Tomorrow's Transactions

Thought leadership from Consult Hyperion

Archives for January 2008

The key role of transit

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[Dave Birch] At a couple of events I’ve been too recently, the key role of transit applications in the NFC world has been reinforced. In some markets, it may well be transit rather than payment that is the initial driving application for NFC handset rollout, which means that the payments guys need to work with the transit guys (both at the simple level of auto-topup but also with more complex value-added services, such as transit-based rewards) to bring the customers on board. Yesterday, another transit-centric NFC pilot was announced yesterday, this time in San Francisco.

Beginning today, pre-selected trial participants will exchange their existing mobile phones for the Sprint trial phones embedded with the NFC enabled smart chip – a chip that will allow them to securely pay for both their fares and their fries. “In BART’s case, a participant will initially have a stored value of $48 worth of BART rides loaded onto their NFC enabled mobile phone,“ BART Director James Fang said. “Once the stored value drops below $10 the NFC technology automatically reloads the phone “˜over the air’ with another $48 worth of rides and the customer will automatically receive our high-value discount, so they will only be charged $45.“

[From => BART Trial First to Use Mobile Phones to Pay for Fares & Food <=]

In case you’re interested, here’s one of the phones that I was playing around with in our office:

Samsung BART phone

Many, many years ago I used to work at BART, so I couldn’t resist posting a picture over on one of my other cyberdens. If you want to see some truly shocking behaviour in the Bay Area in the 1980s, have a look over on my personal work blog.

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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.

68 episode 3: Mabel’s Story

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[Steve Taylor] The blovel “68” takes the form of a series of ‘first hand reports’, people from the future talking in their own voices about their work, their lives and their relationship with communications. We continue with Episode 3, Mabel’s Story.

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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.

Federation is about trust

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[Dave Birch] A conversation today set me thinking (yet again) about why things are not getting better. Once again, I must ask why is it that the identity management situation does not seem to be improving much? In particular, surprisingly little seems to be happening in federated identity. Not because the standards needed to do it don’t exist, or exist but don’t work, but because they don’t overcome the trust barrier. Why should a company trust another company’s credentials? Or, at least, why should a company trust another company’s credentials unless the both belong to a “gang”? Businesses want certainty in these matters, they want to see that liabilities are distributed in a known and understood way, so that everyone knows where they stand. Thus, in a scheme such as MasterCard or IdenTrust, each of the participants can assess risk and reward properly. But if I’m FaceBook, should I accept a MySpace identity? What if the MySpace identity claims to be under or over 18 and I’m going to rely on that credential in some way?

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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.

SEPA is 0 today

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[Dave Birch] I’m sorry not be at the official high-level event, obviously, as I clearly see myself as distinguished, but I’m sure a good time will be had by all…

To mark the official launch of SEPA (Single Euro Payments Area), Charlie McCreevy (Internal Market and Services Commissioner, European Commission), Gertrude Tumpel-Gugerell (Member of the Executive Board, European Central Bank) and Gerard Hartsink (Chairman, European Payments Council) are organising this high-level event with distinguished guests from the EU payments market.

[From ECB: SEPA goes live]

I will probably join in the street party instead, as happy IT vendors citizens laugh, drink, carouse, dance in the streets and set off fireworks to celebrate this significant step in Europe’s progress towards a single market. I intend a practical celebration as well: I shall log in first thing and try a SEPA credit transfer to one of our European forum friends.

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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.

Retail weak

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[Dave Birch] The drive by UK banks to “replace cash usage with cards” came under heavy attack from the British Retail Consortium (BRC). In a strongly worded statement toward the end of last year, the trade association accused card companies of exaggerating the extent to which cards have replaced cash. A BRC survey of 10,000 stores, which together account for a third of U.K. retail sales, showed that cash is still the most popular payment method, accounting for 54 percent of all UK transactions by volume and 32 per cent by value. Their spokesperson said

The card companies, in their publicity campaigns for their products, are giving the impression that cash is on the way out… For example, they are trying to present contactless cards as the ‘new cash,’ because contactless transactions below £10 do not require a PIN.

Well, whether card companies are giving the impression that cash is on the way out or not, European cash payments are declining. They now account for only a third of total European household expenditure, according Datamonitor. The value of cash payments in Europe was €1,787 billion (US$2,651 billion) in 2006, accounting for 34 percent of total household expenditure, down from 38 percent in 2002. And, as APACS pointed out at the time, the vast majority of cash transactions are under £5, whilst the average credit card transaction at a retailer is over £50 for credit. Anyway, the BRC’s point is that cash costs retailers less than cards. Their figures are that on average, a £20 cash transaction costs a retailer less than four UK pence, while a £20 credit card transaction costs at least 17 pence. I’m sure these are accurate: the costs of cash fall on consumers (and society) rather than retailers, so naturally retailers are in favour of it. There’s nothing wrong with that, but it seemed a little a over the top for the BRC director general Kevin Hawkins to say that

Banks have long abused their position by imposing much higher charges on retailers for processing card payments than cash… Clearly, the banks have spotted that replacing cash with cards would mean a further boost to their profits.

The BRC says it is asking the Office of Fair Trading (OFT) “to force the banks to reduce their (card processing) charges.” Surely the way to make a market work properly isn’t to ask regulators to fix prices but to increase competition. If retailers feel that cards cost too much, then they should develop alternatives, shouldn’t they? All they have to do is call…

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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.

Is this the world’s biggest identity fraud?

