Note that this case of the Goldsmids is not “similar” to that of the Crock, nor is it “analagous” to it, nor is it a “metaphor” for it. It was exactly the same. In every respect.

[From kashklash:: exchanging the future » Blog Archive » Technology is progressive, finance is cyclical]

Anyway, with my current focus on innovation — I’m helping the CSFI to plan the first round table in the Visa Europe Research Fellowship series for 22nd January — it set me thing (again) about the cyclical nature of the finance business. Is there something I need to take account of here: I haven’t quite put my finger on it yet, but is there a connection between the stepwise march of technology and where it intersects with the circle of financial services evolution? Perhaps there are some points on the circle where the new technology gains purchase, and some where it is flung away. I need to work on my analogies!!

The series was a companion to Ferguson’s book of the same name. I happen to have a spare copy of this valuable volume on my desk even as I write and I shall be more than happy to send it to the first person to respond to this post with the name of the American who added the little wooden houses and hotels to the game of Monopoly, thus creating the modern version familiar to all.

In the traditional fashion, this competition is open to all except for employees of Consult Hyperion and members of my immediate family, is void where prohibited and is fully recyclable. The prize must be claimed within one month. Oh, and no-one can win more than one of the Digital Money Blog prizes per calendar year.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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 On the ascent appeared first on Tomorrow's Transactions.

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 looks as if contactless is getting some new energy. Barclays are just about to start a major UK advertising campaign (in the middle of the “X Factor”, which is apparently a TV programme of some description) and another pilot is just about to begin in England, with RBS and Stagecoach (a transport operator). Contactless technology has even reached Guildford. My spies reported the appearance of a contactless payment terminal in a nearby Krispy Kreme, one of my all-time favourite shops. Since I am a fearless crusader for first had experience of new payment products, I leapt from my desk and went hotfoot to obtain a dozen assorted. When it came time to pay, I searched for the contactless reader, which was behind a pile of leaflets and waved my PayPass card with a great flourish. It didn’t work. When I asked the assistant, she told me that the contactless terminal had never worked and she didn’t know why. Her boss, however, while confirming that it had never worked, did at least know what it was supposed to do (she knew that it was for transactions under £10 and so forth) so that’s a kind of progress I think.

As an aside, if any of you will be in Swindon (or Swindon-City-of-the-Future, as we call it) on Monday 17th of November, I’m going to be giving an evening talk on contactless and the contactless/mobile future of retail payments for the British Computer Society in a joint meeting with Wired West. If you want to come along (I imagine places are somewhat limited) you need to contact Jeremy Holt of Clark Holt Solicitors who is organising the event. He’s jeremyh (at) clarkholt.com, by the way.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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 Impact of contactless appeared first on Tomorrow's Transactions.

I wonder if it might not make sense to take more active steps to separate banking and payments further and farther. It is, after all, a historical accident that banks provide payment services. Back in 1999, the Federal Reserve Bank of New York Economic Policy Review said that “Economic theory on the operations of commercial banks cannot, by itself, explain why they provide payment services on such a large scale”. Quite.

But if payment services were taken away from banks, then what else would banks do? Many years ago I contributed to the Centre for the Study of Financial Innovation’s report on the Internet and financial services and I used a simple model of banking to consider the impact of new technology on different banking functions. This model — taken from Crane & Zodie’s Harvard Business Review article on “The Transformation of Banking” in 1996 — posits that banking comprises a relatively small small number of functions.

1. Methods of making payments in order to facilitate trade;
2. Mechanisms for pooling resources to fund large–scale enterprises;
3. Ways to transfer economic resources over time and across distances, as in lending and investing;
4. Methods of managing risk, such as insuring, diversifying, and hedging;
5. Price information, such as interest rates and securities prices, to help coordinate decentralised decision making;
6. Ways to handle incentive problems that interfere with efficient transactions.

I think that the first and the last are the ones to consider here. The first is obvious: if there are no payments then there is no trade and further than, as I have often argued, the existence of cost-effective and efficient payment systems allows markets to exist. The last is less obvious, but in this context it means that transactions that would otherwise not take place can take place merely because a bank is the intermediary: in a sense, the presence of banks in the loop legitimises transactions, a problem that the developers of new payment systems often find themselves wrestling with. They resent the bank taking a cut for, as they see it, doing nothing. The current financial crisis may well causes other stakeholders to reassess the ability of banks to solve such incentive problems, but in any case there are already many markets where payment systems provided by non-banks already have substantial market share and it is not clear at all that consumers are bothered by this: on the contrary, some people already trusted non-banks more even before the current crisis.

