Archives for June 2010

Carthago delenda est

Monday, 28 June 2010 by Dave Birch

[Dave Birch] Fascinating evening debating the future of money with the members of the Real Time Club. I had a great time, was kept on my toes and forced to think hard and fast by Malcolm Cooper and the assembled throng. I certainly learned that in future I have to think things through a little better, but it is enjoyable being challenged in this kind of informed forum.

My general point was that in the great scheme of things, we are due a change. Once the industrial revolution got under way, the old monetary order of bimetallism was swept away and was replaced by fiat currency, paper and bank credit. As this happened, the unit of account, means of exchange and store of value began to separate. Now that the post-industrial revolution is underway, we will surely see a transition of a similar nature.

Malcolm suggested, taking an even longer sweep of history, that it may actually be currency that is the aberration and that in the future we may return to a form of barter, albeit a turbocharged, computer-mediated barter. This is a subject I’ve touched on before.

What might the far future really look like? It’s hard to say, except that it won’t be like the past. There won’t, probably, be widespread barter for example despite the ability of networks to reduce the associated transaction costs.
[From Digital Money: A single currency? Illogical, Captain!]

Nevertheless, his point that we mustn’t assume that the current monetary arrangement is a law of nature and will continue indefinitely was well-made and thought-provoking.

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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.

Unexpected reaction

Friday, 25 June 2010 by Dave Birch

[Dave Birch] There was a great session at Prepaid 2010 featuring Manchester City Football Club. As you may recall, they were one of the first football clubs in the world to move to an all-contactless stadium with no paper tickets. In passing, it was mentioned that an unexpected consequence of the transition to (fast) contactless transactions was that the fans all turn up five minutes before the game, so Manchester City were thinking of using loyalty points to tempt fans into the ground earlier on (so that they will buy stuff in the ground I suppose).

This echoed something I remember reading about Reading FC, so I went and looked it up.

Reading FC trialled a contactless system for one season but postponed the project due to financial constraints… “We found a few pitfalls by being an early exponent of the technology, which was a huge success despite reservations from fans and reduced queuing times from 13 minutes to about three minutes,” said Garry Hanson, the club’s IT manager.
“This caused newer issues we had not considered: fans used to filter out five to seven minutes before half time for food and drinks, but as their confidence grew, there was a rush at the half-time whistle instead,” he said.
[From Are contactless payments set to go mainstream? – 16 Jul 2009 – Computing]

Interesting, a certainly an unforeseen aspect of the contactless transition that needs to be factored in to the design of new systems. If the English festival scene is going to be transformed, then some of the lessons already learned will be very valuable indeed.

Music festivals that do not accept cash are set to come to the UK from next summer, the BBC has learned.
[From BBC News – Cash to be axed from UK festivals]

Will next year’s Glastonbury ticket be a piece of paper, an RFID wristband or a sticker for your mobile phone? When we implement the wristband and NFC phone pilot for O2 at the Wireless Festival, it worked perfectly, so I don’t see any reason not to get on with that implementation or a sticker-based implementation as soon as possible.

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Exclusion and the war on lunch

Thursday, 24 June 2010 by Dave Birch

[Dave Birch] Plans are afoot in the US to increase financial exclusion by making prepaid products more expensive and less available by forcing non-bank pre-paid card providers to comply with the same rules as banks, presumably treating a $100 pre-paid card to the same degree of scrutiny and reporting as multi-million dollar bank accounts.

FinCEN has applied a limited regulatory framework since 1999 to certain prepaid products as part of the money services businesses regulations applicable to sellers, issuers, and redeemers of stored value. Under FinCEN’s proposal, non-bank providers of prepaid access would be subject to comprehensive Bank Secrecy Act (BSA) regulations similar to depository institutions.
[From FinCen Proposes New Rules for Prepaid Card Programs]

Prepaid cards are already under attack from ill-thought through regulation of the payments industry anyway. This is a bad thing, because prepaid cards — or, more generally, pre-paid transaction accounts of one form or another — are a key tool for increasing participation in financial networks. We should be looking for ways to increase financial inclusion, not reduce it.

