economies of scale.
2. The historical timing of the MasterCard IPO and competition authorities pressure on interchange means that the opportunity has passed.
3. Bank management doesn’t care.

I think that this last point is important for policymakers to fully understand. Banks are not that bothered by the current situation, as it kinds of suits them. Now, when it comes to competition policy and interchange rates I have constantly argued the competition, rather than regulation in the sector. Policymakers should focus on competition in the payment sector – which we fairly have done to a great extent – and let the market work out interchange rates for itself.

Forcing banks to create a third scheme with low interchange rates just isn’t going to work. And it’s looking in the rear-view mirror anyway. If the European Commission wants to create a dynamic new payment service across Europe, why would it bother with cards at all? Why not a euro M-PESA, setting to one side the fact that the Commission is (as I understand it) going to rule against using M-PESA accounts in Romania as “euro basic bank accounts” under impending regulation. I don’t get it.

The authors point out the contradictions between, broadly speaking, using competition policy or regulation to obtain the Commission’s desired outcome. There is a tension that will need to be resolved at the policy level, because competition (my preferred solution) will not deliver what they want. I think this is a good thing, personally. I also think that the mental model behind this (that there should be a card that can be used at any terminal in Europe) is somewhat last century. Having 50 different cards in my wallet that I need to use in different places in Europe would, of course, be a real pain in the arse. But having 50 different apps on my phone? Not a problem: especially since the phone knows where I am so it can use an appropriate payment mechanism wherever I am and link all of them (via the proposed euro-API for banking) back to my account automatically so it doesn’t need to bother me about that sort of thing at all.

Celent does not believe that any of the main contenders will deliver a new viable and competitive European card scheme any time soon. Furthermore, we argue that the market has moved on in the last seven years, and the case for a European-only card scheme created from scratch is simply no longer there, if it ever was.

[From In Search of a Third European Card Scheme: Time to Move On | Celent]

Indeed. And that was written a couple of years ago. If we ever do build the NEELIE, it will be for political purposes, a sort of symbolic pan-European canal network in the age of the bullet train. Why bother?

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.

The post The phantom NEELIE appeared first on Tomorrow's Transactions.

As we have long advised our clients, a working push payment infrastructure (ie, smart devices and an immediate settlement network) means that a lot of day-to-day payments will shift to the infrastructure).

The “Push Payments Manifesto” at OpenPayee echoes my views on the long-term evolution of the retail payments sector precisely. I’ve written before about how effective push payments will displace other mechanisms, and the manifesto identifies the core reason why.

Payments made using any form of identity token which gives the payee the ability to pull the payment out of the payer’s account are bad.

[From Push Payments Manifesto | OpenPayee]

Quite. And as the manifesto points out, pull payments are a relic from the bygone past when consumers did not have devices and there was no network to connect them to. Now that there is a network and there are smart devices connected to it, there’s no need for these dated hacks. To illustrate the point, as I did at the BayPay London meeting recently, consider the prosaic (and in my case entirely hypothetical) example of gym membership.

Right now, this system “works” through continuous authorities (CAs) on cards. And, as we all know, these are nothing but hassle. If you’ve ever tried to stop someone from taking money from your card once you’ve given them an authority, you’ll know what I mean. People often find that the only way to do it is to cancel their card and switch issuer!

Now consider the modern alternative. You are walking down the street and a message pops up on your phone: it’s your Barclays app telling you that the gym have requested their monthly tenner. (Is this about right? I have no idea what gyms cost.) You put your thumb on your iPhone fingerprint reader to OK the transaction and go about your day. Meanwhile in the background there is an FPS transfer to the gym account and about one second later they have their money. Now, you probably wouldn’t want to be bothered with this kind of payment trivia all day long, so I expect that you would set your Barclays app to auto-OK future payments to the gym within certain bounds. So actually when walking down the street you would simply see a message on your phone telling you that the gym membership had been paid. Now, when you want to cancel your gym membership, you just tell your Barclays app to auto-decline instead. Sorted. Better for the customer, and better for the bank too.

Bill payment represents the biggest monthly cost on a checking account, by a wide margin (OK, maybe debit processing costs might be more, but that’s offset by revenue

[From Is Bill Payment Dead and Gone in Five Years? « Gonzobanker.com]

This might be a weapon for banks to regain some of their lost ground in billing while simultaneously improving service to customers by given them more control over payments.

