Tomorrow's Transactions

Thought leadership from Consult Hyperion

Archives for June 2008

Text usury

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[Dave Birch] In the April E-Finance and Payments Law and Policy (a fine journal), I read about text message loans in Finland (and the rest of Scandinavia), a subject about which I knew absolutely nothing but found absolutely fascinating. Here’s what’s going on. The consumer sends a text message to the company offering the loan (these are typically in the range 50 to 200 euros). The message contains the consumers ID number and bank account details as well as the amount of the loan. The company checks the consumer’s credit and, if it is acceptable, sends back a link to web site with the terms and conditions. Once the consumer accepts these (by hitting “OK” on the relevant web page) the money is sent to their account. The companies do not charge explicit interest, but instead charge an arrangement fee (which is the equivalent, often, of an APR of several hundred percent). Wow.

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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.

It’s the future, I tell you, the future!

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[Dave Birch] I was down at SMi’s Contactless Cards conference in London this week (I ran the NFC payments workshop there — remember our competition?) and picked up the impression that the London contactless roll-out is not going entirely as smoothly as it might. The cards are rolling out, but the terminals are not following the same trajectory. And where the terminals are out there, they’re not transforming customer behaviour. The small transaction focus may be hampering deployment…

Yo Sushi has found that the £10 limit greatly reduces the number of transactions it takes and it also said that the lack of portable contactless terminals was a problem as was the accreditation process.

[From Payments Industry Thoughts: London Contactless Payments Stuttering]

Yet I’m sure I detected more enthusiasm from some of the bigger retailers who were thinking about setting aside under £10 terminals or lanes.

Sainsbury’s is to start a contactless payments trial as part of a multimillion-pound revenue protection programme. The retailer is selecting a vendor for the in-store reading equipment and will begin testing the devices in the coming weeks. “The introduction of chip-and-PIN has reduced the number of card-based scams considerably, but we have seen a substantial increase in cash fraud,” said Sainsbury’s national crime and investigations manager Phil Wilson.

[From Sainsbury’s checks out secure payments systems – 08 May 2008 – Computing]

That’s a perspective I hadn’t looked at for a while. Since there is a fair bit of theft in the retail world — I think they call it shrinkage — reducing the amount in the till also reduces the amount of cash being pilfered. Another line in the business case.

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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.

Meet the people

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[Dave Birch] Preparing my notes for RUSI, I was thinking about what it would take to get the public to have confidence in a national identity management scheme, and it reminded me that I took part in a very good public debate about privacy and surveillance recently. I was on a panel that included the assistant Information Commissioner Jonathan Bamford and Tom Ilube of Garlik as well as fellow Royal Academy of Engineering Working Group member Martin Thomas. It was a little unusual (for me) in that many of the audience were genuine members of the public rather than technology or sector specialists, so I thought it might be a useful service to bring some of their questions to your attention. They were a timely reminder to me about the kind of concerns that our customers will have to address to formulate successfull consumer propositions with an identity component. For example, there were a couple of questions about vehicle tracking. I’m certainly guilty of spending most of my time thinking about personal data in too few dimensions: vehicle tracking was as much a concern the the audience as people tracking. But the subtext should be noted: many of the anecdotes were about how wrong the DVLA database is, which clearly informed opinions about the people database (aka national identity register): there’s a clear distinction, as far as I can see, between the small number of people who are against government identity management because it’s just plain wrong and the much larger number of people (I might go so far as to venture, the majority) who are against it because they think the government will lose, delete, corrupt or spy on their data if they ever get the system working in the first place.

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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.

Opportunity knocks

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[Dave Birch] Our friend David Poe from Edgar Dunn gave a presentation at the recent Chicago Fed conference on payment fraud on

Identifying Security Issues in the Retail Payments System

[From – , Federal Reserve Bank of Chicago]

He sums up an important aspect of managing fraud in the retail e-payments world when he says that “Players often make suboptimal fraud risk management business decisions because the true cost of fraud is often misunderstood.” While we all understand that some costs of fraud end up hidden away in bad debt, he points out that there are other, just as important, substantial costs to be taken into account. These include the opportunity cost of dealing with fraud when management time and effort could be going into growing the business instead. The more I think about it, the more I’m sure he’s right. On the one hand, fraud stimulates new product and service ideas all the time: just pick a recent one at random,

Online shoppers in the UK will be able to pay direct from their online bank account rather than via a credit or debit card, thanks to a new service. The POLi online bank payment platform aims to increase payment choice while reducing card-not-present fraud, a category of fraud covering ecommerce transactions which is on the rise. UK card-not-present fraud rose from £212.7m in 2006 to £290.5m in 2007, an increase of 37 per cent… According to merchants in Australia using POLi, the service now accounts for an average of 23 per cent of their total online payment transactions.

[From Online banking payment system aims to reduce fraud | The Register]

I would never use this of course because I want to pay for everything using a credit card since that frees me from all worry: it’s not my problem if something goes wrong, but that’s besides the point. The point I wanted to make is that there’s considerable intellectual effort going into dealing with online payment fraud, but if that problem were to be fixed then this energy and initiative could be freed up to develop cheaper, better, more inclusive payment systems instead and give a greater boost to net welfare.

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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.

Laundry bills

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[Dave Birch] I’m looking at the tension between financial inclusion and KYC/AML (financial exclusion), specifically in the context of launching new mobile payment schemes in developing countries. My thinking is summed up well here:

Strict KYC norms present a big hurdle: The very people who have most to gain from mobile banking are excluded because they don’t have identity cards, proof of address and other credentials.