These alternative payment providers are also trusted by consumers for Internet transactions – 64% have faith in them, almost the same as the 67% for banks. The research also found that adults aged between 45 and 64 actually trust alternative payments provider more than banks.

[From Finextra: E-payment threat to bank revenue]

The point of the list, though, is to show that banks have plenty to do without payments (which contribute a small amount of banks’ net income — remember payments contribute about 40% of revenues but about 33% of costs as a rule of thumb) and if they were to get better at doing other functions (eg, managing risk) they could more than make up the loss of payments income in time.

So, I would argue, it’s certainly possible to conceive of banks dropping functions that they do not excel at (as they have already done to some extent by obtaining price information from external sources rather than generating it themselves) and focusing on the others. And payments might be one of those. But I think the key reason for expecting the role of non-banks to go through a boom in coming years is that the banks’ ability to exploit new technology is limited. They have other things to spend their money on, all of which generate a better return than marginal new payment businesses. Our friends at Glenbrook made this point in an excellent field report from the NACHA 2008 conference, nothing that

There was what seemed to be a widely held view that innovation sure isn’t coming from within the banks anymore, but rather from “third parties” – primarily start ups. Sure, the payment “system” providers such as MasterCard, Visa, NACHA, and others play a role new product development, but that role was not particularly acknowledged by the non-bankers, nor the bankers for that matter.

[From Glenbrook Partners: Field Report from NACHA's Payments 2008 Conference]

While the potential for alternatives has been recognised and discussed for years, it could be that the “tectonic plates” beneath the payments industry have begun to shift in such as way as to set in motion and irreversible change of some magnitude. Steve Mott put it even more strongly earlier in the year

But over the summer, the winds of change have finally struck, and alternative payment options are set to move full-sail into the looming battle between acquirers and issuers over the very course of the card-payments business.

[From Digital Transactions | Mott Alt Payments]

I think, while Steve may be occasionally somewhat robust in his opinions, he’s dead right on this. Something has changed.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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 Separation, not divorce appeared first on Tomorrow's Transactions.

It’s a story from London, of course, and the student had been using the Barclays OnePulse card that doubles as an Oyster card and a contactless Visa card. The point of reporting the story here is twofold: first of all I’m naturally curious about what normal people think about the payments stuff that I spend a great deal of my time thinking about and second of all because it shows that in some parts of London, contactless coverage (the intersection of people having cards and retailers having terminals) has reached a reasonable level. Despite some of the gloom around contactless at the moment, because the market penetration is so slow, the truth is that where there is the coverage it is popular:

One shop owner said that the cards had really helped in speeding up transactions at busy times of the day, as there was no need for customers to dig around for change and no need for the shop staff to have to take cash and give change. She said: ‘We do three-quarters of our business between 12pm and 2pm. Anything we can do to help the queue move forward quickly helps us and our customers.’

[From Tap and go cards proving popular in London : Credit Card Guide]

With a million point-of-sale (POS) terminals in the U.K., it will obviously take some time to get a decent proportion of those converted to contactless. But when they are, it does make for a better experience. The numbers in the U.S. are steadily increasing as well.

The technology is rapidly gaining in popularity, with nine percent of the US population now possessing a contactless card. Last year the number of open network contactless cards in circulation reached 35 million, nearly double the 19 million in 2006.

[From HomeATM PIN Debit Blog: Contactless and Clueless]

Incidentally, I bought a coffee and a piece of cake at a coffee bar near St. James’ Park tube last week and, noticing the contactless reader on the counter, tapped my wallet, paid in millseconds, and wandered off to sit down and catch up on some e-mail. It wasn’t until later I realised that my wallet now has two contactless cards in it — because my new MasterCard arrived last week with PayPass on board — and I have no idea which card paid for my coffee (or, for that matter, why it worked at all, since the terminals are not supposed to make a transaction when they see multiple cards). Who can call payments boring, when things like this come along.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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 Vox populi appeared first on Tomorrow's Transactions.