The percentage of online and mobile payments made on biller sites increased from 62% in 2010 to 69% in 2013. Bank site payments declined from 38% of online/mobile bills paid to 30% (with third-party sites like Check.com picking up 2%) over the same period.

[From Banks Are Losing The Online Bill Pay Game | Snarketing 2.0]

How exactly this will work, however, obviously depends on the infrastructure available for the banks and billers to use. In the US, this means that people tend to think about ACH.

If I were at a bank right now, I’d take my fresh, new business intelligence system and identify all of my customers who use bill pay to make regular payments to utilities, phone companies and the like. Then, I’d start a campaign to get them from bill pay to biller-initiated ACH.

[From Is Bill Payment Dead and Gone in Five Years? « Gonzobanker.com]

I don’t think this is the only architecture. Given the combination of smart phones, advances in mutual recognition and the reduced management costs of push payments, surely a more likely path is for the biller to message the customer and have the customer respond by initiating a push payment across an immediate settlement network (such as FPS int he UK). It’s a win-win (except for the gym).

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.

The post Push payments are a win-win (and a lose) appeared first on Tomorrow's Transactions.

I can’t remember the last time I gave the kids an actual fiver.

Nick Reynolds posted an observation about interpersonal payments within family units.

“Dad, can you lend me a fiver?”

In a world with cash:

“Yes of course just let me dig through my loose change, there’s always some hanging about in the drawer”

In a world without cash:

“Oh, err, I’ll have to switch the broadband on… hang on a minute the wifi’s down, err… what about my phone… err, the Bluetooth isn’t working again I can’t sync our accounts together… err… where’s that contactless payment card,… err… it won’t let me transfer anything we must be over our limit… err… sorry… ”

[From “Dad, can you lend me a fiver?” in a world without cash | Nick Reynolds At Work]

Of course, Nick could always write out a cheque and have his son scan it with his phone which, given the comments in the Treasury’s recently released paper on “Speeding Up Cheques”, appears to be central to the government’s vision of a new and better Britain. I have to say I’m not the least bit interested in this mode of working. I have a cheque from British Airways in my bag right now: when I got it, I didn’t think “Oh goody, I can scan this with my Barclays mobile banking application — which, actually, I can’t — and thereby have it clear in three days instead of four”. I thought “why oh why didn’t they just send the money either to my bank account via the new-fangled Faster Payments Service (FPS) that we hear so much about these days”. They could have PingIt or Paym’d the money to me. They could have refunded it to the British Airways American Express card that I’ve used with them for a decade or so. But a cheque?

Anyway, back to Nick’s scenario. This isn’t how it works in our house because we are a modern family with mobile phones. And there is never cash in the drawer, ever. Therefore the exchange is rather different:

PingIt request “can you lend me a fiver?”

Confirm.

Er, that’s it..

[From “Dad, can you lend me a fiver?” in a world without cash | Nick Reynolds At Work]

In a world in which there is an immediate settlement system so that you can transfer money between banks in (effectively) real time, there is no need for cash even with the family unit. And there is no requirement for geographic coincidence so the desperate pleas for train fare home late at night can be actioned without  getting out of bed. Come on Nick. Get with the programme, Grandad, this isn’t the US or France.

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.

The post Family faster payments appeared first on Tomorrow's Transactions.

Even the man who invented QR codes says that they are an interim technology. But some of the payment solutions built using them should translate into an NFC/BLE world pretty well.

Here’s a quick payment quiz. Have a guess before you click on the link! Which of the approximately 10,000 new payment solutions that are under development right now works this way:

The system generates a unique QR code that allows a payment to be made, but no customer information or shopping data is passed onto the merchant, and all transaction receipts are kept on the app.

[From Samsung Favors QR Over NFC | PYMNTS.com]

Well, if you guessed “all of them” you’re nearly right, but actually it’s a new payment system from Samsung (who make the S5, amongst other contactless-capable handsets) in Australia (which has a couple of hundred thousand contactless payment terminals in place and the highest retail use of contactless in the world). Why are they doing this? It’s not because QR codes are the best solution — they aren’t — but because better alternatives (NFC and Bluetooth Low Energy) have not been available. But they are now, which makes the Samsung launch rather surprising to me.

