Tomorrow's Transactions

Thought leadership from Consult Hyperion

Archives for March 2012

Progressive views

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[Dave Birch] In Gill Rowland’s wonderful exploration of the world of financial services in 2050 “In Safe Hands” (published at� Long Finance), she explains that in order to create scenarios (i.e., internally-consistent views of possible futures) for a generation from now, she found it useful to look two generations back, and consider the asset classes managed by the financial services industry in 1930. These were broadly commodities, cash, equities and brains. (Looking forward, she adds a fifth asset class based on demographics for 2050 — which to me links to some other notions about the reputation economy.)

At the retail level payments have changed beyond all recognition since 1930. In 1930, we had cash, current accounts, cheques, wire transfers and closed-loop cards whereas now we have cash, current accounts, cheques, wire transfers and open-loop cards. Between the white fiver and M-PESA, we’ve enhanced wire transfers through ACH at the national level and SWIFT at the international level and introduced cross-border clearing and settlement at the wholesale level. The pound in your pocket, though, hasn’t changed since 1930. Well, technically, since September 1931 when the then Chancellor of the Exchequer,� Philip 1st Viscount Snowden, took Britain off of the gold standard.

Listening to Gill speak — as those of you attending the 15th annual� Digital Money Forum will be able to on Wednesday morning — made me reflect on that pace of change. Surely we’ll have done something more radical with money a generation from now?

Gill’s analysis is specifically concerned with financial services, so when she noted that one of her assumptions is continued technological progress I couldn’t help but wonder about the complex inter-relationship between finance and technology. Finance doesn’t seem to progress in the same way as technology. Technological progress, while not “directional”, is certainly cumulative. Engineers and scientists don’t forget about building bridges or the Theory of Relativity and start all over again. But in contrast, finance goes round and round (as it must do, according to the Austrians) from boom to bust.

So are payments going to follow the cumulative progress of technology or the cyclical non-progress of finance? I’d argue for the former. Payments is separating from banking and becoming more linked to the curve of technology.

This would bring us to a period of utility banking. Boring. Just like buying water, and electricity. But it is there for those that prefer the security of those basic services, which I would suggest are likely the majority of people.

[From� Real banking innovation requires separation of basic banking from the rest of financial services « The Bankwatch]

This immediately leads to another debate in my mind, one that I am sure will break out more than once at this year’s Forum: are payments are utility banking service or just a utility service? The evidence, it seems to me, points to the latter. When you consider the number and range of non-bank players in the payments value network, you can see how they will become the focus for innovation. So what is the bank perspective on all this?

Non-bank payment specialists are cropping up all over the world, using technological advancements to steal a march on the banking industry. But are these companies a threat to the more traditional providers of payments, or do these largely niche businesses present partnership opportunities to banks?

[From� Are non-bank specialists challengers or partners to banks? – Reports – The Banker]

Isn’t this a rather limited world view? It depends on the existence of a regulatory moat around the payments keep, because (to coin a phrase) the barbarians are at the gate.

The EC has opened an antitrust investigation into whether the European Payments Council (EPC) is blocking new, non-bank, players from entering the online payments market.

[From� Finextra: EC launches antitrust investigation into EPC and e-payments market]

I doubt the conspiracy theory, and given that there are more than a thousand Payment Institution (PI) licences already granted in Europe, it’s only a matter of time before players such as O2 Money are up and running without bank partners. But what would they do that is different to banks? I’d hope that one answer might be more innovation, and I think it is possible to point to a specific area — one that was discussed at the London BarCampBank earlier this year — which is opening up APIs so that utility payments can then by integrated into more complex applications.

Learning from such open source processing PayPal launched X, a developer based service for PayPal processes as APIs, Application Program Interfaces. APIs allow anyone to pick up and drop PayPal into their systems and, like banking products as apps, allow PayPal to be reintegrated by third parties into any code and operation desired.

The result is that PayPal’s relevance increased massively overnight and led to Citi following a similar approach, when they announced that their transaction services would be offered as APIs at SIBOS this year.

[From� The Financial Services Club’s Blog: The future competitive battleground]

I think this is a realistic interpretation of what Gill’s most likely 2050 scenarios turn into at the retail payments level: non-bank utility companies providing standard APIs and competing on quality of service and grade of service, smart pipes just like the telecommunications operators are going to be. Surely some synergy?

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


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 in the bag

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[Dave Birch] I’ve started reading through the Federal Reserve’s report on “Consumers and Mobile Financial Services” (March 2012) and I’ve already got sidetracked.

The biggest reason respondents gave for shunning mobile payments were security concerns, cited by 42% of the 1,780 people who responded to that particular question on the survey.

[From� Fed Consumer Survey Shows Security Concerns Biggest Barrier to Adoption of Mobile Payments | NFC Times – Near Field Communication and all contactless technology.]

