It’s not often that someone telling me about an EMV fraud exploit makes me laugh out loud, so I got permission to share the story with you.
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.
As we head back to Barcelona for Mobile World Congress again, there’s more talk about NFC and this time it’s not only coming from the operators.
In her state of the industry address at the GSMA NFC & Mobile Money Summit last fall in New York, GSMA Director General Anne Bouverot said that NFC is gaining traction globally, and it is certainly true the the number of handsets sold with NFC capabilities is steadily rising, even if most consumers neither know nor care that they have NFC. But it’s not just in phones: NFC is springing up in TVs, printers, cameras and all sorts of other consumer electronics. In our corner of the transaction treehouse, however, NFC means making contactless payments in retail environments. This hasn’t been going so well. As I said at the time, consumers can’t use NFC to ride the bus, which was my throwaway and prosaic benchmark of mass-market acceptability. But they might soon.
Madrid-based non-public bus operator Jiménez constellation is to introduce a brand new cloud-based NFC ticketing resolution that allows Nexus five NFC phones to be used as contactless ticketing readers at a “fraction of the value of ancient contactless reader infrastructures”. Ticktrack, developed by Spanish startup Aditium, uses host card emulation (HCE)…
[From Spanish bus drivers to check tickets using NFC host card emulation – NFC Business Cards]
Interesting. Something has changed. There were handsets out there. There were announcements all the time about pilots, trials and even live services. But somehow the technology was (and is, to be honest) struggling to gain traction, and every time that Apple announce a new phone without NFC there are a plethora of articles about the death of NFC. If you do have a handset with NFC in it, let’s say one of the super new Samsung S4s, you can’t use it for much interesting. I can’t log in to my bank and load my credit card onto it, for example. All I can do with the NFC on my Android phone is use it as a slightly more convenient version of a QR code. Except in Canada, where I could download my Tim Horton app and buy coffee with a tap.
Something has definitely changed. What? Well, here’s a framing of problem that I often hear. The GSMA (and others) opted for an architecture that put the mobile operators in control. And there’s nothing wrong with that. The GSMA is the mobile operators. But — and let’s be frank, to move the sector forward — the banks and operators have found it difficult to work together. I don’t want to cause trouble, especially since Consult Hyperion advises both banks and operators, but I think we have to be honest and open up the discussions that everyone knows are going on behind closed doors.
These MNOs operate a TSM service and establish the trust. Technically perfect, but this is also the problem that get things stuck. It has no technical issues, it is political. The banks just do not want the MNOs in their food chain.
[From EMV compliant NFC transaction from a mobile phone | The Abrantix Blog]
Maybe. And there is certainly evidence from the marketplace that banks will go to some lengths in order to avoid having to deal with the MNOs. This is despite countless attempts to work together. Personally, I suspect that some of this is down to the sheer hassle of it as much as it is to deep-seated strategic aversion to the Single-Wire Protocol (SWP), but it is nonetheless an observable phenomenon.
Bank of China (Hong Kong) is to introduce a microSD card based NFC payments service before the end of the year… BOC e-Wallet will initially be available for the Samsung Galaxy S4 LTE, Galaxy S III LTE, Galaxy Note II LTE, Galaxy S4, Galaxy Note II, Galaxy S III and LG Optimus G Pro smartphones.
[From Bank of China launches NFC payments in Hong Kong • NFC World]
Phones such as the S4, as noted, already have NFC. So, you might wonder, why bother putting a microSD NFC card into a phone that already has it if not to go around the MNO? This is the nub of the problem. In the complicated (but, let’s be clear, very secure) SIM-based SE model, the MNO calls the shots. And that has turned out to be a significant barrier to progress. It’s not impermeable: in some places (Canada and Australia spring to mind) where there are highly concentrated industries (ie, a small number of big banks and a couple of dominant MNOs) and a determination to work together despite thin margins there are now multiple handsets and multiple banks with functioning implementations in the market.