I used to think that I was abnormal because I can’t be bothered to scan QR codes, but it turns out that I’m actually quite mainstream.

In all of the time I’ve had a phone with a camera and an application for reading QR codes, which is quite a long time, I’ve probably used the functionality two, or at a maximum three, times. I wondered if this might be because I am old or because I am lazy or because I am insufficiently inquisitive, but actually it’s because I am normal.

[From A quick response to the problem - Tomorrow's Transactions]

Whereas I can’t be bothered to run a QE application and scan a code, I’m quite prepared to just tap on something or have something auto-open on my iPhone for me to confirm. Having been involved in quite a few NFC trials, pilots and tests I’m confident in saying that most people are the same. Consumers were perfectly happy to tap to get what they wanted and, as far as I can recall, actually rather liked it. It was the supply chain that didn’t work.

In other words, NFC is great but not yet relevant. This, to be honest, seem like a pretty reasonable assessment of the current situation and contains both good and bad news. The bad news is that the money that the payments industry is spending on NFC will have a much longer payback time than had been hoped. The good news is that we (consumers) end up with something that is simple and quick and secure.

[From Tomorrow's Transactions]

So, as has been known for some time, this is generally true. When people are given the option of tapping, for example, over scanning then they greatly prefer it. The barrier to NFC in the mass market was never the consumer.

An analysis conducted by NFC specialist Connecthings has found that NFC phone users account for a disproportionate percentage of interactions with its NFC- and QR code-based marketing and information services platform

[From Firm finds NFC users interact more than QR code users • NFC World+]

For these and other reasons (to do with security), I’ve always seen QR codes as an interim solution, something that will let people try out ideas (e.g., Bitcoin wallets) while we wait for something better to come along, but never the mass-market strange attractor for next-generation payments, no matter how much I like LevelUp. And it turns out that the man who invented QR codes agrees.

QR codes have seen a range of improvements through its 20 years, but Hara mentions that he believes that NFC and better image recognition will supplant the QR codes’ role.

[From QR Codes Will Be Gone in Ten Years Says Its Inventor »]

For those already in the QR code space this isn’t particularly bad news in my opinion. Or, at least it isn’t for those who used the right consultants to help them to architect their solutions in the first place… The QR code is simply the “last millimetre” connection between the merchant and the consumer. Almost all of the systems that people have built are not to do with this: so if the last millimetre replaces the QR code with the more convenient NFC/BLE combination, then their solution will be even better and more convenient than it was before. We will certainly be advising our clients to structure their solutions so that that swapping out the last millimetre can be painless and cost-effective.

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.

The post Never mind the last mile, what about the last millimetre? appeared first on Tomorrow's Transactions.

Just because there isn’t any contactless crime does not mean that we should ignore the fears of consumers (or, for that matter, the police). Time for some mass market education on cuddle cards, as I now call them.

Although we don’t focus on it — by and large because it works and has become business as usual — I think that contactless payment technology is fun. I had an enjoyable couple of days trying out my usual panoply of cards, phones, watches and stickers when I was last in Canada and I have to report that the situation was all systems go (except for one of my UK MasterCards that was inexplicably declined) whereas in the US it remains mixed. Meanwhile, it’s going gangbusters down under, as I discovered on my last trip to Australia. I paid with cards everywhere, and almost everywhere I paid I paid with contactless. Like in this taxi, for example.

Unfortunately, the Aussie rousers are less enthusiastic than I am about the amazing technology, the rapidly-evolving Australian retail payment environment, innovation at point of sale and quick and easy transactions for consumers. They claim, in fact, that there is wave, plague and apocalypse of crime that can be directly attributed to the new technology.

“We’re seeing many, many theft of motor cars, handbags and burglaries where people are looking for these cards, are getting hold of them and within hours of getting them, they’re going into stores and using them.

[From Tap-and-go credit cards contributing to increase in crime stats, Victoria Police says - ABC News (Australian Broadcasting Corporation)]

This is, if true, rather interesting. I say “if true”, of course, because I have been unable to uncover any statistics that back up the Victoria police claim. Nor, it seems, have any of their fellow law enforcement agencies.

Police around the country have differing views on the effect the cards are having on burglaries. The NSW Police said it had “not seen a spike in credit card related fraud since the advent of contactless payment technology”.