Market research consistently shows the same result. And whether consumers really are concerned about security, or whether they are simply labelling a set a vague fears, underlying disquiet about change and a lack of understanding of new technology “security” as a shorthand, there’s no doubt that we (by which I mean the electronic transactions industry) have to do something to communicate to them.

Security tops the list of consumer concerns about mobile payments. Half of all American consumers say potential security and fraud significantly influence their likelihood to use smartphone technology to make purchases in the future.

[From� Study: Consumers Unlikely to Abandon Wallets in Favor of Paying With Smartphones — NEW YORK, Feb. 29, 2012 /PRNewswire/ —]

The concerns are particularly acute when you introduce the topic of NFC, RFID, wifi, Bluetooth or any other scary payment-through-the-air technology. Despite the careful threat analysis carried out by the sector, showing the risks to be manageable, an entire industry is being formed to address consumers’ fears, however unrealistic they might be. For example, switches to turn on and off contactless cards.

With this new technology, consumers would simply hold RFID or NFC credit cards in a specified area—for example, on an emblem or some other identifying mark—when making a transaction. As long as the “switch” is held, the card is turned “on.” When returned to a wallet or purse and tactile contact is discontinued, the card automatically turns “off.”

[From� Marlin Mickle RFID Tap]

I don’t think this is a new idea at all — I can remember seeing cards like this years ago — but you can see how it might sell. Functionally, it’s pointless. There is no realistic threat model around scanning cards remotely. It has zero usability: I don’t even want to take my card out of my wallet, let alone hold it in a special place. In fact, I don’t even want a card at all – I want to use my phone. The idea does, however, pander to the to the notion that there is a particular vulnerability around contactless and not just for payments. A few weeks ago, a correspondent wrote to point out that someone in the US was selling security pouches for phones.

RFID Blocking for Credit Card & Passports
Blocking GPS Phone Tracking

[From� How to stop GPS tracking, RFID Blocking Sleave,]

We don’t want the CIA tracking our purchases from space, so naturally we bought one to try out (actually we bought a couple). We wanted to see if it worked. Well, here you go…

Worked as advertised, although it’s not clear to me why you wouldn’t just put your phone into flight mode. Anyway, we’ll be giving one of these out as a prize at the� Digital Money Forum next week, so book one of the last places and come along!

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


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.

Harder, harder

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[Dave Birch]  A few months ago I raised the issue of the impact of changing technology on the choices available to those wanting to redesign money. A key impact is surely that the cost of creating new currencies should fall dramatically because of the internet, mobile phones and smart chips everywhere.

Greece could pull out of the Euro and create a “hard e-drachma”. There is no need for physical currency. It’s badge of national vanity

[From� What’s a Grecian e-urn?]

Having always been on the slightly euro-sceptic side of the fence, I don’t really see the end of the euro as a catastrophe but as an opportunity. But what will come next? I can’t help feeling that you need to understand the past in order to have a reasonable guess at the future so I am always keen to learn more on the history of monetary union as well the future of national fiat currency and such like. Anyway. I was loafing in bed with a cup of tea a couple of weekends ago, listening to Radio 4 with half an ear, when “A Point of View” came on. I listened, spellbound, to the historian� Sir David Cannadine talking about the history of currency unions in Europe. In ten minutes, David gave one of the most interesting talks I have ever heard on BBC Radio 4 (and believe me, that’s a pretty high bar). You can read it here.

A Point of View: Making friends the shared currency way

[From� BBC News – A Point of View: Making friends the shared currency way]

David’s description of the Latin Monetary Union (LMU) was concise and brilliant. Follow the link and read it for yourself: I won’t traduce the narrative through paraphrase but the highlights are, essentially, that the Europeans formed a monetary union in 1866, Britain refused to join, Greece got chucked out and eventually the whole thing collapsed. There really is nothing new under the sun.

So will history repeat itself? Forum friend Keith Hart, author of “The Memory Bank“, a book about money from an anthropological perspective, recently wrote this about the state of the European monetary project :

The big mistake was to replace national currencies with the euro. An alternative proposal, the hard ecu, would have floated politically managed national currencies alongside a low-inflation European central bank currency. Countries that didn’t join the euro, like Britain and Switzerland, have in practice enjoyed the privilege of this plural option.

[From� A Crisis of Money: the demise of national capitalism | openDemocracy]

I couldn’t agree with Keith more. The hard ecu, or as I used to like calling it, the e-ecu (since it would never exist in physical form) was always a better idea than the euro. When John Major proposed this extremely sensible alternative to the euro he was ignored.

British Chancellor John Major is proposing a new European currency which would circulate alongside existing national currencies… The Conservative Government is sceptical about full monetary union and regards this new proposal as a way of putting forward a genuine alternative… It is envisaged that the currency, which Mr Major calls the “hard Ecu”, would be used initially by businesses and tourists, and managed by a new European monetary fund.