The Center for Financial Services Innovation (CFSI) has written to Rep. Barney Frank and Senator Chris Dodd asking that prepaid cards – including government benefits cards, general purpose prepaid cards, payroll cards – be exempt from the fee determination set by the Federal Reserve Board under pending legislation.
[From Center for Financial Services Innovation Asks for Prepaid Card Exclusions]

Encouraging people to remain the cash economy does not help in the “war on terror”, or the war on tax evasion, the war on corrupt politicians or anything else. There is a net social benefit to getting people to use cards instead of cash, and we should be making it is a simple and inexpensive as possible for the excluded to participate. We should be easing the regulatory burden on non-bank prepaid schemes with a maximum balance of, say under $500 or so.

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Optimistic, but why?

Wednesday, 23 June 2010 by Dave Birch

[Dave Birch] In a good article in the June 2010 “Digital Transactions“, John Stewart says that “optimism about NFC is starting to spread “despite the “deadlock” between banks and mobile operators. This deadlock, which Mohammed Khan of Vivotech says has “wasted three years”, means that mobile operators never specified NFC in their device profiles and handset manufacturers never added it to their device roadmaps. The result: no handsets in the shops at all and, at the time of writing, not a single NFC device in the Nokia product catalogue. What’s more, Javelin Strategy & Research say that fewer consumers are interested in mobile proximity payments than they were a year ago! (Although, as regular readers will know, I am sceptical of consumer research about this kind of thing.)

What has changed in the US to trigger optimism? One thing is the positive response to the “bridging technology” of stickers. First Data shipped half-a-million “Go-Tag” pre-paid stickers last year and the statistics are mildly encouraging. The average user is paying with the sticker 2.5 times per month and the average reload is $93. In addition, Bling as been shipping stickers to community banks for local payment schemes and Citi has just announced a large scale launch of stickers as well. Customers clearly like waving and paying with their phones. And stickers are also being used by merchants, an indication of their acceptibilty.

At the Rochester, Ind., Dairy Queen, more than 350 customers can wave special stickers fixed to the backs of their cell phones at a scanner in the store, thereby banking loyalty points and qualifying for free cones and Blizzard sundaes. Customers have come back to the store more frequently as a result, helping sale rise more than 3 percent in the past year, says co-owner Dave Reasner. “It’s something that’s working,” he says.
[From Shoppers Check Out of Stores Via Cell Phone – BusinessWeek]

As far as they, and many others, are concerned, stickers are the future. If one day they come built in to the phones then great, but in the meantime they’ll do just fine as they are.

French children’s clothing retailer Tape à l’oeil has rolled out a contactless sticker-based loyalty programme across all its stores and its website.
[From French children’s fashion retailer issues 300,000 NFC loyalty stickers • Near Field Communications World]

Another factor is the shift to smartphones (55m shipped worldwide in 1Q10), seen as more effective carriers for mobile wallets. Nokia’s recent announcement that it would NFC to all of its smartphones announced in 2011 will further fuel this renewed optimism, because surveys show that smartphone users are much more likely to use mobile financial services than non-smartphone users—which may or may not be a guide to mobile payment proclivity—and expect more and more of their services to be delivered on this platform. As I said at the time

Nokia’s no.2 showed up to announce that all Nokia smartphones introduced starting in 2011 will have NFC as standard. Up in our little Digital Money treehouse, this is what is officially known as a big deal
[From Digital Money: Big deal]

Is this enough though? Just because Nokia will make these handsets available doesn’t mean that operators will order and certainly doesn’t mean that operators will order non-SWP version to please other stakeholders who don’t want the operators to be gatekeepers. In a recent report on the market, the analysts Ovum say that

If operators are to realize the aforementioned potential and become players in the value chain, this is wholly dependent on the availability of appropriate devices for consumers to actually make mobile payments with. This is a major problem for operators. There is a paucity of NFC-enabled handsets on the market, and those which are capable of using SWP are almost non-existent
[From Telecoms and Software News]

Well, yes. But the availability of NFC handsets isn’t something like the weather, which the operators just have to put up with. They are part of this ecosystem: they could have gone to the handset manufacturers and added NFC to their purchasing roadmap. Had they committed to the extra $1 per handset, then the manufacturers would have a gone ahead. As it is now, it’s not at all clear whether the operators have given away their position in the NFC permanently or whether avoiding the SIM and SWP in favour of stickers or SD cards is just a temporary fad. I firmly believe that other handsets manufacturers will produce SWP handsets in 2011: but will the operators order them?