So what has changed? Why are the Canadian coffee chain and the Spanish bus company investing in NFC ? Well, the most interesting case study from Mobile World Congress last year was, as I have said before, BankInter in Spain. They launched what we called at the time a “NOSE” (NO Secure Element) payment service that uses tokenization to shift the risk analysis balance away from SE levels of security. The reason why this was such an interesting case study was that Bank Inter own an MNO. When you own an MNO, and still find it too much hassle to launch a SIM-based NFC payment service, that has to tell you something about the chosen model. Last year I called it an earthquake, and I stand by that.
Technically, what they did was to use a version of Android that had Host Card Emulation (HCE). At high level, this means that handset can pretend to be a payment card rather than having to have the SIM involved. When last year Google announced that HCE would become part of Android and that there would be no need to patch any more, a lot of people suddenly regained interested in the technology. The responses to this technology change have been very interesting indeed, as they seem to indicate considerable latent demand for a technology that we were being told was finished.
“With the entry of HCE we are free”
[From Spanish bus drivers to check tickets using NFC host card emulation • NFC World]
It wasn’t the technology that was the problem, it was the business model. Having previously criticised the SIM-centric model (with genuine integrity and, I think experience has shown, real cause), I stand in testament to the GSMA’s commitment to explore different views on this important topic and I am delighted to be able confirm that I will be giving part of the breakfast briefing on “HCE: NFC Threat or Opportunity” at the Mobile World Congress in Barcleona on Wednesday 26th February at 8.30am. I am genuinely looking forward to this as I personally think that there is an opportunity for mobile operators to use HCE to revitalise NFC in the mass market and, along with BLE, find new and more flexible business models that will make sense to financial services and other sectors. I expect to learn a lot from my fellow panelists and I look forward to seeing you all there.
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.
How exactly does switching to the “chip and PIN” system used everywhere else in the world (except North Korea, I’m told) stop the kind of thing that’s been going on at Target?
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.
The Target breach will encourage the US to adopt EMV, but it’s not a magic bullet. However, the breach may have wider implications for the future of retail transactions than EMV adoption.
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.
Off to the Barclaycard Wireless Festival for the day. I don’t really understand why its still called that. In the old days, when it was sponsored by O2, then calling it the wireless festival sort of made sense. But now it’s sponsored by Barclaycard, they should probably call it the Contactless Festival instead. Anyhow it featured a great many very popular bands, as evidenced by the enormous crowd trying to get in.
I know it looks chaotic but in the end it only took about 25 minutes to get in. Contactless was much in evidence. Barclaycard had kitted all of the bars out with contactless terminals and were kind enough to give me one of the promotional lanyards containing a contactless card (a Visa gift card preloaded with £20) to go and try out. Which, naturally, I did. And, I have to say, it worked perfectly. As testimony, allow me to present the first beer I bought with it!
Being me, I couldn’t leave it at that though, and I started to try out some other contactless paraphernalia about my person. An obvious experiment was to try my Barclaycard phone, and that worked too, but oddly it went online, which rather slowed the transaction down. I don’t understand why it did this, so I’ll ask the chaps when I’m next in the office.
More interestingly, I asked a couple of the bar staff what they thought about contactless and they had both positive and negative observations that I promised myself to report in a spirit of openness and balance…
Positive. It’s quick, and you don’t have to hand the terminal to the customer for them to enter a PIN. And they thought my phone was really cool. They also said that some customers had been paying with their own contactless cards and not just the promotional lanyards.
Negative. There were two big issues that came up in both conversations with bar staff. One was the spending limit, which the bar staff said was too low at £12 (the limit was actually £15, but the all of the drinks cost £4, so you could buy three drinks at £12 but not the advertised four beers in a drinks carrier, because that costs £16). Surely it would have made sense to have subbed the bars so that four beers plus carrier was a £15 special.
Enough of these scientific experiments (most of which I drank), and off to see some of the popular beat combos on show. Here’s 47 second taster so that you can get the idea if you’ve never been to one of these events before.