[From� BBC ON THIS DAY | 20 | 1990: Major proposes new Euro currency]

The idea of the hard ECU was to have an electronic currency that would never exist in physical form but still be legal tender (put to one side what that actually means) in all EU member states. Thus, businesses could keep accounts in hard ECUs and trade them cross-border with minimal transaction costs, tourists could have hard ECU payment cards that they could use through the Union and so on. But each state would continue with its own national currency — you would still be able to use Sterling notes and coins and Sterling-denominated cheques and cards — and the cost of replacing them would have been saved. After writing about this last year, I subsequently discovered that the proposal goes back well into the early days of Margaret Thatcher’s government.

In fact, the origin of [the hard ecu] was seven years earlier in the 1983 report of the European Parliament on the European Monetary System… The parallel-currency proposal was supported across the political and national groups in the parliament, including by the Germans so long as the central bank only concerned itself with stability of the currency (as subsequently transpired). It was taken up by Margaret Thatcher as the acceptably cautious route towards a single currency for Europe, part of her much cherished drive for a single European market for Britain’s successful financial-services industry.

[From� Letters: On New York’s courts, Cyprus, Mexico, Dennis Ritchie, the euro, Manchu, obesity, doofuses, New Orleans | The Economist]

The idea of an electronic currency union to facilitate international trade has new resonance. While Bitcoin captures the media attention, there are a great many possibilities: new community currencies, brand-based plays, commodity baskets and goodness knows what else. All of these make it an exciting time to be in the electronic money business, but they also make it unpredictable, which is why it is fun. A couple of years ago, people began to look to social media as the natural place for new currencies to emerge:

If Facebook were a country, it would be the third largest in the world, so it figures that the social networking giant is trying to develop its own currency – Facebook Credits.

[From� Facebook Credits starting to make some real money]

It isn’t a country, of course, and we shouldn’t get too carried away with that kind of thinking, but the point holds. If communities are the natural basis for currencies, then there are many communities (both “real” and virtual) that might incubate the successor to the euro (and, for that matter, the Dollar and the Yen). My review of Matthew Bishop and Michael Green’s “In Gold We Trust”, I said that

I support their observation that (as Hayek thought) we might reasonably expect many forms of private currency to develop in the post-fiat world and there is no reason to imagine that only a single alternative will emerge.

[From� In Gold We Trust – don’t we? | The Enlightened Economist]

We’re not looking at a world in which some kind of new currency takes over, but a world in which a great many communities choose the currencies that are most efficient for themselves.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


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.

Toilet training

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[Dave Birch] Being a technologist, I’m often accused of not understanding customer needs and dynamics. I now know that this is true, and it’s because of a story that showed up one morning in my daily trawl around the world’s NFC-related news.

Panasonic Europe has unveiled its new Eluga smart phone, an slim waterproof Android handset that features built-in NFC technology.

[From� NFCNews | Panasonic to launch waterproof NFC phone for Android]

I did wonder when I saw this story why on Earth anyone would want a waterproof NFC phone since I didn’t think that NFC would work underwater (I don’t know whether this is true or not, but I do have a vague memory from my rather hazy days as a physics undergraduate that high frequency field propagation through liquids is different from field propagation through gases – hence the use of very low frequency radio communications to talk to nuclear submarines).

Communication with submarines is difficult because radio waves do not travel well through thick electrical conductors like salt water.

[From� Communication with submarines – Wikipedia, the free encyclopedia]

However, as someone much smarter than me in our development team immediately pointed out, I’m thinking of the wrong use case. The actual use case is…

101,000 people claimed for mobile phones dropped down the toilet in the last 12 months (uSwitch, Feb 2011)

[From� Phones 4u – Mobile Phone Insurance]

Aha. If we’re going to replace the plastic card with the mobile phone, then we have to have these practicalities in mind. If you drop a fiver in the toilet, it might be salvageable. An iPhone not so much. And if you flush your debit card it will take days to get a new one, whereas if you go and get a new phone then your m-debit card should appear over the air automagically.

I imagine that one of the reasons for the 101,000 phones dropped into toilets — sorry to be graphic, but if we’re going to shift to mobile wallets we’re going to have to understand the characteristics and dynamics of mobile use — is that pfaffing about on phones has replaced reading books of Giles cartoons and last week’s Sunday papers as the default leisure activity in the smallest room. Reprovisioning those phones that are dropped, lost, stolen or broken will be an essential part of the mobile proposition, because if you drop your physical wallet in the toilet, it’s gone and that’s the end of it (unless you’re going to get all Trainspotting about it). Of the phones that don’t go round the U-bend, an awful lot go missing in other ways.

the [Transport for London] lost property office at Baker Street takes in about a thousand mobile phones a week.

