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Archives for June 2007

Is mobile the new smartcard?

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[Dave Birch] The Chicago Fed published an interesting letter asking whether mobile is the new smart card by which they mean, in an American context, will mobile payments flare and then die away. They agree with me (!) that mobile holds a significant advantage over contactless cards in the area of paperless two-way communication. Cards just do not allow for the sending, receiving, and presenting of information, as mobile devices do. These are clearly factors that point to mobile beginning to encroach on cards territory. They are already are in some places. France, for example, where Orange has announced that it will launch the first mobile contactless services, based on NFC technology, in Bordeaux in early 2008. And in the U.S., where Wells Fargo and Visa are to conduct public mobile payments trial with up to 500 customers in the fourth quarter of the year. So is mobile the new smart card: ie, a new payment technology that starts in France and then spreads worldwide except for the U.S., finally sneaking in to the U.S. under the guise of contactless? Well, I guess, the answer must be yes!

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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.

How did I manage to work Dr. Who into ID cards?

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[Dave Birch] I can’t helping reading stupid non-stories in the newspaper when they touch on anything related to identity. Hence I found myself reading the “60 Second Interview” in the free London metro. The interview with Freema Agyeman, the actress who plays Doctor Who‘s current assistant and is therefore a major heroine in our household, covers her early career working at Blockbuster. As Blockbuster are often rather lazily held up as a central part of the pro-ID card business case (“imagine how much easier it will be to rent a video using an identity card), I couldn’t help but note her comment that

The not-so-good times were when people lost their temper. At one point, the membership applications got really strict because stuff was going missing. People had to bring in two proofs of address dated in the previous four months. They brought in passports and driving licences and shouted at us that if they could open a bank account with them, why couldn’t they get a Blockbuster card.

Has Freema uncovered the killer application? I didn’t see her at the Public Private Forum on Identity (PPFI) meeting at the Treasury, so I think someone should alert the authorities at the earliest opportunity.

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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.

EMV USA

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[Dave Birch] EMV migration in the UK is complete, as you all know, and the fact of the matter is that it went pretty smoothly and on the whole, worked rather well. According to APACS cards and fraud control manager of operations, Martin Lewis, and head of cards technical unit David Baker, there are now 133 million chip and PIN cards in operation, supported by 900,000 sales terminals and more than 61,000 ATMs. The migration is spreading around the world, all the way up to the U.S. border. When even Canadian and Mexican migration is complete, will the U.S. then be forced to issue EMV? Probably not, because of on-line authorisation. Besides, who knows what new technologies will be dominating the retail payments space by then?

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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.

ATM anniversary

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[Dave Birch] I got invited on to BBC World to be interviewed (by Zainab Badawi) about ATMs, which was quite exciting really. I had been very busy all day and hadn’t really been paying attention to the package that rolled before the interview, so it wasn’t until I got home that I realised that the core of the story was not only the 40th anniversary of the ATM, but that John Shepherd-Baron, the former De La Rue executive credited with inventing that machine in 1967, “now believes that the ubiquitous ATM will be made redundant within the next three to five years by the demise of paper cash“. Even an unreconstructed e-cash fanboy like me wouldn’t go with a five year horizon, but I appreciate both the sentiment and his support for our strategic perspective that it will be mobile phones that are the final nail in cash’s coffin, not mobile phones. Anyway, John says that the inspiration for the ATM came to him in the bath and a deal to develop the first such machine was sealed over a pink Gin with the then chief executive of Barclays.  In a BBC interview timed to coincide with the fourtieth anniversary this week of the installation of the first ever cash machine at a Barclays Bank branch in Enfield, North London, Shepherd-Baron explains the origins of the four-digit PIN and how the first machines actually worked (hint: they didn’t use plastic cards).�

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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.

All sorts of payment frauds are growing

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[Dave Birch] Not all of the payment fraud in the world is payment card fraud. A survey of more than 3,000 corporate treasury officials raised the alarm about cheque and electronic payment fraud.