I was reflecting on the security issue later on, because it really seemed a block. I took the time to explain to one of the women at the bar that there was no risk to her as a customer, because the UK banks’ were unequivocal about unauthorised use: if someone uses your card without your permission, they will refund the transaction. Yet she was unconvinced and was clearly uncomfortable about the idea of “no CVM” purchase. This has been true since the earliest days. As I highlighted four years ago:
Among those that are not yet ready to use contactless, security appear to be the dominant consideration. Which means, of course, that whatever we might think about actual security situation we must get better at communicating it.
As I don’t know anything about customer communications and public information, I genuinely don’t know how to cross this chasm, but I wonder if it’s yet more evidence that we should be moving more quickly to contactless phones. The simple PIN code that I need to open up the mobile wallet on my Barclaycard MasterCard phone (the Samsung Tocco that I wrote about before) might well provide the reassurance that people want, even though it doesn’t really make much difference to the overall risk (phones are inherently safer than cards because people notice when they go missing anyway).
Overall, the weekend’s experiences did leave me with three firm conclusions:
1. Both the public and the merchants liked contactless. In this kind of environment – crowded, quick service – the technology performs very well. These were similar to the results seen elsewhere: the punters like contactless payments.
Festival-goers quizzed on the experience, said they were quicker (96%) and easier to use (98%) than credit or debit cards, while a resounding 100% said they’d want to use the PayPass prepaid wristbands again to pay at other festivals, concerts and sporting events.
[From Finextra: Contactless wristbands join wellies and camping gear as festival essentials]
2. We should accelerate the development of contactless phones, because they help with the security issue.
3. The Horrors are a good band, but not my cup of tea.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]
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.
Eric Schmidt’s very bullish comments about near-field communication (NFC) technology in the US retail market have got people talking about business models again.
Eric Schmidt, Google’s executive chairman, believes that a third of check-out terminals in retail stores and restaurants will be upgraded to allow wireless “tap and pay” from mobile phones within the next year.
These follow a series of statements by Google executives that, whether they are true or not, seem to have legitimised the technology in the eyes of a broad range of businesses.
She added that there is a ton of activity around NFC in international markets, giving the example of a successful trial of the technology that Starbucks ran in London.
[From Google Commerce Chief: We’re Making A Huge Bet On NFC As A Company]
I’ve never heard of this Starbucks NFC trial, so if anyone can point me in the right direction I’d really like to read up on it. But that’s beside the point. The point is that lots of people are now taking NFC seriously in the retail space and the mobile operators are developing NFC strategies. But what business model will there be for them? And what options do they have?
The question will then be how operators manage to regain relevance for their role in NFC transactions (which will come later, if at all), when the first trillion NFC interactions will have bypassed them.
[From Dean Bubley’s Disruptive Wireless: What will be the business model for free NFC-based interactions?]
You can see the problem that he is alluding to, but it may not be immediately obvious why it is such a problem specifically for operators. Look at the issue from a slightly different perspective, one that stems from security. I would argue that there are two different classes of application for NFC in mobile phones. These are, broadly speaking, “open” applications and “closed” applications. They are, broadly speaking, about interaction in the case of open applications and transaction in the case of closed applications. Creating such applications is, broadly speaking, easy to create in the case of open applications and difficult in the case of closed applications.
Why? Well, it’s because the closed applications need security and the open applications don’t. Open applications are things like games and business cards and “friending”, where consumers touch phones to something (which may be another phone) in order to get or exchange some information. These are what Dean means by “interactions”. Closed applications are things like payments and tickets, where real money is involved (other than the service providers own) and the applications must be what security professionals refer to as “tamper resistant”. They must also work, all the time and every time. These are what Dean means by “transactions”.
Working out how to do implement secure electronic transactions is (I’m happy to say, since it’s a big part of Consult Hyperion‘s business) difficult, complicated and interesting. It’s easy to picture how life might be with your credit card inside your mobile phone, but think what has to happen to realise that picture! How will the security keys necessary for the card application be transported across potentially insecure networks into the tamper-resistant chips (the “secure elements”, SEs) in handsets? How does the bank know that your credit card is going in to your phone and not a fraudsters? When you get a new phone, how does your card make its way from your old phone to the new one? How does the wallet application in the phone communicate with the card application in the secure element?
