[Dave Birch] Here in the USA, people seem to think that payments work fine.

Credit cards and cash are perfectly easy and acceptable ways to pay, so without applying any real innovation to the mobile payment process beyond the transaction, we’d just be fixing a problem that doesn’t exist.

[From A tale of two iPhones — what an NFC-equipped iPhone would do to the mobile payments market | VentureBeat]

Really? I beg to differ. Yes, credit cards are perfectly easy (provided that you don’t care about the cost) so long as you have a working credit card. And yes, cash is easy (provided that you don’t care about the cost, inconvenience and cross-subsidy to criminals) so long as you have the cash. A problem that doesn’t exist? Wrong. I don’t listen to management consultants and their Powerpoint blandishments. When I want to step over the border into the future of payments, I go there in person. It’s important to me that when a client asks me how something works, I know because I’ve tried it. So here’s what payments in the US were like for me last week.

I drove over the BART at Millbrae to take the train into town for a couple of meetings. I tried to top up my Clipper card using my prepaid US$ MasterCard but it was rejected. Not a good start. In fact, as I discovered at a parking garage later in the week, it seems that unattended terminals won’t accept prepaid cards at all. So when it says in the advertisement that a prepaid open-loop card is…

Ideal for your holiday abroad

[From Cash Passport: The Pre Paid Travel Money Card | Travelex]

…they mean so long as you don’t need to park car, get on a train or buy a soda. Fortunately I had a spare UK credit card in the bottom of my bag, so I used that instead. Off I went on the train. I needed to pick up a couple of things downtown so I went into a well-known chain clothing store and a sportswear store. Interestingly, they both had contactless readers on prominent display. Sadly, the terminal in the chain clothing store would not recognise my UK contactless cards (so much for interoperability). In the sportswear store the clerk said that I couldn’t use contactless because they had to check ID on all card transactions. I generally don’t have ID with me, because I lock up my wallet and passport in the hotel, but as it happened I’d forgotten to put my wallet back in the safe so I had it with me. I showed the clerk a UK driving licence that they could not conceivably verify and then paid by swiping a prepaid card that didn’t have my name on it anyway and I signed the transaction “Sergio Aguero“. State of the art security.

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The next day, I went out with my travel wallet containing the prepaid US$ MasterCard, a Clipper card and my hotel key. I went to buy a coffee in a sophisticated-looking SF-style coffee place. While I was standing in line I was scanning for wifi on my phone and found several networks but all with passwords. I asked the barista if they had wifi. She said they didn’t have wifi. When I recovered from the shock I walked out and went on to the next sophisticated-looking SF-style coffee place that did. Anyway, after I got the coffee, I “quickly” logged in to check the balance on my prepaid card. I hadn’t been keeping track of the balance (this is a key reason why mobile prepaid — such as my excellent O2 Wallet and companion O2 Money Visa card — is a much better proposition than prepaid cards). I was down to the last couple of dollars. Later, back at the hotel, I tried to top it up online using my UK debit card. “Transaction could not be completed”.

It didn’t say why not, so I e-mailed “customer service” at the card issuer and the next day I got bad a stock e-mail giving a variety of reasons as to why transactions in general might be declined, but no indication with my specific transaction had actually been declined. But I got a clue later in the day. On the way back to BART, I passed an ATM and I thought maybe, since no-one was looking, that I should get some greenbacks as back up. I took my debit card off to the ATM. “Transaction declined”. I tried another ATM “Transaction declined”. Oh well. I thought I could probably get by without any cash — after all, this was in the USA where credit cards are “perfectly easy and acceptable” so no problem.

The next day I drove into town in plenty of time for my first meeting. I parked at a meter. Since I didn’t have 12 quarters with me, I was given the choice of paying by mobile or paying with a parking card. I went into a nearby store to buy one of these cards and they told me that they don’t sell them and that I would have to walk a few blocks to Walgreens to buy one. Naturally I couldn’t be bothered to do this, and as the guy wouldn’t give me any quarters, I went back to the meter to look at the mobile option, but I didn’t want to download the app because O2 would have charged me more than renting a car for the day to do this. Hhhmmmm…. I went back and persuaded the guy in the bar to exchange $2 in quarters and then went off to the meeting. A big thank you to business colleague who lent me his SF parking card so I didn’t have to keep running out and finding quarters.

After a second meeting, it was off to lunch where, I’m happy to say, I swiped my MasterCard and signed for it (I couldn’t fit “Sergio Leonel “Kun” Agüero del Castillo” on the receipt, as recommended by a correspondent, so it ended up as just Sergio Leonel Kun, but I’ll keep practising). Nevertheless, the 1972-style transaction did at least work.

At this point, I got a text message from my UK mobile operator to tell me that my data charges now exceeded £40. Aarrrgh! I’d forgotten to turn off data roaming again. (I’d turned it on earlier to get some directions to a meeting.) I drove over to Best Buy to buy a prepaid phone to use in the US. Since I’m going to be in the US once or twice a month for the next few months, I figured this would make economic sense and would impress my Finance Director with my firm grasp of the need for cost savings in these difficult times. Wandering the racks, I noticed that Virgin Mobile had the LG Optimus Elite for only $129. I’d been looking at the 4G HTC Evo at $299 but… the Optimus Elite has Google Wallet! Hurrah, more payments fun. (I have to say the guys and gals at Best Buy were very helpful as I tried to work out which plan to get etc.)

