Tomorrow's Transactions

Thought leadership from Consult Hyperion

Archives for March 2009

Cards aren’t just about payments

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[Dave Birch] There was an interesting development in the world of payments and cards recently when the Utah Transit Authority went live with a new ticketing system that accepts contactless payment cards as well as contactless tickets: not as a pilot or trial but as a live system supporting the three main brands.

UTA’s new EFC system accepts major contactless credit and debit cards such as Visa payWave, MasterCard PayPass and American Express expresspay for a single adult cash fare on more than 600 buses and a fleet of light rail and commuter rail trains.

[From Utah Transit Authority Showcases Open Payment System – Government Technology]

Mass transit has become a focus of activity and innovation in the contactless world, not just because of the scale of mass transit systems but because of two intersecting drivers that lead to a win-win. From the transit side, many operators don’t actually want to run ticketing systems if someone else can provide a working payment solution.

The MD of London Underground Tim O’Toole said the ability to use near field communication-enabled phones and other next-gen ticketing tech on London’s public transport will be enabled by the new deal.

[From Oyster deal lights touchpaper for new tech makeover – Financial Services – Breaking Business and Technology News at silicon.com]

There has been one interesting barrier to the integration of payments and transit in certain markets, and that is that the ISO-based contactless interfaces and the Felica-based contactless interfaces have required separate chips. This has now changed, as the Moversa joint venture between NXP and Sony starts to bear fruit.

Moversa will unveil the capabilities of its latest security chip – the Universal Secure Access Module (U-SAM) – at this year’s Mobile World Congress. The chip manages contactless smart card applications, regardless of protocols and operating systems, in Near Field Communication (NFC)-enabled mobile devices… Moversa’s U-SAM supports two of the most widely installed contactless smart card technologies in the world, NXP’s MIFARE™ and Sony’s FeliCa™ systems, as well as a number of other contactless operating systems and applications. The chip will enable mobile device manufacturers to design products which are interoperable with existing contactless infrastructures.

[From MOVERSA – PRODUCT NEWS FROM MOVERSA]

It’s a terrific time to be looking at the future of cards in that space, as mobile and contactless technology continue to revolutionise the customer experience.

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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.

Grey areas

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[Dave Birch] I’ve been reading John Cooley’s book on counterfeiting Currency Wars, which is about various attempts to destabilise countries by forging their currencies. He talks a lot about North Korea’s “superdollar” forgeries and the like. He says at one point that there is a grey area between actual counterfeiting and the deliberate over-issue of fiat currency. This led me to reflect that the quantitative easing policy of the British government is likely to be reduce (by inflation) the value of the pound Sterling far more effectively than Hitler’s plans to bring Britain to its knee through counterfeiting in the Second World War:

Operation Bernhard was the name of a secret German plan devised during the Second World War to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes. It is the largest counterfeiting operation in history.

[From Operation Bernhard – Wikipedia, the free encyclopedia]

As an aside, one of my sons went on a school trip to Germany earlier in the year and actually visited the scene of this dastardly plot to sabotage Sterling, the Sachsenhausen concentration camp. If you are at all interested in this story, there’s an excellent film about it, The Counterfeiters. Now, think what the modern version of this might be: not counterfeiting physical money, but creating electronic money. What would Operation Berhard look like in 2009?

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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.

Government interface

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[Dave Birch] Government identity is so important that the vigilance of the “issuers” must be unwavering. Thus, the rest of the identity management value network can function. It’s so important that one might even go so far as to say that a key role of government should be to test it’s own vigilance in an open and transparent way. In other words, shouldn’t parts of the government be checking up on other parts of the government and telling us what happened. This would be a really interesting experiment to try here in the UK, now that the government has started issuing identity cards. It would be great to have some reassurance that the process is indeed protecting us from international terrorists, dole scroungers and health tourists. The National Audit Office (NAO) could try and obtain bogus identity documents from the Identity and Passport Service (IPS) and see what happens. Just like the recent experiment in the US.