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Head in the clouds

Monday, 21 June 2010 by Dave Birch

[Dave Birch] At the recent European e-Identity Management Conference, Kim Cameron from Microsoft pointed out a few privacy and security concerns that relate to the cloud. This is important stuff, obviously. For one thing, the cloud is the new black. Remember this from a year ago?

All government departments are to be encouraged to procure new IT services based on a cloud computing model.
[From UK government CIO wants to build a “government app store” – 19 Jun 2009 – Computing]

This never meant that they actually would, or indeed, should have used the cloud for anything. I’m not sure if I’d want my medical records on Google Docs, one phished password away from universal access. Indeed, the idea of a special cloud for e-government wasn’t far behind:

Establishing a Government Cloud or ‘G-Cloud’. The government cloud infrastructure will enable public sector bodies to select and host ICT services from one secure shared network. Multiple services will be available from multiple suppliers on the network making it quicker and cheaper to switch suppliers and ensure systems are best suited to need.
[From News : NDS ]

Hold on. Suppose the cloud goes wrong, as one might imagine that a government IT cloud would have a propensity to do, what then?

In our opinion cloud computing, as currently described, is not that far off from the sort of thinking that drove the economic downturn. In effect both situations sound the same… we allowed radical experiments to be performed by gigantic, non-redundant entities.
[From MAYA Design: The Wrong Cloud?]

Hhhmmm. So this means that if the government cloud goes down, or more likely that the gateway goes down, then there are no government services. Surely the solution is to have lots of clouds, not one, so that citizens can use any of the clouds to connect to any of the services: it shouldn’t matter whether citizens want to sign on in person, at a kiosk, using the phone, through the set-top box or on a PC. All of these channels should federate their identity through to the government for access.

ID cards, technology

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Big deal

Monday, 21 June 2010 by Dave Birch

[Dave Birch] Well, that was an interesting day. I’ve been at the Mobey Forum where I was invited to chair a panel on the future of payments with the excellent Bo Harald of Tieto, Gerhard Romen (Nokia), Harry Leinonen (Bank of Finland) and Wim Westerhof (Rabobank). It turned out to be a very good discussion and it’s left me with some food for though about “the cloud” that I’ll blog about later.

I thought I’d go along because I thought it would be useful to catch up with the mobile transactions buzz and make sure the advice that we give to customers is absolutely up to date. The Forum could hardly have gone any better, because Nokia’s no.2 showed up to announce that all Nokia smartphones introduced starting in 2011 will have NFC as standard. Up in our little Digital Money treehouse, this is what is officially known as a big deal, so I wasn’t surprised to see phone calls from journalists coming in within minutes of it reaching the twitter sphere. This was good news.

Nokia veteran Anssi Vanjoki, who will head Nokia’s new Mobile Solutions division starting in July, told an audience at the 10th anniversary meeting of the mobile-banking group Mobey Forum in Finland today that Nokia remains committed to NFC.
[From Nokia Announces Symbian Smartphones to Pack NFC in 2011 | NFC Times – Near Field Communication and all contactless technology.]

I had the opportunity to chat with some of the Nokia folks later in the day and at the evening dinner out on one of the beautiful islands around Helsinki [soundtrack] and the feeling seemed to be (and I think I agree with this) that it will be smartphone functions (such as exchanging business cards and so on) that will drive NFC adoption so it makes sense to start with the smartphone range. Having said that, one of the Nokia guys reminded me that “Nokia is all about the mass market”, presumably meaning that the intention is to extend from the smartphone range into all phones in time.