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[Dave Birch] No doubt you will all have choked on your cornflakes this morning hearing about the sorry tale of Jerome Kerviel, the so-called “rogue trader” (I thought they all were!) who threw away FIVE BILLION EUROS of Societe Generale’s money and, in passing, may have left the world financial system on the brink of collapse. Now Societe Generale (amusingly, the “Global Equities Derivatives House of the Year”) must have had an army of compliance-wallahs, ticking boxes here and there, and spent a fortune on management consultants and auditors to comply with Basel II and every other directive under the sun. And yet, as the FT tells us,

Mr Kerviel appears to have built up his losses over a short period using accounts and passwords belonging to colleagues.

[From FT.com / In depth – The rogue trader who cost SocGen €5bn]

Well, well. And there was me thinking that investment banks with extremely valuable data to protect would have used some form of 2FA or even 3FA to protect themselves against losses that could extend into billions. Perhaps they decided against smart cards on the grounds of cost, or doing proper risk analysis on the grounds that it was waste of money, or something like that.

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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.

A new law

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[Dave Birch] I propose new law, to go alongside Moore’s Law and Reed’s Law and all of our other useful tools for dong back-of-the-envelope projections of where things will be going in the short- to medium-term. I propose Stoke’s Law, which is that

as the amount of data that the government collects grows, so will the number of people who are victims of crimes that were made possible by unauthorised access to government databases.

[From Analysis: Metcalfe’s Law + Real ID = more crime, less safety]

We all know it to be intuitively true, but the question is “what is the shape of the curve”? Jon Stoke’s links it to Metcalfe’s (ie, square) curve, but I wonder if it mightn’t be steeper than that because of the variety of criminal interests that might want to exploit different subsets of my personal data. To take a simple case, there might be criminals that want to access my national identity register record because they want to pretend to be in order to allow an illegal immigrant to get a job but they are different from the terrorist interests that want to access my DVLA record because they need to track down people who have cars that use a particular stretch of road every day.

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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.

Making prepaid work

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[Richard Allen] Why would anyone use a prepaid card? I’ve been doing a survey of some U.K. products in that space. (You can do your own research at Which prepaid card.) Typically, it costs £10 to get a card, a pound or so just to load some value, 50p minimum to buy something with it, a couple of quid to draw money out of an ATM, 3% currency charges for overseas use, and so on. Many of them charge a monthly fee of around £5 in return for lower charges, but they’re still expensive one way or another. Yet the market is still growing. Some of that growth is explained by the growth in online gaming, but I wonder if remittances might also be a strong growth driver. One of the cards you can get is actually two cards that are specifically designed for remittance purposes. You send one card to your Uncle Eric in Back-of-Beyond and top-up your card with value. You then “text” Uncle Eric some value (that bit is really bonkers and incurs a 2% fee) and he can take it out of any bank or ATM (with a MasterCard logo).

How much does it cost? If you ignore the cost of the card, sending £100 to USA will actually cost you about £107 and will yield approx $190 at the other end (based on $1.96=£1 exchange rate). Expensive? Well, compare it with Western Union, the market leader. It charges £114 to send a £100 that appears to yield $185. I made similar comparisons for India, Poland and Argentina. Shopping around, there are some good alternatives. I could just get a normal pre-paid card, send it to Uncle Eric (with the PIN, of course!), then add value at a UK Post Office thereby skipping the nutty “text” bit and save another £2. Some cards, such as the sensational, soar-away Sun pre-paid card, do not charge for foreign currency transactions, thus saving another 3% or so, and some come with a paying-in book and second card (for Auntie Ethel). I reckon that we can now get $195 to Uncle Eric at a cost of less than £103. That’s better than using your average credit card! We can do all that without a single bank account or credit record between us: the infrastructure is already there – it’s called MasterCard (most of the pre-paid cards I looked at were MasterCard/Maestro-branded). We just need to find ways of using it more effectively.

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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.

More on innovation

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[Dave Birch] Forecasts of future events are heavily influenced by present circumstances. That’s why predictions are usually wrong. It’s hard to transcend current assumptions to obtain genuine insight. In the world of banking and payments, we are no different. Chris Skinner said:

Maybe I’m wrong … but I cannot think of one, bank-created innovation that has then permeated other industries. C’mon. I must be wrong. Give me one that banks created and is now seen in airlines, retailers, or elsewhere. Ah … hold on, here’s one. The ATM. The ATM is now in airports as self-service ticketing machines, and also in retailers as self-service checkout terminals.

I hate to argue with Chris (not really — we rather enjoy a good argument), but it’s the other way round. The ATM as we know it today was invented by at baggage handling company!

However, the modern, networked ATM was invented in Dallas, Texas, by Don Wetzel in 1968. Wetzel was a department head at an automated baggage-handling company called Docutel. In 1995 the Smithsonian’s National Museum of American History recognized Docutel and Wetzel as the inventors of the ATM.

[From Automated teller machine – Wikipedia, the free encyclopedia]

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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.

Harry Potter it’s not

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[Dave Birch] Now, this is very exciting. But only to me. It turns out that “Digital Identity Management: Technological, Business and Social Implications” had shot up in the Amazon rankings: I imagine someone must have bought a copy, because it went up to 38,735. This sounds poor, but it’s actually not bad. Charles Dicken’s “A Christmas Carol” was 99,541 and the last book that I bought (A.C. Grayling’s “Against All Gods: Six Polemics on Religion and an Essay on Kindness”) was at 1,835. It was an exciting and heady time, that week, because it’s I’ve slipped way back down below Dickens. Anyway, I’m beginning to learn how good it feels to an author to see their book up the chart, now matter how briefly. In fact, it’s fantastic in more than one respect, because it’s a recognition of the fact that digital identity is becoming an important business topic.

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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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