[From� Clive James on… Upstairs Downstairs, Melvyn Bragg on Class and Culture, and Make Bradford British. – Telegraph]

If there are a couple of thousand phones a week down the khazi and another couple of thousand a week left on the bus and another couple of thousand stolen and another couple of thousand dropped and smashed… that’s a fantastic opportunity to demonstrate to the man in the street the advantages of mobile over conventional cards and paper money. If we do it right, that is, which means putting as much effort into customer service, call centres and help desks as into sales and invest the right amount in staff training.

This is one of the reasons, incidentally, why the mobile operators feel that by going for SIM-based NFC solutions they will be able to deliver a better customer experience. I should in fairness report that my first experience in this respect has been rather good. For reasons too dull to elucidate, I walked into an Orange shop and bought a splendid new Samsung Wave 578 with QuickTap. I took the SIM out of my old Samsung Tocco and put it into the new 578 and fired it up: hey presto, my BarclayCard MasterCard was magically transferred to the new handset ready for use. Well done chaps.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


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.

Frenemy of the state

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[Dave Birch] More on Facebook’s “real names” nonsense. Their S1 filing admits to 1 in 20 bogus accounts, but who knows what the real figure is. None of my Facebook accounts are in my “real name” and I doubt I’m the only one.

“There may be individuals who have multiple Facebook accounts in violation of our terms of service, despite our efforts to detect and suppress such behavior. We estimate that false or duplicate accounts may have represented approximately 5-6% of our MAUs as of December 31, 2011.”

[From� Major Changes In Facebook’s Amended S-1: Mobile Ads, Zynga, Yahoo Patents, Credit | TechCrunch]

I don’t really care about this, except for the fact that if people believe that Facebook, or any other online space is a “real name” space, then that does more harm than good because people who don’t really understand how all of this works could be misled and I can see how that might lead to problems. Still let’s hope that some people (e.g., sex offenders) do use their real names…

A new app will let you check all your Facebook friends against the National Sex Offender Registry.

[From� Are Your Facebook Friends Sex Offenders?]

This isn’t all about dating scams, crime and teenage bullying. It’s national security as well. How Facebook know whether someone’s name is real or not I have no idea, and I certainly don’t believe for one moment that they are capable of distinguishing agents of foreign powers from “legitimate” users. Nor, for that matter, is anyone else.

NATO’S most senior commander was at the centre of a major security alert when a series of his colleagues fell for a fake Facebook account opened in his name – apparently by Chinese spies

[From� How spies used Facebook to steal Nato chiefs’ details – Telegraph]

I read this with a certain nostalgia. When I worked at the� Supreme Headquarters Allied Personnel Europe (SHAPE) Technical Centre in the Hague in the early 1980s, my first day on the job began with an extensive lecture on the security responsibilities attendant on our clearance level. I was working on a project concerned with keeping secure communications networks up and running in the event of a Russian nuclear attack, which was quite interesting, and once we had been sternly advised to be wary of beautiful tall blonde Eastern European women striking up conversations with us in supermarkets, I spent literally every waking hour of my young life praying for this to happen. It never did, but if there are any beautiful tall blonde Eastern European women who have any interest in white-noise jamming of direct sequence spread spectrum satellite channels, here are my contact details:

STC Card

My point: people are misled by the social network environment and so they make poor decisions. We already know that men will do almost anything if asked to by an attractive woman:

The story also revealed another sad truth, a reflection on human nature. Men will do anything for an attractive woman, without even bothering to check whether she’s real or not.

[From� Digital Identity: Linked]

And we already know that woman will do anything for a handsome non-existent soldier. Absent a working identity infrastructure, we really shouldn’t let people meander along under the impression that social media identities a real. Which, by the way, did make me wonder about the wisdom of publicising the NATO story. Wouldn’t it have made more sense to to pretend to go along with the “Chinese spies” and feed them misinformation rather than let them know that you had blown their cover. Haven’t these NATO guys ever read “The Zimmerman Telegram“? I thought this was high up on the reading list for anyone entering a career in a security-related profession. It would be have been infinite to friend the American brass with a convincing bogus Ahmadinejad and then start posting stuff about shipping centrifuges to Tibet and such like.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


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.

Less than zero

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[Dave Birch] Well, it’s finally happened. After all these years of proclaiming that the mobile phone will replace the payment card, my mobile phone has officially replaced its first payment card. Now, obviously, I’ve been using my mobile phone� as well as various payment cards for some time. But I think it’s a bit of a milestone on the payments journey to be at the point where my mobile phone has completely� replaced a payments card. Yes, that’s right. It’s completely replaced one of my payment cards. In fact, I threw the card into the bin, an act witnessed by the head of our Associate Programme, Lindi Friel.