In the architecture developed by the transaction incumbents (by which I mean banks and telcos), the management of the closed applications is undertaken by something called a “trusted services manager”, or “TSM”, an entity that stis between the providers of closed services, such as banks and transit operators, and the mobile operators who connect to the SEs that they, in effect, own and rent out space on. This model may be disrupted, because it was founded on the assumption that the SE would be under the control of the MNO and that the TSM would have to cut a deal with the MNO to rent the SE space (what you’ll often here telco people refer to as the “apartment model”).
In the Google play, the TSM is operated by First Data and the SE is operated by Google (it’s in the Nexus handset, not on the SIM). The operator has no control over the SE and can extract no “rent” for its use. I notice that in the Nilson report (#972, page 7) it says that the Nexus S is the only smartphone in the US market with an SE not controlled by the mobile operators: it might have said that it’s the only smartphone in the US with an SE, full stop. The operators (in the form of Isis) are not yet in the marketplace. Why are Google being so active then? Well, on the Catalyst Code I read a while back.
Google has obviously made a decision that NFC is an opening into something more interesting and lucrative than transforming a phone into a payment card– advertising and marketing opportunities at the point of sale – the physical point of sale. And, it has done a deal with VeriFone that takes the economic sting away from the merchants who need to buy into their vision to make it work – and who have by and large turned their noses up at NFC up to this point. Layer on top of that their Google Checkout asset and their newly launched One-Pass wallet application and you have the makings of an interesting new payments player.
[From Google Takes on NFC, Will They Crack the Code? at The Catalyst Code]
Karen is, as usual, spot on about this. But I’m not so sure about this…
What’s amazing is that Google was the first to connect all of these dots
[From Google Takes on NFC, Will They Crack the Code? at The Catalyst Code]
This doesn’t seem amazing to me, because I’ve been involved in numerous attempts to develop mobile proximity propositions involving banks and operators and from these experiences have developed (I think) a reasonably accurate map. A month before the Google announcement, I wrote on Quora that “I’m sure [loyalty and rewards] will be Google’s strategy too. Payments are not an interesting enough application to persuade people to go out an get an NFC phone.”
So how come banks and operators didn’t connect the dots, then? Banks and operators have smart people in them, and some of them have smart consultants too. But it is very difficult to make institutional strategies for non-core businesses and have them translated into a practical tactics with appropriate priorities. If you were in a European mobile operator back in 2009 and you had an idea for using NFC to create a new business, where did you go with the idea? I went in to an Orange retail outlet: they are the first operator in the UK to sell a commercial NFC handset with an onboard payment application: not only did the shop not accept NFC payments but they didn’t sell any NFC tchotchkes, such as blank NFC tags. If you’re a smart kid and you get one of these phones, and you have an idea for using tags as tickets for a gig you and your mates are running… well, hard luck. This is problematic, because we need lots of people to be experimenting, developing and playing with the new interface to create the new, open applications.
In April, Nokia’s vice president for industry collaborations, Mark Selby, speaking at the WIMA NFC conference in Monaco, contended that NFC applications not securely stored on SIM cards, embedded chips or other secure elements will account for two-thirds of the revenue that NFC technology will generate through 2013.
I hope Mark won’t mind me mentioning that we discussed this over dinner a couple of weeks ago and, while I agreed with him about the market, I bored him at length with my moaning about the slow development of the ecosystem. Where are the Nokia NFC tags for kids to buy? Where are the NFC USB sticks to connect laptops and phones?