To do so, GAO designed four test scenarios that simulated the actions of a malicious individual who had access to an American citizen’s personal identity information. GAO created counterfeit documents for four fictitious or deceased individuals using off-the-shelf, commercially available hardware, software, and materials. An undercover GAO investigator then applied for passports at three United States Postal Service (USPS) locations and a State-run passport office.

[From Security Document World]

And the results? Did the ever-vigilant staff, the best IT that money can buy and the process designed by top management consultants come together to defeat these almost trivial attempts to deceive?

In its four tests simulating this approach it was successful in obtaining a genuine U.S. passport in each case.

[From Security Document World]

Uh oh.

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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.

Free!

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[Dave Birch] Well, now I’ve got your attention here’s a quick reminder that next week is the 12th annual Digital Money Forum and we still have a few places left. They’re not free, but they’re well worth the almost insignificant delegate fee considering the incredible range of expertise and experience on offer. You can view the full agenda online over at the Digital Money Forum or you can download it here (248.3K). The Forum is now in its twelfth year, and once again promises the combination of discussion and debate, learning and fun, that has earned it the reputation as the place to be for people interested in the future of retail electronic payments. It continues to be a unique event, where interaction and invention replace product announcements and “death by Powerpoint” sales pitches.   As you may know, this is a not-for-profit event that supports a variety of charities. This year we are supporting BUFFER (which provides specialist diagnostic equipment for breast cancer), Action Medical Research and Jubilee Action which helps children worldwide. This years Forum is made possible by the kindness of our sponsors Visa Europe, Monetise, WebMoney and VoicePay with support from our charity tournament sponsor ACI Worldwide.

Some come and join our experts from the World Bank, Financial Services Authority, The Economist, European Payments Council, Transport for London, Nationwide, Barclays, Royal Bank of Scotland, Sidley & Austin, O2, The Guardian, Innovaro, Masabi, EAT, ABI, Finextra, Disruptive Analysis and the Free University of Brussels at the 12th annual Digital Money Forum in London on 31st March and 1st April at the Guoman Charing Cross hotel and come away with the kinds of new concepts, new friends and new business ideas that many of you have come to expect from this unique event. All delegates will receive a copy of our popular Digital Money Blook (the most interesting posts from this blog over the last year) and Larry H. White’s “Free Banking in Britain” along with “The Nudge Factor”.

Thanks for reading that. Now for the details of two terrific — and absolutely FREE — events on Monday 30th March in London. If you are interested in the future of electronic payments, you have the opportunity the spend a relaxing lunchtime and afternoon in the company of an assembly experts rare on these shores.

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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.

Virtual washing machines

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[Dave Birch] I have from time to time expressed some concern that the cost of complying with money laundering laws, policies and regulations increases the net welfare because, as far as I can see, there is just as much money laundering going on in the world now as there was before. But I may be wrong because I don’t have access to any exact figures for how much money is being laundered. Except in the UK, where we know the precise amount:

In other words, we have over £82,000 of money laundering where notes were accidentally washed through washing machines;

[From The Financial Services Club’s Blog: Sorry sir, the dog ate my lunch money]

Yet another problem with notes and coins duly recorded.

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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.

No, wait, Titanic isn’t the right metaphor

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[Dave Birch] For many years I have consistently maintained that multiple identities (more specifically, multiple virtual identities bound to digital identities that can be authenticated against “real world” identities) are an integral part of the digital identity infrastructure of the future and emphatically part of the solution, not part of the problem. There is a technical caveat though: the virtual identities must be kept separate. As Robin Wilton notes, with his usual perceptiveness,

maintaining different ‘personas’ can contribute to personal privacy – and personal privacy is undermined when the barriers between those ‘personas’ are broken down.

[From Racingsnake – the blog of Future Identity: Is privacy only for the rich?]