Image

Yes, it’s my Starbucks card. I’ve been using my Starbucks app for a while now. It’s worked perfectly, every time. It’s worked cross-border. When I have no money, I can top it up in seconds and pop in for a coffee and cake while I work. it’s not limited to £15 like contactless cards (well, shortly to be increased to £20, but you get my point) so if I’m buying a few coffees because we’re having a business meeting there, there’s no problem. My Starbucks card is now in the bin, replaced once and for all by my Starbucks app. I think I just heard Brett King say at IPS 2012 that a quarter of Starbucks US customers are already using mobile, and I for one cannot see any reason why they would ever go back to plastic.

Incidentally, I got an e-mail from Starbucks telling me that from now on if I use my Starbucks app to buy in-store then the staff can call me by my name. I had to go and log in to my Starbucks account to find out what name I’d used when I set it up. Naturally, I hadn’t used my “real name”, which in this case is pretty handy. When they call out “Latte with extra shot for Dave” there might be many Daves and so confusion, but when they call out “Latte with extra shot for� Theogenes de Montford” I’m pretty sure I’ll be the only one up at the counter. But I digress.

My prepaid coffee card turned out to be the vanguard for the next generation retail experience. Not so my bank-issued credit card, my driving licence, my Waitrose loyalty card or my gym membership card (OK, I made that one up for effect), but surely it’s only a matter of time. So why was my Starbucks card the first to go? I think that illustrates a more general point about mobile payments that we’ve been discussing on the blog for a while. As a retailer, Starbucks had control over the acquiring of the transaction. This is the critical path. Making it simple and easy for the customer to use the mobile app made customers want to use it. And it didn’t matter that they could only use it in Starbucks, and it didn’t matter that the security isn’t “bank grade” and it didn’t matter that it’s a bar code instead of NFC.

One thing that I think that the Starbucks mobile experience has shown us is how willing consumers are to adopt mobile payments solutions that only work in limited locations, like one store.

[From� Handicapping PayPal and Google in the Mobile Transaction Platform Race – pymnts.com]

Correct. This what I’ve referred to in the past as “branded ubiquity”. One thing I learned from the failed attempt to roll out Mondex was that geographic ubiquity was, with 20-20 hindsight, totally the wrong way to roll out a new payment proposition. It didn’t matter to the public that (I’m making up this example) their new card worked in Burger King but not MacDonalds, so long as it worked in all Burger Kings. Customers needed certainty of tender.

What does this imply when we move to mobile? Having a different card for each coffee shop, as I do, is a bit of a pain. Having a different loyalty card in my wallet for every shop I might conceivably visit is out of the question. But having a million slots in my mobile wallet is not. In fact, it’s very desirable as a consumer. I don’t want to have to remember cards: I just want to tap, and have the phone take care of everything else.

This means, as we all understand, that the link between payment products and value-added services is fundamental to a sustainable business model. More integration and sophistication is just around the corner. Suppliers are already working to make this easier, and it’s one of the key reasons why merchants are looking forward to mobile wallets.

The First Data OfferWise solution allows offer publishers to electronically attach offers such as deals, eCoupons and loyalty programs to one or more of a consumer’s payment cards or mobile wallet to enable streamlined and automatic redemption of the offer at the point of sale (POS).

[From� First Data Presents OfferWise to Streamline Offer Redemption and Customer Experience | Daily Deal Media]

To be completely honest, this is going to be bad news for people who have built their future on transaction revenues from retail payments, because those transaction revenues are going to trend down under the pressure of competition from new entrants who don’t care if those transition revenues run on zero margin, or possibly even a less-than-zero margin. That means an entirely new kind of competition at POS.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers

�

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.

Anglo-Saxon attitudes

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[Dave Birch] An economy needs money. Without money that is appropriate to the specific economy it is supporting, the transaction costs associated with commerce are too great. And since commerce is the basis of prosperity, that means that the economy cannot grow or develop.

Under the Roman empire, the province had benefited from the use of a sophisticated coinage in three metals – gold, silver and copper – lubricating the economy with a guaranteed and abundant medium of exchange. In the first decade of the fifth century new coins ceased to reach Britain from the imperial mints on the continent, and while some attempts were made to produce local substitutes, these efforts were soon abandoned. For about 300 years, from around AD 420, Britain’s economy functioned without coin.

[From� FT.com / Comment / Opinion – Call this a recession? It isn’t the Dark Ages]

During what are now called the “Dark Ages”, the inhabitants of our sceptred isle were reduced to barter or the exchange of goods for precious metals. They often cut up jewellery to make tradable units. But they weren’t barbarians — just take a look at the goods in the amazing “Staffordshire Hoard” — they were just people who didn’t have an economy that needed money.