But, looking forward, there’s another issue here. This classification of open/interactive vs. closed/transactional NFC uses is too simplistic, because as the technology spreads in the mainstream, interactions will need to be secure too. When I tap my phone against an advert at the bus stop, I want to find out more about “Kung-Fu Panda 2″ and not get directed to a porn site, a reverse-charge premium rate phone call to Honduras or send a text message to someone who wants to sell my mobile number to commercial organisations. I want my phone to check the digital signature on the tag and make sure that it is valid, and that it is signed by an organisation recognised by UK phone operators, or banks, or the government, or whoever. But signing the tags (which is part of the NFC standards, but no-one uses at the moment) means that someone has to distribute keys, and certificates and all that stuff. None of this exists right now, but in the future it will have to.
So… Not only is there no ecosystem for transactions, there’s no ecosystem for interactions either. Now you can see why the mobile operators are going to have to work so hard to stay in the NFC loop. A couple of years ago they could have started to roll out the handsets for open, interactive purposes and started many communities off on experimenting with the new technology while they developed the necessary infrastructure for both secure transactions and secure interactions, but they didn’t because they couldn’t see a business case. What’s the business case for selling public key certificates so that advertisers can digitally sign tags using their internally-generated private keys?
It’s hard to work out a conventional business case around a business that simply doesn’t exist yet, and I understand that. But I think that even three or four years ago, the consumer response to the early pilots and trials was so positive that it was clear that the technology would make the mainstream. Now that Google’s activities have served, in an odd way, to legitimise both NFC technology and the business models around it, maybe the operators should adopt a more Google-like approach to business model: start building way more cool stuff, monetise what works and then be ruthless in killing off what doesn’t.
My employer, Consult Hyperion, has provided paid professional services to some of the organisations named here in connection with products and services discussed here, but the opinions in this post are my own (I think) and presented solely in my capacity as an interested member of the general public
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 are some people, in some parts of the world, who still prefer cash over any form of electronic alternative. My mum, for example. But her demands on the Treasury are modest. In other countries, cash has a bigger impact, because local distributed entrepreneurs need it for business-to-business transactions.
Somali pirates are reported to have received a total of $12.3m (£7.6m) in ransom money to release two ships. They are believed to have been paid a record $9.5m (£5.8m) for Samho Dream, a South Korean oil tanker, and nearly $2.8m (£1.7m) for the Golden Blessing, a Singaporean flagged ship. “We are now counting our cash,” a pirate who gave his name as Hussein told Reuters news agency.
[From BBC News – Somali pirates receive record ransom for ships’ release]
I’ll bet they are. And It will take them a while. Once again, these marine miscreants aren’t looking for prepaid mobile phones, gift cards or PayPal accounts: they are after cash, and I’ll lay a pound to a penny that they didn’t want Yuan or Roubles or Kenyan Shillings and an M-PESA account in a false name: they wanted dollars, and in $100 bills. The cash was dropped from a helicopter on to the ship. Wait a minute, you might be tempted to think: how on Earth can people move millions of dollars in cash around when we have stringent KYC/AML/CTF legislation in place! I think I may have found the answer. They are criminals, and therefore don’t care about such restrictions. There’s an amazing story in one of the free newspapers you get on the tube (Metro, 20th June 2011).
Three Britons accused or smuggling more than £2m into Somalia to pay pirate ransoms. They were given sentences of between TEN AND 15 YEARS (my emphasis) and also fined £9,000.
That £9,000 fine must have strung. This is, apparently, the first time that “westerners” have been sentenced for their involvement in ransom payments. Hhhmmm. Interesting. Now what were they smuggling into Somalia again? Was it mobile handsets for illicit m-payments? No. Prepaid cards to be used for nefarious purposes? No. Bitcoin wallets on encrypted USB drives? No. It was cash. Of course it’s quite inconvenient to have to ship huge wads of $100 bills around, so perhaps the pirates had asked for euros instead. It could do with the support at the moment. If the Feds decide to start issuing $500, or $1000, bills anytime soon, the euro would be devastated, since almost half of the euros out there are in the form of €500 notes and if drug dealers, money launderers, kidnappers and corrupt politicians decide to dump them for dollars the demand would collapse (nobody uses them in legitimate transactions).