So we need a good technology (firewalls, PKI, keys, tamper-resistant hardware blah blah blah, you know the score) to make the barriers and should not rely on guidelines or ombudsmen instead. However, I made a terrible mistake explaining this vision to group of people recently. I said that the partitioning of identity in this way was the equivalent of building a big ship with a series of waterproof compartments separated by strong bulkheads, so that if one compartment is holed, the ship is not threatened. What, someone said, you mean like the Titanic?

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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.

There’s always mistales

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[Dave Birch] Well, this is interesting. One of my mobile phone operators (I currently have three: my iPhone, my dongle and my son’s phone) has sent me someone else’s bill. I now have someone’s name, address (why it came through our door I have no idea: the address isn’t even in the same town, let alone the same street), mobile number and an itemised bill. I’m sure I could get up to some mischief with this. I don’t want to pick on mobile operators in particular, but I do want to point out that this sort of thing will always happen. In a bizarre way, we’ve come to expect them. It’s even vaguely comforting to read about the usual colossal cock-ups with computers, because it reassures you that all is right with the world…

Zamora said the pump at the By-Pass Deli and Conoco service station at Stevens Drive and the Highway 240 Richland bypass registered only $26 for the fuel. But somehow the transaction was recorded on his debit card as totaling $81,400,836,908… After learning that afternoon by e-mail that his debit card was maxed out (no kidding! ed.) he called customer service… “Somebody from a foreign country who spoke in broken English argued with me for 10 to 15 minutes,” Zamora said. ” ‘Did you get the gas?’ he asked. Like I had to prove that I didn’t pump $81,400,836,908 in gas!”

[From Local News | How many billion dollars for that tank of gas? | Seattle Times Newspaper]

I am literally astonished that a charge for $81 billion could go through the debit card system at all. Wouldn’t you have thought that the settlement system had some limit minding in it that will trigger if a transaction for more than, oh I don’t know, let’s say A BILLION DOLLARS comes through on a debit PAN? Clearly, whoever built the system never imagined that this could happen, so they never put in any logic to watch out for it.

It’s crazy to build systems on the assumption that nothing will go wrong. Amusingly, in a tragic and depressing kind of way, this was reinforced by the news that public employees have already been snooping around in the proto-national identity register to look up friends, family and presumably other “interesting” people even though it’s not even been built yet. Still, not to worry. So far it’s only 30 local authorities that have noticed a problem.

Staff at 30 local authorities have been responsible for “serious security breaches” in the government database that will form the core of the national ID cards programme. Local authority staff have viewed sensitive personal records on the Customer Information System (CIS) run by the Department for Work and Pensions (DWP), it emerged today. The £72m Customer Information System is an Oracle database being built by Accenture for the Department for Work and Pensions. It will hold a wide variety of data on nearly all UK citizens.

[From ID Cards insider: scheme is “largest , most complex and sensitive undertaking in Government” (Tony Collins’s IT Projects Blog)]

Why on earth would anyone have imagined that there would be any other outcome? And by the way, if I was one of these public employees snooping around for the purposes of amusement, I’d have been using someone else’s username and password, so there’s no real chance of catching them.

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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.

Coining it

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[Dave Birch] What a coincidence! George Selgin’s book arrived a few days ago. I put it on my next-to-the-sofa pile, looking forward to starting to read it over the weekend sometime. It reminded me that I’d seen an article of his in the Wall Street Journal a little while ago. I’d put it to one side because it was about the current coin shortage situation in Argentina, which relates also to the period of British history covered in his book. It’s hard to imagine a time when trade and industry were held back because there were too few coins in circulation, but that’s exactly what the situation was in England during the industrial revolution. Employers needed coins to pay wages and couldn’t get any, customers couldn’t pay in shops, and the economy suffered. What does this have to do with Argentina? Well, there’s a coin shortage there at the moment.