Of great relevance to our world is that Nokia would not comment on whether the NFC smartphones would be SWP only, saying only that the device configuration depends on customer requirements, or something like that, which I interpret as meaning that if the operators order SWP-only phones then fine but it’s entirely possible that some devices will go out with options for removable secure elements (SEs) such as microSD or an additional secure element within the handset. At the Forum, I expressed a fear that the SWP-only phones under operator control might stifle innovation because the operators would not leave open security domains on the SEs. There needs to be a sandbox where the people who will come up with the next generation of killer applications (ie, kids, generally speaking) can play around and experiment and if they have to register with operators and get GlobalPlatform domain keys to do anything with phones, then they won’t.

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Nearly men

Wednesday, 16 June 2010 by Dave Birch

[Dave Birch] Had an interesting meeting with one of our customers, looking at their new technology strategy. One of the topics was, of course, NFC. NFC is in a funny state at the moment. There are no handsets — well, there’s one, the Samsung — that implement the new standard Single Wire Protocol (SWP). There are a few systems up and running here and there but they are all small scale and they almost all use the old Nokia 6212, a non-SWP handset released a couple of years ago.

Telefonica O2 aims to be the first operator with fully commercial payment services using the contactless technology, NFC (Near Field Communications). The carrier will launch such offerings, integrated into handsets, in the UK, Spain and the Czech Republic in late 2010 or early 2011, Michiel Van Eldik, Telefónica’s group director for new business and innovation, told Reuters. The firm already has a commercial pilot in the Czech city of Pilsen, using Nokia 6212 NFC phones, preloaded for use with local transport services.
[From Nokia looks for successor to RFID tags – Rethink Wireless]

I think Orange might quibble with this, as they hope to have commercial services operational in the UK (with Barclaycard) and in France (as part of Payez-Mobile). But anyway, there still seems to be a commitment to the technology. Partly because, as Liisa Kanniainen of Mobey Forum said in Singapore recently, the customer response has always been overwhelmingly positive and partly because so much effort has been expended.

Let’s see what a bona fide innovator has to say about this:

Aaron Greenspan. President & CEO, FaceCash: NFC is… “still not available in any of the SDKs we’re using from the major phone manufacturers, so it’s kind of irrelevant to us right now.”
[From MasterCard Will Open Its Doors to Entrepreneurs and Developers, Inviting Innovation – pymnts.com]

This wasn’t in the script. We were supposed to be engaging consumers by now, the handset manufacturers were supposed to have NFC chips in lots of models, the mobile operators were supposed to be ordering them, new services were supposed to be springing up on the NFC infrastructure. But, as of now, NFC is of no interest to innovators.

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Who benefits from a national ID scheme?

Tuesday, 15 June 2010 by Dave Birch

[Dave Birch] Writing in the June 2010 edition of the US magazine “Liberty” (which is a libertarian journal), Wendy McElroy made a couple of observations that resonate. She says

I am not against ID in general: it serves valuable functions.

She then goes on to distinguish between identification and certification, as distinction that is missing from many ID card-related visions. She then makes a crucial point, one I that endorse wholeheartedly.

The valid functions of ID have a common characteristic: they provide advantages to the individual who holds the ID.

Indeed, an a central reason for the tragic trajectory of the UK ID card scheme was precisely that it did not. She then makes another assertion:

Who benefits from national IDs? The state, not the individual.

I’m afraid I have to disagree with Wendy on this one. Individuals can benefit from national IDs, if they are assembled in the correct way (ie, my way) and I have no objection from the state benefiting from them too (apart from anything else, I pay for it) provided that that precondition is met. But suppose a national ID infrastructure isn’t put together in a 21st-century way? In that case, it still isn’t only that state that benefits: criminals do too. As I said a couple of years ago:

If you were going to create a criminal enterprise based on bogus ID cards, who would you target? Probably the group with the least recourse to the law: illegal immigrants. This is exactly what has been going on in Malaysia, where a fake identity card issuing syndicate which cheated hundreds of illegal immigrants has been broken up by the police
[From Digital Identity Forum: New identity crimes]

Of course, there’s a problem the other way round as well, with illegal immigrants being given documents that they are not entitled to.