[From Banks stare down police over tap-and-go]

Still, this tidal wave of contactless crime must surely have shown up in the bank fraud statistics.

One of the major banks said on Thursday it had 30 per cent more ­contactless cards in the market compared with a year ago but card fraud was flat.

[From Banks stare down police over tap-and-go]

Oh well. Let’s just assume for sake of argument that there is a crime wave, plague and apocalypse but only in Victoria and only amongst issuers who do no collect or report card fraud statistics. That still sounds like a bank problem to me, since issuers will bear the losses. If a mugger demands my contactless card then I will give it to him. I couldn’t care less since it’s not my problem: the UK banks have an unequivocal guarantee to refunds unauthorised transitions. Nevertheless, the Melbourne heat seem most upset about contactless in general and especially miffed that they were not one of the stakeholders consulted in the banks’ roll-out.

he said police were not consulted before tap-and-go credit cards were introduced and that he regretted their introduction… “They are chewing up an enormous amount of police resources.

[From Tap-and-go credit cards contributing to increase in crime stats, Victoria Police says - ABC News (Australian Broadcasting Corporation)]

The crime wave, by the way, does not seem to have affected public confidence, since contactless use continues to soar. It is at very high levels in Australia already, with more than two-third of supermarket transactions already tap and go. Use amongst police chiefs, so far as the statistics presented in the article would indicate, seems particularly high.

Mr Lay did admit he used a tap-and-go card all the time.

[From Tap-and-go credit cards contributing to increase in crime stats, Victoria Police says - ABC News (Australian Broadcasting Corporation)]

Aha. I should point out, by the way, that the Victorian peelers objections to contactless go back some time. They’ve always been uncomfortable with contactless.

Police want to ban banks’ tap and go technology after vowing to take on big business over sloppy work practices. The force said it is sick of “mopping up” for “totally slack” initiatives that it states encourage crime.

[From Police want ban on tap and go technology, saying sloppy practices can promote crime | Herald Sun]

We have to address real issues, of course, but the fact is that public perception around contactless is not always rational. That Australian story was widely reported in the British press, fuelling public concerns (I have made a fascinating podcast with Karen Williams from Spectrum Insight on this topic). The British press have, it seems to me, always been rather keen on these scare stories. See this hilarious comment on a Daily Mail story about contactless.

It is well known that in America, thieves carry tablets and electronic readers in bags, walk around railway stations and shopping malls and scoop up all data automatically from these cards.

[From Customers charged twice for items because contactless cards were activated from their pockets | Mail Online]

Really? “Well-known”? If anyone can point to me a single reputable report of this ever happening, I would be grateful as I would like to link to it and continue the investigation. Far from being “well-known” I frankly doubt that it has ever happened at all. If you jammed an electronic reader up against my arse on the Tube, and kept it there undetected long enough to scan my card (I only have one in London wallet – haven’t you ever heard of card clash) then you would not get my name or the CVV for the card, so it’s not much of master crime. You can’t use the data to make a clone card and you can’t use it to buy online. Neverthess, as the analysis of contactless sentiment I discussed earlier in the week show, just because something doesn’t happen does not mean can ignore it. If consumer believe it, then we must deal with it.

I think we as an industry should probably be reacting to the “fear” area with some pretty clear messaging around how the technology works, how liabilities are distributed and the consumer protection that the combination provides.

[From Contactless sentiment - Tomorrow's Transactions]

The traditional way of educating the mass market in the UK about anything is to pester the BBC to include it as an EastEnders story line. I shall come back with some ideas soon, but since I haven’t watched EastEnders for at least a decade, it may take some research to get a viable narrative.

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.

The post Crime and contactless appeared first on Tomorrow's Transactions.

Social media sentiment provides a useful perspective on the evolution of contactless payments in the UK.

If you are interested in the perception of contactless cards in the UK you might find my podcast with Karen Williams from SpectrumInsight interesting. Just out of curiosity we’d asked SpectrumInsight if they could apply their social media analysis techniques to anything as boring as payments and Karen had risen to our challenge by agreeing to monitor the space for a month or so. We chose contactless payments as the specific sub-topic to monitor. Karen was kind enough to pull together what they found into a few slides for us to share on the blog and I’ve picked out four of them to highlight here.