One way to deal with this problem would be to allow “KYC- lite” that restricts the amounts per transaction to minimize risks while ensuring that the poor aren’t left out.

[From Bloomberg.com: Opinion]

I’ve argued before — in other fora — for a much stronger KYC/AML break at the low end of the market since it would provide a low-cost means to improve the lives of a large number of the poorest people. The main argument against this, naturally, is that the break might then be exploited by criminals, terrorists and so on. I don’t buy this at all, but do need to address it.

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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.

It’s crazy, but it might just work

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[Dave Birch] Let’s create a vision for a 21st-century identity card. Let’s create a vision that we can communicate effectively. Let’s create a vision that is founded on minimising the storage of personal data. Let’s create a vision that the public and the government can understand. Let’s create a vision that contains some genuine innovation, some excitement, some potential. But most of all, let’s create a vision that is founded in mass media, because that’s where the British public get their science and technology education from. I would suggest that, as in so many things, Dr. Who should be our guide.

You’ll be familiar, of course, with Dr. Who’s psychic paper. As any devotee of the BBC’s wonderful series knows, the psychic paper shows the “inspector” whatever it is that they need to see. If the border guard is looking for a British passport, the psychic paper looks like a British passport. If the customs officer on Alpha Centuri wants to see a Betelguesian quarantine certificate, the psychic paper looks like a Betelguesian quarantine certificate.

200806171440.jpg

Now that is what I call a vision for an ID card. And what’s more, it will work.

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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.

Grasses up

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[Dave Birch] If you haven’t been over to Wikileaks, you should probably go and have a quick look before you read the rest of this post! There’s an article about it in a recent New Scientist, talking about how “onion routing” is used to provide anonymity. So people (eg, whistleblowers in large corporations) can obtain genuine anonymity online. I’m in favour of this, generally speaking, and it’s certainly necessary in a free society. But is it sufficient?

Suppose, for example, that I post a plausible-looking document that seems to show that the British Royal family are actually giant extraterrestrial bloodsucking lizards. How do you know whether it’s a genuine leak or a double-cross? If, for example, there’s a document purporting to be the Identity & Passport Service’s National ID Scheme Options Analysis, how can you be sure that it really comes from them (just to pick a mischievous example) or was made up by someone at No2ID? If we as a society agree that some from of whistleblowing is a social benefit — and yes, we must also accept that it means that some drug-dealing Nazi child pornographers will be able to take advantage of it too — then we should have systems in place to deliver it. And that doesn’t mean implementing anonymity.

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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.

Out of Africa

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[Dave Birch] The news that M-PESA in Kenya now has more than 2.7 million users — with 50,000 more joining every week — reminds me that sometimes new technology can not only make payment systems more efficient, more effective or more profitable, but also genuinely life-changing. But with ATMs getting more expensive, bank branches thinning out, petrol prices making it expensive to get to towns, Post Offices closing left and right… how long will it be before the successful non-bank mobile-based transaction-oriented pre-paid services being launched in developing countries find their way back to the U.K.? After all,

Any new rival to Visa and Mastercard should seriously consider ditching the card concept altogether and utilising customer’s mobile phones.

[From Rival to Visa and Mastercard without cards? – Mobilisation]

Now, it may seem far-fetched to imagine that G-Cash, M-PESA, Cellpay and others might have Europe in their sites, but it must be surely be a line of thinking that as SEPA has failed to deliver the (Commission’s) desired result — in that it has led to low-cost national debit schemes being abandoned and replaced by international schemes — perhaps another approach might be considered? What if the so-called “third scheme” were not some boring old-fashioned hello-1949 thing with accounts, cards, statements and the like but M-PESA? Any financial institution could provide the line of credit used to fund the pre-paid account at the heart of the scheme. Now, obviously I’m not the only person to be thinking this way…

A new dedicated mCommerce account may be the way to go. Remember that when credit cards (a new payment system) were launched in the 1970’s, it came with its own dedicated account management system. Why should that not be the case for mobile payments?

[From Mobile Banking: Where is the money?]

I wonder if we aren’t heading for more change than the Commission and the banking industry could possibly have imagined when setting off on the SEPA path. Anyway, let’s stop for a moment and celebrate M-PESA’s achievement: a win-win-win for consumers, Safaricom and microfinance. Payments really can change peoples’ lives.

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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.

Adriana Lukas, MediaInfluencer

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[Dave Birch] Adriana Lukas was one of the founders of Samizdata, one of the first political blogs, and went on to be part of the The Big Blog Company before becoming a social networking, well, guru, frankly. She is developing interesting new thinking about identity from a non-technical direction and in this podcast she discusses some of the key concepts, touching on hew work with Project VRM and “The Mine” tool.

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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.

It’ll never catch on

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[Dave Birch] Well, we’ve all made some predictions that didn’t really work out, but Clifford Stoll’s 1995 Newsweek article stands out from the crowd for completely misunderstanding the nature and direction of change. In a general diatribe about how the Internet is useless and will never amount to much, he says that

Even if there were a trustworthy way to send money over the Internet–which there isn’t–the network is missing a most essential ingredient of capitalism: salespeople.

[From Clifford Stoll: Why Web Won’t Be Nirvana | Newsweek Technology | Newsweek.com]

Well, we still don’t have a completely trustworthy way of sending money over the Internet, although PayPal is doing a pretty good job, but there’s no shortage of salespeople. True, most of them seem to be selling Viagra, but there’s an awful lot of commerce going on nonetheless.

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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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