Just how long money continued to be used is guesswork. It probably went on into the very early years of the sixth century. By then, with nothing to buy, no taxes to pay, no business to conduct and society in disarray, money as such would have had little meaning.

[From� Coinage In The Dark Ages?]

The slow introduction and acceptance of Anglo-Saxon currency meant that the economy could begin to function again and the resurgence of trade with Europe was, as I understand it, a clear milestone on the way to more prosperous nation. A fascinating topic, and I’ll spare you the four pages of notes I took while listening to one of the world’s leading experts on the topic of Anglo-Saxon money, Dr. Rory Naismith.

One thing I learned from Rory’s superb lecture on “Mints, Moneyers and Authority in Anglo-Saxon England” is that as England (well, there was no such thing at the time – we’re talking about the Anglo-Saxon heptarchy that subsequently became England under� Athelstan in 927) moved out of those Dark Ages and developed its economy, the Anglo-Saxon silver pennies (the “sceatias“) that carry any inscriptions were marked with the name of the moneyer, not the secular or religious authority. In other words, you didn’t care that your penny had been minted in a geographic region such as� Mercia controlled by, say,� King Offa (the chap who built a dyke to keep the Welsh out) around the end of the eighth century. What you cared about was that you could trust your penny to be of the right weight and quality for commerce.

The coinage of early medieval England consisted of silver pennies and some much rarer gold coins. These represented not only a means of payment and a store of value with implications for economic history, but also provide scholars with an important window onto developments in culture, political history and administration.

[From� Dr Rory Naismith – Clare College Cambridge]

I’m very curious about the relationship between cash and trust, between coins and the economy and always keen to learn more, so I’m absolutely delighted that Rory has very kindly agreed to come along to this year’s Digital Money Forum to present on the topic of Anglo-Saxon minting. So if you want to broaden your knowledge of money, get some ideas about how technology might open up new opportunities for the post-modern moneyers of our electronic age, and meet a really nice guy then pop over to the Digital Money Forum and register now while there are some of the 100 places left.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


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.

Beyond the leather

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[Dave Birch] A typically excellent piece by Karen Webster over at pymnts.com surveys the mobile wallet landscape. She concludes by suggesting that consolidation is inevitable.

But I am going to lay down a wager that consumers will have only a handful of icons on their phones that connect to a single-tender type (payment app) or a wallet (multi tender types) and that merchants accept payment with mobile only for a few of these icons.

[From� Commentary – Karen Webster Sizes Up the Rapidly Changing World of Mobile Payments | PYMNTS.com]

I’m sure she’s right. I might be tempted to further and say that they will only have one mobile wallet. Personally, I can’t wait. The idea of taking all of your payment cards, loyalty cards, money, ID documents and such like and chucking them all into some sort of mobile wallet in your handy device-formerly-known-as-the-mobile-phone is most appealing. Indeed, as Karen notes, mobile wallets are all the rage at the moment. Visa has one called “V.Me”. Google has one. The US telcos have got together with some of the card issuers there to make “Isis”. Square has its “CardCase”. And there’s an elephant in the room yet to declare…

Since 2010, Apple has filed a series of so-called “iWallet” patents that deal with mobile device payments including NFC systems that are linked to credit and debit accounts.

[From� Apple nabs parental controls patent for ‘iWallet’ transactions]

Now we read that, dissatisfied by the choices available to them from payment companies, technology companies and software companies, the major US retailers are going to band together and make their own mobile wallet.

Wal-Mart Stores Inc. and Target Corp. are among roughly two dozen retailers working together to develop a mobile-payments system to compete with similar products from Google Inc. and big cellphone companies, according to people with direct knowledge of the project. The push represents an effort by frustrated merchants to get the upper hand in the fast-developing market that turns cellphones into payment devices. The race pits the retailers against banks, credit-card networks, telecommunications firms and technology companies.

[From� Retailers Join Payment Chase – WSJ.com]

At a strategic level, this is about more than sticking more coupons in a wallet to provide some value-added services around payment instruments. To the retailers, the payments themselves are a problem. When you hear people in the payments industry asking questions like “why bother with [insert new technology/product/service here] because cards work and everyone’s happy” you know they haven’t looked at the big picture. Not everyone is content with the status quo.

Right now, Google’s Wallet, ISIS and Visa’s V.me are all about taking existing plastic cards and using virtual versions of them, but this must surely be only a stepping stone to new retail payment instruments.

[From� Ordinary people]

While it’s a digression here, I have written before (more than once) that much of the analysis that we have done in this space, going back some years, has flagged the development of new retailer-centric instruments as a more-likely-than-not development, an opinion that has been reinforced by the successes of, and lessons learned from, the Starbuck mobile solution.