In Pakistan and Malaysia a high number of illegal immigrants become legitimate because they acquire a biometric card. Illegal immigrants get into the system usually at entry points of the country. Entry points are governed by human resource. And human resource can be corrupted.
[From The Hindu : Life & Style / Society : A question of identity ]

I found a similar point being made in a story from the Yemeni News Agency.

When a Somali refugee who could not speak purely Arabic and insists that he is from Hjjah province, came to al-Thawra police station in the Capital Sana’a for ID, he was requested by the police station to present his documents. He was ready with his electoral card, neighborhoods’ supervisor recommendation and ID copies of two witnesses as identification documents to get his Yemeni ID. As the concerned policeman wanted to stop the process of granting him the ID, his co-worker rejected that saying there is no excuse to stop or delay it because he has all the required documents and it’s the election committee’s responsibility.

That’s a different case isn’t it? Why shouldn’t people with the right papers get a national ID? The chap in question wasn’t trying to bribe the police to give him an ID. Ah, but…

Police officers affirm that refugees can get IDs by giving bribes to concerned officials. These bribes are ranging from USD 500-1000. “Thousands of African refugees could obtain Yemeni IDs by bribing the brokers who have relations with civil affairs investigations and who in their turn allow the procedures to pass through,” said a police station’s officer. Many Africans had been arrested after finding out that they got IDs illegally, a policeman affirmed, but he did not mention the number, the place of their detention and the number of issues; whether they were referred to justice or not.

In fact what is going here is even more interesting: some officials not only allow illegal immigrants to bribe their way to the papers that will get them a national ID, but they have an absolute incentive to do so, which is that you can’t vote without an ID cards.

An election committee chief in Hajjah province got surprised when he discovered that the number of the registered people in the electoral district is twice the population number.

The same problem crops up time and time again. Identity documents become the target of criminal enterprise and because they don’t work properly they deliver terrific profits to the bad guys without really helping the good guys very much.

The most wanted are Serbian biometric passports, “which cost up to EUR 3,000”, the article claims.
[From B92 – News – Crime & War crimes – “Albanians pay EUR 3,000 for Serbian passports”]

You can see the problem. If the state relies on an ID card to regulate its relationship with citizens and that ID card embodies certain entitlements (that is, it is not simply an identity) then the incentive to get one shoots up, because once you have it then you are “inside the wire”, so to speak, and can act with impunity. So long as the card actually works, of course.

About 10% of the 24 million MyKad identification cards issued since 2001 had been replaced after they were found to be faulty.
[From 10% of MyKad identification cards found to be faulty]

If 1 in 10 ID cards isn’t working properly, then people will get used to that fact, so if a criminal shows up with an ID card that doesn’t work, the shopkeeper/doorman/whoever will assume that it’s broken and take it at face value, so I could stick my picture on any old ID card, that put the card in the microwave to fry the chip. This isn’t really progress, is it.

government, ID cards

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Tender moments

Thursday, 10 June 2010 by Dave Birch

[Dave Birch] A bank person mentioned to me that they think the European Commission’s recommendation on legal tender (22nd March 2010) is, as he put it, “strange and undesirable”. That’s actually pretty outspoken for a senior member of staff at at large European retail bank. So what does the recommendation actually say? Well, the key points are as follows:

Euro notes and coins are legal tender and retailers can only refuse them for reasons of “good faith” (for example, the retailer has no change).
Retailers should only refuse high-denomination banknotes in “good faith” (for example, if the value of the note is disproportionate to the purchase)
No surcharges should be imposed on cash payments.
Banknotes stained by the Intelligent Banknote Neutralisation System (IBNS) remain legal tender but should be returned to national central banks (as they likely come from a robbery).
Retailers must accept 1 and 2 eurocent coins in payment.