Malaysian police have arrested a Lebanese man allegedly carrying fake currency with a face value of $66 million after he tipped a hotel staff with a $500 note, an official said Friday. The largest U.S. note currently in wide circulation is a $100 bill. But police found bundles of $1 million, $100,000 and $500 notes in the man’s hotel room in Kuala Lumpur on Sunday, said Izany Abdul Ghany, head of the city’s commercial crime unit.
[From $500 Tip Leads Police to $66 Million in Fake Bills – ABC News]
Cash does seem to attract the wrong kind of person. There has to be a better way.
Elizabeth Buse, group president, Visa, responsible for Asia Pacific, Central Europe, Middle East and Africa said that bringing transactions out of cash into electronic forms will allow governments to have better tax compliance and greater monitoring of fraudulent transaction and money laundering.
There’s an interesting experiment in this line of thinking underway right now, The Central Bank of Nigeria (CBN) is attempting to restrict the role of the cash in the economy there and push for a more efficient less-cash system.
To be precise, the CBN on April 20 sent a circular to all banks, Cash-in-Transit (CIT) operating firms, payments system service providers, limiting daily cash withdrawals to N150,000 for individuals and N1 million for corporate entities effective June 1, 2012.
[From From cash to cashless economy: How practicable is CBN’s mop up policy?]
There’s been a storm of complaint about this from various elements in Nigerian society. I assume that some of these complaints come from people who are happy with the corruption and tax evasion that cash delivers, but there are also reasoned complaints that the electronic infrastructure is insufficient.
On May 17, the House of Representatives objected to the proposal by the CBN & requested the CBN to suspend the implementation of the policy. They argue that that the country was not prepared for such a change
[From Nigerian Cash Management Reform — Counting On Currency]
I hope the CBN stays the course, and not just because of economic efficiency. Cash discriminates in favour of the tax-evading, corrupt elites at the expense of the powerless and poor: electronic payments should be a cheap, fast and transparent alternative.
The biggest enemy in fighting poverty is physical cash. The fact that people living at the bottom end of the pyramid need to conduct their business with paper notes (and coins) is the main reason why they are often stuck there.
But how can an emerging market make the transition from cash to cashless? The answer is, of course, to skip past the slow roll-out of conventional banking and payments infrastructure and use mobiles, not cards, to replace cash. Kenya points the way…
Over 13,000 sugarcane cutters in Mumias Sugar zone will start receiving their pay electronically following a deal between Mumias Sugar Company, Family Bank and mobile phone money transfer service providers. Acting harvesting and transport manager Mr Franklin Maguge said the firm was considering the possibility of extending the programme to cover other casual workers in the next one month… The services will be also extended to cover sugarcane cutters National Hospital Insurance Fund (NHIF) medical scheme monthly remittances to make it easy for them to pay without going through hectic process.
[From 13,000 Sugarcane workers to get paid via phones. « Mobile Money Africa]
This story gets even more interesting, though.
The sugar milling firm in collaboration with Safaricom and Airtel mobile phone services providers and Family bank is also making arrangements to have the cutters provided with mobile phones at a subsidised loan for efficient running of the programme.
[From 13,000 Sugarcane workers to get paid via phones. « Mobile Money Africa]
Providing subsidised loans to the workers who do not have phones presumably saves money compared to paying them in cash. So if some of the workers still insist of getting paid in cash, great ineffeciencies remain for the company. When few enough remain, the company than quite reasonably insist that they are paid by mobile (I can remember my first factory job when I was a teenager, when the company was going through the process of switching the workers from cash to direct deposit – it wasn’t instantaneous, but it was done in the end). Come on mateys, all aboard for lack-of-Treasure Island.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]
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.
At a recent Financial Services Club event, one of the speakers said that it was unlikely that retailers would make changes to their POS systems to adapt to new payment mechanisms, outside of their normal replacement cycles. With one exception. He said they might make the investment in POS if it was for their own payment system. In other words, Tesco won’t change their POS software because some student comes up with a cool way of paying for things with iPhones, but they will change their POS software to launch their own payments service, wallet, device or whatever that reduces costs and increases benefits.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]
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.