That first chart seems to indicate, as you might expect, some correlation between topics being discussed in the mainstream media and the topics discussed on Twitter so this provides some confirmation that the discussions on Twitter are vaguely anchored in reality.

The second chart concerns the top themes that were covered in tweets about contactless. Unsurprisingly, “bank” and “debit” are at the top. But if you put together Oyster, buses and TfL, then actually transport would come top. I realise that this is a London-centric perspective, but I take these issues to be a reflection of the importance of mass transit in pulling contactless into the mass market.

The third chart concerns the issues that we covered in tweets about contactless. The main one, as you can see, is acceptance and (good news, I think) this reflects a general sentiment that people want contactless to be accepted in more places. I’m convinced that one of the reasons why cash is still more than half of all retail transactions in the UK (compared to 40% in the US where the near-ubiquitous no-signature-swipe provides the functional equivalent of contactless) is that small merchants in particular are not well served. I still see signs saying that cards are not accepted for transactions below (say) £10 when the merchants should really be demanding contactless-only transactions for small amounts (see Julian Niblett’s comments on this last year).

And that last slide looks at emotions, not something I normally consider when looking at the contactless adoption curve and therefore of great interest. See what you think, but I think we as an industry should probably be reacting to the “fear” area with some pretty clear messaging around how the technology works, how liabilities are distributed and the consumer protection that the combination provides.

From looking at these slides and talking to Karen, I think I draw three broad conclusions that I hope will be useful input to our clients strategies around the technology.

1. First, I’m surprised that so many people were complaining that they wanted contactless cards but couldn’t have one (my son is one of them, by the way).
2. Secondly, while it might hard to get people to try contactless it seems that once they try it then they like it and they want to be able to use it in more places. So we probably need to have short term focus on the getting them to use it that one time to get started. Maybe more focus on vending machines?
3. Third, if the Twitter sentiment is anything approaching a reflection of what normal people actually think, I don’t understand the issuers’ baffling strategy of sending contactless cards to people who don’t want them and not sending them to people who do want them.

We’re going to be doing some more work with Karen in the world of payments over the next few months and she has very kindly agreed to come along to the Tomorrow’s Transactions Forum 2015 to talk us through what she finds. Mark the dates in your calendar now:

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.

The post Contactless sentiment appeared first on Tomorrow's Transactions.

The US shouldn’t look at Japan as a model for mobile payments, and Europe shouldn’t look at the US.

An interesting discussion about the relationship between age and payment mechanisms in a meeting this week reminded me to look again at Japan to see how the combination of money, technology and an ageing population come together to shape retail payment trends.

The number of prepaid electronic money cards in circulation hit 182.17 million in June, or triple what it was five years ago, a recent Bank of Japan survey said… growing at an annual pace of 15 percent to 20 percent in recent years… The BOJ credited the surge to people in their 30s who were the first to use the technology when it debuted and have since shed their privacy concerns to adopt it.

[From Use of prepaid e-money cards soars | The Japan Times Online]

Edy is by far the most commonly-used e-money service, predominantly on cards although an increasing number of consumers are using it on their phones as well. It remains a fact though — as Dean Bubley observed in a Twitter conversation on such — that most consumers with contactless phones still use their cards rather than the phones. That’s not to say that the use of contactless phones isn’t growing for other purposes. I guess it just means that payments are not as much fun as rice cooking…

Appliance makers in Japan are jumping on the smartphone bandwagon with new appliances that can communicate with smartphones. Panasonic will launch a steam microwave oven and two induction heating rice cookers on 1 June that can communicate with Android-based smartphones. The appliances also use the FeliCa contactless technology.

[From Japan sees rise in smartphone-connected appliances - Telecompaper]

Another little window into the future is the use of NFC to provide a convenient and simple interface between healthcare devices, a crucial segment of the internet of everyone else’s things in an environment evolving to support the elderly.

…healthcare equipment maker Omron has launched the Wellness Link service which allows users with Android and FeliCa-equipped handsets to track their health online with data obtained from the equipment, which includes scales, thermometers and blood pressure gauges…

[From Japan sees rise in smartphone-connected appliances - Telecompaper]

All very interesting. But back to payments. I thought that the most interesting quote in that Japan Times article came at the end.