Sensible policies for a better Eurozone, you might think. All it the recommendation is doing is simply enforcing the rather obvious rule that euros are legal tender. Except for the bit about surcharging.

The commission also warned that retailers should not impose surcharges on the use of cash instead of credit cards, a rather unusual option that to this date has not actually been imposed by any shops, but the possibility of doing so does exist in theory and Brussels wants to stamp out the idea before it materialises.
[From EUobserver / Commission frowns on shop signs that say: ‘€500 notes not accepted’]

I don’t see why retailers shouldn’t surcharge. Above ten euros, say, the marginal cost of debit cards is less than the marginal cost of cash (for legitimate businesses who pay their taxes) so why shouldn’t the retailer should be able to direct payment choices? And if they also want to surcharge card payments under €10, let them. The customer can then decide which shop to go to.

Incidentally, the surcharge on €500 notes could be quite high, like €20 or something. Why? Because the people with €500 notes are criminals, so they won’t care about the €20 since they already save €400 on taxes.

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Faces

Wednesday, 9 June 2010 by Dave Birch

[Dave Birch] As I blogged before, Consult Hyperion joined forces with Identrust to sponsor the Digital Identity Forum track on “Identity is the new money” at this year’s European e-Identity Management conference in London on 9th-10th June 2010. It was a really enjoyable event, I have to say, so hats off to Roger and the team from EEMA. The morning keynote came from Emer Coleman from the Greater London Authority who showed us a video about squirrels and then went on to talk about something called the “London Datastore”. I didn’t really understand her slides, which mentioned Marx, The Wire, Mini-Me from that Austin Powers movie, a tumble dryer and the Chicago School, but I think it meant that they are going to start using open source, which is a good thing, and they are going to open up some public data, such as where the new cycle hire stations will be (although they don’t know, since the sites are only indicative and you have to file a Freedom of Information Act request to find out).
This was followed by a panel discussion on the different “faces” of identity: ethical, legal and technical.

The ethical perspective came from Alexander Hanff, Head of Ethical Networks at Privacy International. Alexander noted the significant changes that have occurred in the UK in the last couple of weeks, with the abolition of the ID card, Children’s Index and so forth. He was rather positive about the new Coalition and said that he expected more “positive changes” to come. I have to say that I wasn’t clear on the vision, although he did mention transparency as a key element in the new identity and trust landscape, and that’s something I do agree with.
- He did mention in passing that most businesses are unprepared for the impact of European telecoms regulation. This isn’t my field, so I didn’t entirely follow this part, but it seems that the EU is going to require the interweb to spy on its users in case they are terrorists or something.
The legal perspective came from Kevin Fraser, Head of Data Protection, Ministry of Justice. Kevin explained the eight key principles of data protection.
The technical perspective came from Forum friend Kim Cameron, Chief Architect, Identity & Access, Microsoft. Kim set out some of the drivers for cloud computing and some of the challenges that it faces. He mentioned in passing the problems of synchronising data over the interweb, which is exactly the problem that I have noticed with Microsoft Exchange and Outlook (they seem to send megabytes of data back and forth). He asked, essentially, whether the costs of identification and authentication will erode the cost advantages of the cloud (I think not, because I expect standard platforms to arise) and pointed out, entirely accurately, that none of this has really been thought through. He was advocating a claims-based model and reminded people that this is about M2M as well.

I liked having these different perspectives brought together at the beginning of the event as it made for a good foundation for observations and questions in the Digital Identity Forum stream, where John Bullard from Identrust chaired the speaking session and I chaired the panel session: though I say so myself, it was an excellent afternoon — many thanks to John Skipper, Vincent Jansen, Giles Sergant, Frank McCarthy, William Heath, Pete Bradwell, Robin Wilton and Henry Potts — and I came away with a number of new ideas to take back to our customers who are interested in developing identity-based businesses for the mass market. I was specifically curious as to whether the panel and the delegates had any feelings about the potential for banks to be identity providers, but the conversation was much more interesting and wide-ranging. I’ll put together a discussion of a few key points for the EEMA web site when I have some time.

banking and finance, identity, management

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