I’ve suggested that a plausible, logical step for retailers will be to abandon the antiquated infrastructure of payment cards—issuing and acceptance, interchange and rules—for new, retail-centric payment mechanisms.

[From� Retail and the long game]

Meanwhile, in the UK, Visa Europe have invested in the Monitise/Carphone Warehouse joint venture to bring the “SimplyTap” service to the high street, hoping to provide a wallet service that is attractive to retailers here. Not wallet wars, exactly, but as I wrote before,� certainly skirmishes. I have to say that my personal, early experiences with the rudimentary UK mobile wallet in my Orange phone (which has a prepaid Barclaycard MasterCard and a contactless interface) have been positive: it’s fun being able buy a coffee by tapping my phone instead of getting a card out and I have already (on more than one occasion) lived the dream of the marketing people by leaving home without my wallet but with my phone. I’ve found that the use of the prepaid card works very well in this context. Prepaid cards might be a bit of a pain, but prepaid cards in a mobile wallet are not: you can see what your balance is and top it up while walking down the street.

Fun and mildly convenient… probably not enough to set the world on fire. Karen says that she doesn’t know who will win the wallet wars and I don’t either, but I think I do have some clues as to the winning proposition. The winning mobile wallet won’t be an electronic emulation of a mundane wallet. The mobile wallet won’t be a virtual reality version of a leather wallet. It wll be a� hyper-reality version of a wallet: not an electronic version of a wallet as it is, but an electronic realisation of what a wallet should be. At the� Mobile World Congress in Barcelona, Alberto Jiminez from Citi called this “going beyond the leather”, which I thought was a terrific description. But what does he mean? How will the wallet in your mobile phone differ from the wallet in your pocket? There are probably three main differences.

First of all, if you lose your mobile wallet, it doesn’t matter in the same way that losing a real wallet does. If you lose that, it’s gone. But if you lose your mobile wallet, then it can be tracked, traced, monitored and turned off. You can go and get another phone and in a few minutes have your wallet restored, automagically via the airwaves. And your phone can be locked, with a PIN today but with your fingerprint or voice in the future. So the m-wallet is more secure than the wallet.

Secondly, your mobile wallet understands context. It knows where you are and what you are doing. If you open your mobile wallet in Tesco, it won’t bother showing you your Waitrose loyalty card. If you’re in W.H. Smith and you have W.H. Smith coupon in your wallet, it will apply it automatically for you at point of sale. Your mobile wallet might contains thousands of loyalty cards, store cards, coupons and so on, unimaginable with the bulging leather version jammed into my back pocket. So the m-wallet is smarter than the wallet.

So what might these actual services look like? In the next two years, expect to see the following worked into your mobile banking, payment and ultimately “wallet” applications:

Deals and offers: Highly targeted, relevant offers based on prior buying patterns and current location. Imagine receiving a time-sensitive text message or in-app alert with a coupon to your favorite electronics store after your digital wallet “checks in” that you are within the store.

Digital receipts and account information updated in real time to give a comprehensive view of personal and linked accounts while also displaying loyalty rewards status.

Real-time, customizable alerts to certify that the purchases being made in an account are valid, based on your phone’s proximity to where the purchase is being made.

[From� The Value Of Mobile Payments Is Beyond Transactions – Forbes]

Finally, your mobile wallet is connected. This is where I expect to see the unexpected consequences of innovation! I’ve no idea what will happen when my wallet becomes connected to Facebook, Twitter and Foursquare — although some of Amex’s recent announcements provide some interesting pointers — but I can imagine life getting very interesting! I’ll post some more about the “social wallet” in the future. So the m-wallet has more friends than the wallet.

All of these things together are why I feel that the mobile wallet mania is not only justified but may be a rare case of under-hyping! The history of mobile to date is one of explosive growth, rapid adoption and sweeping change. The secure, smart, connected mobile wallet will bring genuinely new functionality and business models that are very different from the business models around payment cards today.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers

�

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.

Beggars and buskers

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[Dave Birch] I’m thinking hard about cash at the moment because of my debate at the� Financial Services Club tonight on the future of cash with Adam Lawrence, Chief Executive of the Royal Mint and John Howells, CEO of the LINK Network in favour. Since they both make a living out of cash, and I make at least part of my living out of digital money, it’s going to be fun. I’m especially looking forward to asking Adam why the Mint bothers to make 1p and 2p coins that no-one wants (and why they are replacing 5p and 10p coins with new ones that mean all vending machines have to be updated) and asking John why ATMs don’t have contactless interfaces to defeat skimming. And I’ve got plenty more aces up my sleeve with regard to the cost of cash to the European economy (tens of billions of euros) and it’s role in tax evasion, corruption and drug dealing.

I think I’ve got the ammunition I need to keep them pinned down — cash is, after all, expensive, anti-poor, pro-crime and a total deadweight on society — but I need to make sure that my defences are in place too. While trying to anticipate the pro-cash arguments that might be fired across my bows, I began to consider the specific cash of casual donation.