Yasuhide Yajima, chief economist of NLI Research Institute, said the use of e-money cards will continue to spread because elderly people feel safe using them and they can be handled like cash.

[From Use of prepaid e-money cards soars | The Japan Times Online]

In the UK, we seem to think that the elderly must be supported using cash and cheques because they are incapable of adapting to modern technologies. I suppose that’s just one of the ways that Japanese payments are evolving differently from ours. Another is the central role of the mobile operators in driving interoperability and new services.

Japan’s leading mobile operator and provider of integrated services centered on mobility, and KT Corporation, South Korea’s leading telecom operator, have agreed to develop a cross-border e-money service that would enable DOCOMO customers with compatible smartphones purchased in Japan to use a prepaid e-money service called “Cashbee” in South Korea… Cashbee is available at some 52,000 locations in LOTTE Group department stores, convenience stores and mass transportation facilities such as subways and buses. The service currently has 5 million users.

[From New DoCoMo Fact Book - NFC Deal with KT | Wireless Watch Japan]

DoCoMo are also building interoperability in other directions to make it easy for Japanese consumers to use their phones to pay elsewhere. Telcos in the Europe and the US have not gone down this route because they have adopted the EMV standard that provides interoperability for them, but the DoCoMo route does show how you could use NFC terminals to run non-EMV payment systems.

The collaboration will connect DOCOMO’s domestic payment network to the world, enabling customers using iD mobile credit payments with compatible DOCOMO smartphones to make contactless payments outside of Japan, anywhere MasterCard® PayPass™ is accepted.

[From MasterCard Connects NTT DOCOMO’s Domestic Payment Network to the World | MasterCard Social Media Newsroom]

Now, no-one should imagine that US or European markets are going to evolve mobile contactless like, say, Japanese or Korean markets have done. These are markets with entirely different structures and entirely different market dynamics. As Consult Hyperion has long advised clients, we should look to these markets for inspiration and ideas but not for templates.

So, I think it’s a mistake for anyone really in the U.S. or developed countries to be looking at Japan as a model for mobile payments.

[From The Future of Mobile Payments]

David is right about this. But I’d go even further. Not only is Japan not a model for the US, the US isn’t a model for anywhere else either. Both the US and Japan are special cases. I’m not saying this in hindsight: it’s been part of the Consult Hyperion mobile world view from the earliest days. That’s why the trick in Europe is to look and learn from those markets but not to try and copy them.

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.

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The new payment systems regulator is tasked with increasing innovation. This means increasing competition, which means reducing barriers to entry.

There was a good article back in the September “Financial World” magazine arguing that transparency is a key to regaining confidence in the banking system. I agree strongly, and I’m not the only one.

More transparent record keeping would allow law enforcement to trace the transfer of funds and identify those responsible for the illicit use or theft of virtual currency.

[From Virtual Currencies, Real Theft - Javelin Strategy & Research Blog]

Indeed it would, and some might argue that that transparency be extended to legacy infrastructure as well. (It’s not really the topic of this post but remember than transparency need not subvert privacy. You could have pseudonymous dark pools but force the release of linked identities given a warrant, for example.) If, however, transparency is taken to mean thorough KYC/AML/ATF procedures (henceforth known as CDD, or customer due diligence) that identify all participants to a transaction to all observers, then it will force criminals, terrorists and corrupt politicians to abandon electronic means of exchange and go back to cash. If that happens, then we are all worse off. Having some traceability is better than having none at all, as I’ve argued before. And it’s not as if having rigorous CDD solves the problem.

Worse still, the increased cost associated with a tougher stance on KYC does nothing to make the system any more secure, and may in fact drive up risk rather than reduce it.

[From Cost of KYC too high says Swiss start up » Banking Technology]

I suppose you could argue that what is driving the players at the moment is not risk but liability. So long as they can shift the liability onto someone else, no-one really cares who you are. The system is broken.

The two set up 68 accounts in 19 different cities using 24 aliases to handle the transfer of funds and sent the bulk of the money to individuals in Nigeria, who set up the operation. Money was also wired to addresses in the UK, Ecuador, India, the United Arab Emirates, and the US, none of which has been recovered.