Payments fraud last year was pervasive and increasing

says a report from the Association for Payments Professionals. The Association for Finance Professionals did another survey and found that 72% of its 414 respondents had been victims of actual or attempted fraud in 2006, up from 68% in a 2005 survey. But here’s the good news: electronic payments turn out to be significantly safer than paper (cheques processed as images are also much safer than paper cheques) even though ACH and payment card networks are subject to increasing fraud attacks, particularly in transactions on the Internet and over the phone. Nearly all respondents said they had been the target of actual or attempted check fraud in 2006, while 35% reported fraud activity in ACH debits. Seventeen percent said they had seen attempted or actual fraud with consumer credit cards. Of those who reported fraud activity with cards, consumer credit cards accounted for by far the most response (82%), with signature debit cards registering 18%, stored-value cards 7%, and PIN debit cards 4%. Of those respondents that accept consumer payments via the phone or over the Internet and also reported ACH fraud, some 44% said they received fraudulent ACH instructions from their Internet channel; 45% said the same about the phone channel. Similarly, the organizations responding to the AFP survey are sustaining fraud losses from card-not-present transactions. Liability for these transactions is cited by 64% of those respondents that sustained losses because of card fraud as the primary reason for the loss. Delays in filing chargebacks comes in second, at 25%.

Organizations that suffer financial losses from card payments do so primarily because they are ‘card-not-present’ merchants

notes the report, although it might have gone on to say that they are CNP merchants that have not signed up to 3D Secure. Interestingly, in light of a recent string of hacker intrusions into merchant data bases, none of the respondents reported fraud stemming from a card-data breach. But then, as has been discussed on Digital Identity, there is a clear correlation between the size of the breach and the likelihood of fraud (and the type of data). If a neighbour steals your card from the post, there is pretty likely to be a subsequent fraud. If some government department tells the entire world your personal details, there may be a few frauds, but not that many.

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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.

Building blocks for the identity utility

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[Dave Birch] In his presentation to EEMA, my colleague Neil McEvoy calls for the creation of an identity utility, to be used by government, business and individuals alike. Neil mentions that the NFC-equipped mobile phone could be the critical device to make this a reality, because the mobile phone can act as both the identity provider and the identity consumer. So will there be enough mobile phones, and will enough of them have NFC, to make this a realistic vision? Well, in many countries (eg, the U.K), mobile penetration is already over 100%. Nokia alone sold 348 million handsets last year. There are nearly half a billion mobile phone users in China. 49 million handsets were shipped in Japan last year. ABI Research forecasts that by 2012, some 292 mln handsets (more than 20% of the global mobile handset market) will ship with built-in near-field-communications capabilities.

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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.

I could imagine using this

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[Dave Birch] There’s been a rash of announcements of new payment schemes recently, many of them centred on mobiles. I find myself reading some of these announcements and thinking “well, that sounds neat” but then saying to myself “I couldn’t see me using it”. There’s a disconnect. But some of them I could see myself using. For example, Pay By Touch have developed a Reward and Gift Card Kiosk. The Internet-enabled kiosk lets shoppers create customized store-branded and third-party gift cards with personalized “to” and “from” names and single or multiple design full-color graphics. Gift cards can be purchased and dispensed directly from the self-serve kiosk, eliminating the current requirement of purchasing gift cards at the check-out lane or customer service counter. The kiosks store an unlimited number of graphics, so multiple merchants or brands can be supported on a single kiosk. Here’s how it works:

  1. Using a touch-screen, the shopper chooses from multiple designs to match the gift-giving occasion, and chooses the denomination he or she prefers.
  2. The shopper then types in both the recipient’s and the gift giver’s name (likely her own) into the “to” and “from” fields.
  3. Using a credit card, the shopper purchases the gift card directly through the kiosk. The shopper presses “print” and a personalized, activated gift card is printed in seconds, along with a receipt.

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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.

M-PESA at the RSA

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[Dave Birch] I dropped in at the RSA for another seminar, this time including Nick Hughes from Vodafone talking about one of our favourite projects, M-PESA. He gave an excellent talk about the role of m-payments in improving the life of people in developing countries. A few points he made to establish context (my paraphrasing):

  • The average European cow gets €2.50 per day in subsidy and 75% of Africans live on less than that: they don’t have much spare money.
  • In Kenya, 30% of household income goes on what we in the West would call bribes.
  • A fifth of working Kenyans send money from the cities back to the countryside but there are few banks or ATMs. High transaction fees for sending money hit them hard.
  • In Kenya, mobile phone penetration is already 30% (in South Africa is it 60%).
  • As The Economist pointed out back in March 2005, poor countries don’t need a PC in every home, they need more mobile phones.