A common category of issue is “street commerce”. In particular, the question of cash donations to buskers and beggars.

[From� Beggars can be choosers]

If there’s no cash, the argument goes, then how will people be able to give money to beggars and buskers? I simply don’t think this is the problem it appears to be.

Cashlessness won’t necessarily leave the homeless out in the cold. People could still give them actual goods, or vouchers for free meals (an idea that was briefly popular in the early 1990s). Donovan notes that many homeless people already treat some donated items as if they’re currency, accumulating and trading them for things they need more.

[From� Cashless society: What happens to charity when no one carries loose change? – Slate Magazine]

Personally, I never give anything to charities or homeless people in the street — we have our “family” charities and we support them via direct debit — but I do sometimes give money to buskers as I do think they add to the gaiety of the nation. The solution, at least in the case of London, is obvious: put a “yellow button” next to each busker’s pitch so that that people passing by can give a quid with a 280 millisecond tap of their Oyster card or, starting very shortly, their contactless bank card or NFC mobile phone. I’m sure people would soon get used to seeing “fixed price” yellow buttons here and there: Visa/MC could be persuaded to change their rules to avoid the need for keyboard, PINpad and card slot and the acquirers could be persuaded to waive the MSC for these purposes. Why? Because it makes society a better place (and, frankly, they need to get people used to tapping cards, watches, hats, badges and phones, because they’re not tapping them on anything at the moment) and makes London specifically a better place in time for the Olympics.

If someone tried to cheat the system by setting up yellow buttons that charge £10 instead of £1, they might get away with it, but not for long. When my phone tells me it’s just donated £10 instead of the £1 I was expected, I will just complain to my bank and get the money back. The busker hasn’t got the £10 as cash, merely as a credit to a merchant account, so they’ll get it back from him. And then have him arrested for fraud.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


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 isn’t only me who thinks there’s an “identity problem”

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[Dave Birch] Over at the CSFI/Visa Europe Research Fellowship on “Identity and Financial Services”, I posted about a report that Adam Banks, the Chief Technology Officer for Visa Europe wrote on “The Future of Technology and Payments” last year. In it, Adam says that there is a “crisis of identity” and that

traditional identity management models are becoming increasingly unsustainable and there is an opportunity for a collective industry solution and the need for a trusted partner.

[From� It is a crisis – CSFI Identity and Financial Services]

To my mind, one of the key reasons why the identity management paradigm needs resetting is that we are taking mundane conceptions of identity and translating them into what Adam calls the “parallel” virtual world. But in my view the virtual world isn’t parallel to the mundane at all: it’s different, and notions of identity in that space are not reflections or projections of mundane identity but more powerful, more nuanced and more complex. Virtual identity can do amazing things that mundane identity cannot.

Adam’s conclusions, though, are spot on: if some sort of robust personal identity management (PIM) solution were to be adopted then the implications for the payment industry are “profound” (not my words: Visa Europe’s). You can see why this: once you know who somebody is, then transferring money around is easy. If I amble into Tesco and Tesco know that for sure that it’s Dave Birch and that I have an account at Barclays, then they can just ask Barclays for the money once I’ve got my shopping: there’s no need to go through payment schemes or other third parties. There’s probably no need to even authorise: if I stiff them, I’ll never be able to buy anything from Tesco again (and if the UK retailers decide to form their own payment system, I won’t be able to buy anything from any other retailer either).

This is why the technologies associated with identity and authentication are so critical, why their exploitation will be disruptive. And, incidentally, why Adam is so right to flag the issue. Visa Europe and its members have to disrupt themselves because of this, and I am convinced that if they don’t do it them someone else will. If you’ve cracked identity and have established a value network around identity management, then payments become, frankly, easy. Identity, though I hate to chant the mantra, is the new money. There is an opportunity for a collective industry solution and the need for a trusted partner.

Identity is critical in many ways: It ensures the right degree of user personalization, enables the reliable billing of services used across a platform, and provides a strong foundation of trust for any transaction occurring on the platform.

[From� Making Sense of Ever-Changing Payment Technologies: The Year of APIs and the Reshaping of the Payment Ecosystem – pymnts.com]

Patrick is right here to highlight the key role of identity in constructing the future payments infrastructure, although I would draw a slightly different diagram to illustrate the relationship. He has drawn identity on top of payment services, whereas as I would draw them side-by-side to show that some commerce applications will use identity and some will not, some commerce applications will use payments and some will not. It’s not that difficult to imagine a future Visa Europe (or perhaps even Visa Europe itself) providing services to commerce that are based on identity but not on payments (we’ve already experimented with one of them, using Visa cards to log in to government services).

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


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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