[From Mother/daughter team jailed for million-dollar internet dating scam • The Register]

Hold on. 68 accounts using 24 aliases? What was the point of the billions of dollars spent on KYC, AML and ATF? And why am I going on about this anyway? Well, in her keynote at Payments Innovation 2014, Mary Starks (the acting MD for the UK’s new Payment System Regulator) said that on the whole regulators “don’t do innovation”. I was on the panel with her, so I made what I think was a reasonable point that the best regulatory approach to innovation is competition, and that a focus on reducing the barriers to entry to payments markets that do not involve systemic risk is probably sufficient. We don’t need to imagine what people might come up with, we just want to make it easy for them to do so.

When it came to the discussion that followed, I used CDD as an example of such a barrier. The costs and complexity of CDD can make it very difficult for new entrants, especially those dealing with low-value payments, the excluded and specialist niches to get off the ground. One of the reasons for this is that there is no infrastructure for them to plug in to, so everyone has to build everything from scratch.

Surely all of this dialogue about passports and utility bills, declarations and signatories and KYC and AML is pushing a demand for a new digital infrastructure to cure all of this mess.

[From Digital identities demand a digital infrastructure | Banking View]

Karen Wendel from Identrust talked about the infrastructural approach in her presentation as well, and this all links to the discussions about the idea of a financial service passport (or a “pay name”) at techUK last year. I really think that the idea of pseudonymous, strongly-authenticated CDD identities is an idea whose time has come. I should be able to participate in a transaction as John Doe, provided that I can prove that someone (e.g., my bank) knows who John Doe actually is. You don’t need to know who I am to do business with me, so long as you know that _someone_ knows who I am.

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.

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I’m a big believer in wearables (not watches). But then I have been for a while.

It seems to me that one of the most interesting of contactless attributes, which is freeing payments from the tyranny of form factor, has yet to properly exploited. But in one area – wearables – we are seeing some developments. Such as this one from down under:

Menswear label M.J. Bale, Heritage Bank and Visa have teamed up to create a suit with a contactless payment chip and antenna woven into the sleeve.

[From Contactless payment SUIT lets you pay with a wave of a sleeve | Mail Online]

It’s a cute idea and I will of course go and buy one, since I feel it is both my blessing and curse that I find new payment toys unbearably fascinating, but I don’t really want another payment account. I’d rather just take one of my contactless credit cards (naturally I have several) and slip it into a convenient hidden pocket in the sleeve of the suit. And if you’re wondering where I got that idea from, it was my Thomas Pink Commuter shirts that I bought back in 2006.

The Commuter has only recently been launched but Pink says it is already flying out of shops faster than a rush-hour train.

[From A passion for pockets with a difference - FT.com]

The Commuter shirt had two features that I really liked. It had a channel running up the inside to carry earphone cables tucked away out of sight. These connected through a hole in a side pocket so that you could keep your iPod snug and out of the way. And it had that second pocket for a contactless card in the cuff. It was designed really for Oyster cards, but we put Visa cards in the pocket to make purchases using standard POS terminals with contactless interfaces. In memory serves, we also bought of few of them a presents for some of our favourite customers at the time! Anyway, I just went upstairs and got one to model for you:

The point I used to make was that contactless was about more than the interface, it was about form factors and that it would lead to innovation and I used the shirt to show an example of innovation beyond the card itself. Although the shirt was fun and helped to make an interesting demo about contactless payments in conference presentations, I thought it had two design flaws.

First of all, the pocket was behind the cuff on the top of the wrist. This meant you had to lay the back of your forearm across the contactless POS terminal or Oyster card reader. The pocket really should have been on the underneath of the forearm near the wrist to make paying a more natural action.

The second problem was that if you were wearing a suit and coat, it was hard to get the card close enough for the reader. I remember thinking at the time that I wished that the pocket was in my suit rather than in my shirt.

Naturally, being a consultant rather than a business wizard my thoughts went no further. Now only eight years later some entrepreneurial Aussies have gone and put the payment in the suit. I know it’s really just a publicity stunt but good for them – it’s a bonza idea and may stimulate some further innovation in a country where half of all Visa transactions are already contactless. What’s more, it will add some fun to payments, so I hope my consumer feedback from 2006 will prove useful to them.

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.

The post Contactless innovation in wearables (nothing new!) appeared first on Tomorrow's Transactions.