[Dave Birch] Deloitte, a management consultancy, have published a report called “is the retail payments industry heading for disruption?”. It looks to me as if it is based on the disruptive innovation concepts of Clayton Christensen (our favourite guru). I think this is a very useful way to look at the evolution of the retail payments sector — I have used the same analysis myself for a couple of years ago in a course I teach at the Visa Business School — and it can help with product and service development in very practical ways. Deloitte says that

Credit card companies are showing classic signs of “overshoot,” which makes them vulnerable to disruption, especially disruptive innovation.

I agree, but I think this is only part of the story, and the example of EMV helps to illustrate why.

Technorati Tags: credit cards, EMV, loyalty, mobile, payments, retail

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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.

[Dave Birch] Chip and PIN has been back in the news again. This time, it’s reported that large numbers of cash withdrawals are being made using cards without a security chip and it is the banks themselves that are allowing it to happen. The newspaper story says that there are more than 140m cards in circulation and every day more than 7m withdrawals are made at cash machines across the U.K., which is true. It goes on to say that if banks rejected every card with a slight fault in its chip they would be inundated with complaints from furious customers — which is true, of course — and therefore fraudsters using cloned bank cards that have no chip can still get their hands on other people’s cash and it gives the lie to industry claims that the system is totally secure. Wow, that sounds terrible: there’s a flaw in chip and PIN. Let’s find out more…

Technorati Tags: payments

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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.

[Dave Birch] To everyone who has given me support, feedback, criticism, ideas and prizes: a big thanks for helping the Digital Money Forum blog to make it all the way to becoming one of the eight blogs chosen for American Banker’s blogwatch.

Technorati Tags: payments

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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.

[Dave Birch] I don’t normally read Paul Johnson‘s Spectator articles, in fact I don’t normally read The Spectator (although I am reading “A City Spectator: Bulls, Bears, Booms and Boondoggles”, the collection of Christopher Fildes’ superb Spectator columns on the City), but I happened on his recent piece on gold. It includes the story of the guinea, which I’m ashamed to say I didn’t know. In 1663, under Charles II, a new gold coin was minted in England. It became knows as the guinea, because the gold had come from the West African coast. It was originally worth one pound Sterling, but by 1694 it had risen to thirty shillings (note to non-British readers or British readers under the age of 40 or so: there were twenty shillings in one pound) because of inflation. Remember that England’s currency was a bit of a mess at the time, which is why the cleverest man who ever lived, Sir Isaac Newton (who, as an aside, invented the catflap as well as universal theory of gravitation), was put in the charge of the mint. The value of the pure gold guinea rose against the debased coinage of the realm. Under the currency reform of William III, it was pegged at 21 shillings and six pence (note for younger viewers: there were twelve pence in a shilling). In 1717, it was fixed at 21 shillings, which is why to this day in merry England (and other parts of the United Kingdom) a guinea is one pound and one shilling, or one pound and five pence in new money. From the eighteenth century onwards, the professional classes — as distinct from the working classes — dealt in guineas rather than pounds: I’m pretty sure that horses are still priced in guineas today although bills from gardeners and such like no longer have this charm.

Technorati Tags: coins, money

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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.

[Dave Birch] There was a story in the Wall Street Journal today (no link because registration is required) about money laundering, talking about how Columbian drug dealers employ “smurfs” to go round depositing small amounts (a few thousand here, a few thousand there) of dollars from drug sales into banks in the U.S. so that their Mr. Bigs can then withdraw cash in pesos in Columbia. By coincidence, I happened to be at a World Online Gambling Law seminar today — along with a couple of our clients — and learned a lot about the topic. Not from a “how to” perspective, of course, but more from a “this is why we’re imposing massive costs on the payments industry” point of view. One of the things that I learned was that the money-launderers best friend, the 500 euro note, is increasing in popularity as it strives to replace the $100 bill as the criminals’ store-of-value of choice. Apparently a substantial fraction of the 500 euro notes that have been printed are no longer in circulation in the eurozone, so Latin American drug barons are making substantial interest-free loans to European central banks, just as they have made interest-free loans to Uncle Sam for years. I’m sure that crime, drug dealing, corruption and terrorism have all fallen significantly since the introduction of more stringent anti-money laundering (AML) legislation, although I don’t have any figures to hand…

Technorati Tags: payments

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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.

[Dave Birch] Having been reading some of James Gardeners insightful reflections on innovation banking, and in particular having been thinking about some of the questions he posed when talking about Xerox and Microsoft, I am forced to ask a tough question: where is the innovation in payments going to come from? Bank’s IT budgets are going to be sucked up by SEPA initiatives for the foreseeable future and those initiatives mean downward pressure on payment income. Insofar as I understand the strategy of banks that we work for, in recent times it has been to change the cost/income ratio by both increasing income (perhaps by making riskier investments!!) and becoming more operationally efficient: factories for money. But I wonder how this works in the longer term?

Technorati Tags: banking, payments

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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.

[Dave Birch] I’ve been wondering why the IRIS biometric scheme is so bad. I’ve now given up on it completely: the last couple of times I’ve tried to used — when it’s actually been working — it hasn’t let me in. I don’t know why it’s stop recognising me, although I have a theory. What if it is something to do with the number of people enrolled? I was an early adopter of the scheme, and it’s always been pretty terrible. I’ve complained about it before bit always come back and given it another try. Well, no more. Whether the biometric, the system or the government procurement procedure failed, I’m not sure. But it’s not a very good advertisement for large-scale biometrics, just as the procurement for the national identity card in the U.K. is about to begin.

Technorati Tags: biometrics, government, transport

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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.

[Dave Birch] Here’s another milestone that will probably pass unnoticed. The U.S. Federal Reserve will stop processing paper cheques in 2010. From then on, they will only handle “Check 21″ (ie, captured images and details) and I’m sure that the numbers of those will continue to fall. For some people, that’s a problem. If, for example, you make equipment to print and process cheques as does Panini North America in Dayton, Ohio. Their president, Douglas Roberts, says that

Checks will take us into 2010, 2011, but we need to be selling something in 2009 beyond checks… Checks will be a maintenance-only industry.

Technorati Tags: payments

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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.

[Dave Birch] Now, I’m more than happy to admit that I don’t really understand patents. So there’s a shout going out from this blog for someone who does to provide comment on a story that a couple of journalists enquired about recently. The U.S. Patent Office — yes, the people who allowed someone to patent Archimedes theory (warning: link not suitable for family audiences) — have granted Google a patent on payment by text message. What strikes a mere normal businessperson such as myself as odd is not only that payment-by-text-message systems already exist and are widely used by people all around the world, but that they were in commercial operation for years before the patent was filed in February 2006. How does this work? How can you be granted a patent on something that already exists?

Technorati Tags: mobile, payments

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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.

[Dave Birch] I’ve been running a masterclass at NFC World in Singapore, where the enthusiasm for all things NFC (including retail payments) was high. The two largest local mobile operators operators announced that they will pair up with the country’s two electronic-purse schemes to launch — as The Straits Times was quick to point out — incompatible trials of NFC. While the plans for the integration of national schemes in Singapore are in place and the migration to the Common Electronic Purse Specification for Singapore (CEPAS, which we’ve discussed before) is expected in 2010, as of today if you get a NETS phone it won’t worked on the buses and the EZ Link phone won’t work in road tolling. I mention this only as a reminder than technical interoperability and business interoperability are entirely different things, a recurring meme this week. More than one speaker said that getting banks and operators to work together continues to prove difficult, while one speaker said that their scheme had been a success precisely because it didn’t involve either banks or operators!

Technorati Tags: mobile, nfc, payments

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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.