Argentina’s central bank blames it on “speculators,” meaning everyone from ordinary citizens, who stockpile coins, to Maco, the private cash-transport company (think of Brinks) that repackages change gathered from bus companies to resell at an 8% premium. But those explanations ring false. “Black marketeering” would not exist if coins were easy to get in the first place. After all, Argentines could just as easily hoard razor blades or matchbooks. Yet there’s no shortage of those. What’s so special about coins? The answer is that coins are supplied by the government alone. “Put the federal government in charge of the Sahara desert,” Milton Friedman said, “and in five years there’d be a sand shortage.” If Argentina wants to end the coin shortage, it ought to give up its monopoly.

[From Opinion: Argentina Is Short of Cash – WSJ.com]

This is a point well made and because we’re going to be discussing the apparently crazy idea of private-sector currency at the CSFI at the end of the month I’ve been keeping an eye out for stories to bring up at the round table. If you have any more, do send me the links.

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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.

London calling

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[Dave Birch] I’m a technologist so in a peverse way I rather like recessions, because (as The Economist pointed out a while back) a recession is when you see real innovation. Many successful companies got their start during hard times:

The list includes household names like Burger King, FedEx, Microsoft, Wikipedia and G.E.

[From How Will the Recession Affect Innovation? – Economix Blog – NYTimes.com]

Why is this? When things are pottering along splendidly, profits are high, no-one in a bank (or any other company) is going to invest much in anything new. The markets for innovative products are too small and the money to be made is insignficant.

Companies with overly deep pockets can flood a bad idea with money. Overly patient companies can let bad ideas linger for years.

[From Innovation During The Great Disruption – Forbes.com]

But when there’s a bit of a downturn, some companies see it as an opportunity to grab some business while competitors are retrenching to the core. This is why, I think, our payments-related work has been holding up in these difficult times. But businesses still need some inspiration to take the plunge and redirect resources away from core business. This is why that an exciting event like the London Olympics is such fun, because it serves as a spur to innovation, setting some targets for British industry to reach and make the Olympics a showcase for innovation. Oh wait…

But risk management is at the core of the IT implementation, so Pennell will maintain a conservative approach and favour proven technology, which will be customised for the Games’ purposes.

[From 2012 CIO hits the ground running – vnunet.com]

What’s the proven technology that he’s talking about? Steam engines? Television? Contactless smart cards? Well, it doesn’t appear to be the latter…

The same cautious approach applies to innovations such as contactless payments, despite the efforts of banks such as Lloyds TSB to push the idea of making the Games a cash-free environment. “Contactless is an interesting concept and we have had a few conversations around that, but my suspicion is that it isn’t something we are likely to do,” said Pennell.

[From 2012 CIO hits the ground running – vnunet.com]

So that’s that then. I hope LBG have some other innovations to excite the public with and make their 80 million pound sponsorship worthwhile. It’s just as well that their sponsorship manager says that LBG staff are inspired by Olympic history, because the Olympic future looks rather uninspiring. My prediction that London 2012 will more closely resemble London 1948 than Bejing 2008 is coming true. There’s still time for the government to re-introduce rationing to finish the effect (my Mum and Dad would love that, by the 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.

Prime directive

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[Dave Birch] Thanks to the generosity of our sponsor, the StoLPan project, Consult Hyperion and city lawyers Sidley Austin will be running an free afternoon seminar on the Payment Services Directive (PSD) at the Guoman Charing Cross Hotel in London on 30th March 2009.

The seminar will comprise three sessions:

  • An overview of the PSD by William Long from Sidley Austin
  • National implementations in members states by William Long from Sidley Austin, and then after tea
  • A roundtable discussion (led by me) on the business impact featuring a couple of companies in the field.

Some observers think that for banks, the PSD represents cost with little benefit, but for some non-banks, the PSD represents an opportunity to get into the payment business. Why not come along and make up your own mind by discussing the directive with other experts in the field?

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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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