They’ve certainly done something right. There are already 477 agents live where you can take in cash to top-up your M-PESA account and the number of people signing up has accelerated to currently 2,500 per day (it was 1,500 per day last month) and there are now around 140,000+ customers. Safaricom are now targeting a million customers by the end of this year. They’ve processed around a million transactions. The average customer is already doing 3-4 transactions per month. The average P2P transfer is for UKP23 (say around $40). By the end of May, a billion Kenyan shillings had been through the system. Nick mentioned that the scheme is now being trialed in Afghanistan and Tanzania and will soon begin trials in Sri Lank and also gave some examples of the scheme’s use, which I won’t repeat here, except to note that they demonstrate how a good, functional payment system makes life better for the average person.

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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.

Automat

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[Dave Birch] Presumably one of the benefits of moving to a smart identity card — alongside smart passports and driving licences — is that many of the associated processes can be automated. Somewhere like Malaysia, which has had a smart identity card for years, shows how this can be done. There, passport applications can be made online or at kiosks. The Deputy Home Affairs Minister Datuk Tan Chai Ho says that e-kiosks and e-applications were part of the Immigration Department’s efforts to go paperless and increase efficiency. Only one e-kiosk had been installed at the time of writing, but it can process a passport for an identity card holder in as little as 10 minutes. Applicants deposit the RM300 fee in the machine, which can also photograph passport holders, enter their details and then pick up their passport the next day. This means, of course, that the integrity of the passport applications now depends on the integrity of the identity card and the National Registration Department has detected 364 cases where the MyKad has been tampered with but has found no cloning of the identity card. Mr. Ho said the tampering was confined to changing of the photograph on the card and most of these cases involved illegal immigrants. He said that in these cases the MyKad chip was damaged because it contained the personal particulars of the card holder which could not be altered.

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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.

Real profits, but for how long?

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[Dave Birch] Something you may not have noticed, but there was another milestone passed on the road to the future of banking a few weeks ago, when Project Entropia auctioned banking licences for its virtual world. In fact there were five licences sold, with the highest bid at $99,900 going to “Yuri”, an undoubtedly fit and proper avatar. Financial services follow the money, even when it is virtual. Last year, a player set up a bank in another science fiction game, EVE Online, but that one was unsupported and unregulated by the game’s operator, CCP hf of Iceland. The player tried to abscond with the deposits, but CCP froze his account before he could sell them for “real” money. EVE Online has been attracting more interest, this time from the Financial Times, which picturesquely calls a galaxy far far away where rampant capitalism held sway, free from the restraints of Sarbanes-Oxley legislation, SEC inquiries and European Commission investigations. Where there are “large-scale scams, widespread corporate espionage, military-industrial alliances and interplanetary wars”.

Eve seemed like a playground for totally unfettered hardcore capitalism, with none of our justice systems or controlling bodies.

according to Trey Ratcliff, a former player and CEO of John Galt Games Note, by the way, that EVE Online has 200,000 players paying a $15-a-month subscription. Jason Schripsema, CEO of SolarBOS, a maker of solar electric products, says he became fascinated with manufacturing and marketing products for other players. He learnt valuable lessons about how to maximise profits and prioritise projects, and says

Eve is a good training ground for anyone interested in business – the markets really work.

Dan Speed, acting economist for CCP, says the game is “hypercapitalistic”; rife with corporate espionage and wrongdoing. One group infiltrated a corporation, assassinated its chief executive and carried out a heist. Another staged a successful IPO to raise money to build space stations. Investors lost everything when the outposts were attacked and taken over by a rival. I thought it was amusing that Mr. Speed goes on to say

Yet honest players survive and they are earning virtual qualifications for real-world jobs.

What “real-world jobs”, I’m dying to know. Has the East India Company been advertising on Monster.com? Is Sir Walter Raleigh about to launch an expedition to El Dorado? Is “The Apprentice” now featuring John D. Rockefeller?

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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.

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