I was pottering around the British Library’s superb exhibition on science fiction and, since it is free, felt it only moral and just to stop off in the gift shop and buy a couple of books. Truth be told, there were a hundred books there I wanted to buy, but I decided to limit myself to two, one of them being a copy of Edwin Abbott’s magnificent Flatland, one of my all-time favourite books, for no.2 son. Browsing on, I was astonished to find a new edition of Edward Bellamy’s “Looking Backward, 2000-1887” from the Oxford University Press. This is dated 2009, so it didn’t exist when I wrote about the book back in 2006.
I’m always curious about the first reference to the credit card in literature. The oldest I’ve found so far is in a long-forgotten text from 1886 called “Looking Backward, 2000-1887” by one Edward Bellamy. I picked up a 1947 edition from the Amazon marketplace, which suggests it must have been reprinted a few times. Indeed, the dust jacket claims it to be one of the best selling utopian fantasies of all time.
In this new version, according to the web site (I haven’t read it yet – will start tonight):
The discovery of this new edition made me think again about just how long it takes to effect change in the conservative world of money. Yet perhaps Bellamy was only a couple of decades out in his predictions of cashlessness, which isn’t bad across a 125-odd span. Public attitudes are changing, even in conservative nations such as our United Kingdom.
Only 31% of people said using notes and coins was their preferred payment method, with 41% saying they would choose to use a card if they could, according to the Payments Council.
[From The Press Association: Consumers ‘choose cards over cash’]
Personally, I would never use notes and coins again if I had the choice, and it looks as if more and more people are coming to the same conclusion.
It found that while 83% of people aged over 55 would use cash when buying something for up to £3, 12% of under-35s would use a debit card.
[From The Press Association: Consumers ‘choose cards over cash’]
I’m certainly over 35, but I fall in the later category. I would always used a card, given the option, although I never use a debit card of course. Why anyone would use a debit card when they could use a credit card (except in the face of surcharging, about which more in a later post) I don’t know. But this leads me to conclude that Bellamy may well have been a more accurate soothsayer than anyone suspects. This is because the “credit card” that he describes in the book is actually a pre-authorised offline prepaid card, and these surely are they key cash replacement product de nos jours. In the Federal Reserve Payments Study last year, prepaid was identified as the fastest growing segment.
The Study found that prepaid cards represented the fastest growing payments segment from 2006 to 2009, with an annual growth rate of transactions at 21.5%. By way of comparison, the number of debit card transactions grew at 14.8% and the number of credit card transactions declined by .2% annually over the same time period.
I’ve just been exploring some prepaid opportunities with one of our clients, and one of the factors that we were kicking around (not giving any secrets away!) was that prepaid is a way to experiment (provided that not-too-ridiculous KYC/AML/CTF doesn’t derail it) in a way that other products aren’t.
From the consumer side, prepaid allows consumers to test new opportunities and options without risking a lot of money or putting their bank accounts or credit cards on the line.
[From PaymentsJournal – When It Comes to New Payments Technology, Prepaid Will Lead the Way]
This is a good point, but I feel there’s another factor, at least in Europe. You don’t need to be a bank to offer prepaid services: the combination of an Electronic Money Institution Licence (ELMI) and a Payment Institution Licence (PI) means that any company can offer a full service: an open-loop prepaid card. I suspect that many of the companies applying for these licences are doing so because they want to use new technology to deliver new services that need payment, if you see what I mean. That is, they don’t expect to earn money from the payments themselves, but from the value-added services that need the payments to take place (what people are starting to call the “Google Model”). Hence Bellamy’s vision may be realised not from within the payments industry, but from, say, retail or mobile or brand or somewhere else entirely.
I’ve been using the prepaid contactless MasterCard on my Orange phone for a couple of weeks now — mainly in Pret and McDonalds — and I have to say it works pretty well. I’ve very comfortable with the idea of switching to prepaid, because prepaid on the phone isn’t a pain, it’s easy. When the prepaid balance falls below a certain level, you’re asked to enter your PIN and top up. Simple. Thus while it may be initially hard to imagine prepaid cards replacing cash in retail transactions, the more I use my prepaid “card” in retail transactions, the easier it becomes.
Naturally, I obtained a spare copy of the new edition of “Looking Backward” and I have it on my desk beside me as I type. I will cheerfully dispatch it post-haste to the first person to respond to this post with the name of the first-person narrator of the story in question. In the traditional fashion, this competition is open to all except for employees of Consult Hyperion and members of my immediate family, is void where prohibited and is not connected in any way with the London Olympics 2012. The prize must be claimed within three months. Oh, and no-one can win more than one of the Digital Money Blog prizes per calendar year.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]
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.
[Dave Birch] I just saw an American in a bit of a pickle at Holborn Tube. He was trying to buy a ticket, but the machines won’t take non-chip cards, so he was stuck. His US American Express card was useless. Fortunately he was my brother-in-law, so I bought his ticket with my splendid Barclaycard OnePulse card. This is happening to Americans all the time, and since it happens to the banks’ best customers, they are beginning to respond.
I was pleased to see in the news recently that Chase and Wells Fargo announced the issuance of EMV chip-enabled cards for several of their credit card portfolios.
[From Portals and Rails]
I notice that at many of the US international airports I’ve been to recently (on a sample of three) you can buy prepaid Sterling and Euro pre-paid chip and PIN cards from the Travelex booths as well. Chase and Wells aren’t the first US EMV issuers.
State Employees’ Credit Union (Secu) is set to be one of the first financial institutions in the US to roll out chip and PIN debit cards to its customers. The non-profit cooperative has enlisted French vendor Oberthur Technologies to help migrate its 1.6 million debit card holders to EMV between March and the end of the year.
[From Finextra: State Employees’ Credit Union makes EMV move]
The pressure for US migration is growing. As Jamie Henry of Walmart mentioned in his recent Tomorrow’s Transactions podcast, many retailers are asking the banks to go ahead with migration because they think it will reduce their costs dealing with fraud and PCI-DSS. Perhaps the pressure is reaching a critical point of some kind.
Don Rhodes, senior director of risk management policy for the American Bankers Association, says a number of emerging technologies, such as the EMV chip standard, mobile payments and peer-to-peer or person-to-person payments, will soon change the way U.S. financial institutions and merchants connect and transact. And it could all happen in 2011, much sooner than most industry experts expect.
The kind of things that have been going on with Google and Square and Isis would serve, I think, to reinforce that the trend is accelerating. The fact that some of the trailblazers (eg, Bling Nation) have found it heavy going doesn’t mean anything about the overall trend (the weather isn’t the climate, as they say). I saw in a Mercator Advisory Group press release that they are saying that
Merchants are advised to “spend the $10″ for EMV capable terminals now in anticipation of an eventual EMV roll-out.
[From EMV in the USA: Waiting on Debit, a Mandate, or Just the Opportune Moment]
They were anticipating an early 2011 start for the EMV roll-out, which is exactly what appears to have happened, albeit still on a limited scale. Elsewhere, the chip and PIN bandwagon rolls on inexorably.
Due to an increasing number of transaction fraud worldwide, more and more countries are shifting from the stripe card standard to the EMV standard, which substantially enhances transaction security and operation efficiency. Now some major Chinese commercial banks are to join the trend, planning to issue their chip band cards by the middle of the year.
Perhaps in the Americas it will take political leadership to enable to the final push towards EMV, a President with real vision and a commitment to the well-being of his nation.
President Chavez has mandated that the country move to EMV chip cards later this year which should stop this type of fraud
Well, if only President Obama shared the wisdom, vision and economic genius of the noted revolutionary leader Hugo Chavez! So Viva El Presidente and down with the reactionary and counter-revolutionary Yankee magnetic stripe hegemony imposed by the running dog lackeys of imperialist aggression.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]
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.
Recent Posts Recent Comments Recent Mobile Money Practice blog posts