Time to pay. I used my UK John Lewis MasterCard, but it got referred so the guy at Best Buy had to phone up a call centre somewhere, presumably because of MasterCard fraud control. This took about 10 minutes to resolve before the payment went through (but the same card was subsequently declined at the iMax because of “over voice limit”, or at least that’s what I thought the iMax clerk said). We went through the phone activation process, which took a while, and had its own moments of madness. After the Best Buy guy had activated the phone, I tried to make a phone call to Best Buy just to check it was working. Beep. I got through to a Virgin Mobile voice mail jail: Alex the robot told me that I had $35 credit on my account, but if I wanted to make a call then I need to top it up by another $0. OK, that sounded fun. So I pressed the buttons for top up because I wanted to see what happened when they charged $0 to my card. Remember, I do this so you don’t have to.

Voice mail jail. I gave up and called the Virgin Mobile advertised helpline and got back through to Alex the robot. Aarrggh. After I series of menus, I got an option to talk to somebody so I took that. We went through security and then the helpful chap said he knew what the problem was and that he would fix it. So I turned the phone off and turned it back on again. While I was doing this, I noticed something of a kerfuffle behind the register. They’ve lost my John Lewis card and are turning the place upside down to find it. (I assumed it had been accidentally thrown in the trash and resumed fiddling with the new phone.) After about a quarter of an hour the card still hadn’t turned up. I didn’t particularly care, since I have lots of cards, and John Lewis don’t charge for replacement cards (I know because I’ve lost this one before). So I was waiting for the Best Buy guys to apologise and give me the phone for free or something when… it turned up! It had found its way into a pile of papers and ended up in a cupboard somewhere. I couldn’t resist taking a picture of the guys after they had turned the place upside down looking for it!

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That night, Barclays called me at 1am and 3am. I didn’t know it was Barclays: the phone rang showing an 0845 number so I just assumed it was some of those annoying ambulance-chasing PPI lawyers and ignored it. Later on, I heard the phone beep with a text message but I ignored that as well, since the last one I’d got was…

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When I woke up, it turned out that Barclays had sent me a text message asking me to call fraud control. Fair enough. I called, and a robot read out some transactions and asked me to confirm they were real. I did that. End of call. I wondered if my excellent Barclays app had a menu somewhere along the lines of “tell fraud control to allow transactions from this location” but it didn’t and I suspect that the app doesn’t know where the phone is anyway. But it did have a “call” button so I pressed that and found myself connected to a UK call centre (at NINETY PENCE PER MINUTE) and they put me through to fraud control who asked me if I’d told them that I was going to America. I hadn’t, of course, since I go to America all the time and use my Barclays and Barclaycard cards there all the time. But whatever. She told me that my card was now OK to use in US ATMs.

The location thing, on reflection, is a bit annoying. If the app knew where it was, then it could tell fraud control for me. Or when the ATM transactions arrived at the neural network in the Barclays supercomputer complex, the supercomputer could have asked the Barclays app where it was – and if the app’s location appeared to coincide with the location of the ATM then they could allow the transaction without bothering me. But back to the story. Having spent who knows how much at NINETY PENCE PER MINUTE calling Barclays, I could now use my debit card in the ATMs so I swallowed my pride, caved in and went and drew out some cash, which proved jolly helpful later on when another the John Lewis card was declined at the iMax. I could have used my debit card but I absolutely hate using my debit card for anything other than cash withdrawal.

Next day, I fired up my Google Wallet. I set up the prepaid card to get my free $10 and then I tried to top it up but you can only top it up using a US card and my new Simple debit card hasn’t arrived yet, so I tried to top it up with a prepaid card linked to a US address but this got declined. So I created a “virtual” credit card and linked it to my British Airways Amex card, just to see if I could. Off I went. I happened to find my self strolling past a Gap, and I remembered that they had terminals with a prominently displayed PayPass logo so I popped in to buy some socks. At the register I proudly tapped by phone on the terminal and… nothing. Despite several attempts, the terminal remained profoundly indifferent to my next-generation payment technology. The clerk told me he’d had a couple of people try to pay with Google Wallet but it never worked. I asked him about contactless cards, and he told me that he had indeed seen three or four people pay with contactless cards over the last six months and that they did seem to work. I went to next door to see if they had a PayPass terminal and they did. It was a women’s cosmetics store, so I bought a make-up mirror (I figured that that’s the sort of thing you can never have too many of) and once again attempted to give the clerk a peek into the future. Once again, nada. I asked the clerk: she had never seen anyone pay with contactless anything and had no idea what I was babbling on about. So 0 for 2 on my Google Wallet.

Meanwhile, I got a call from my wife. Not only was my MasterCard blocked because of suspicious activity (using it to buy things with a magnetic stripe) but her companion card had been blocked too: so she was embarrassed doing a chip and PIN transaction back in the UK! Why would the system block a chip and PIN transaction, in the UK, with the correct PIN entered? Ludicrous. I called John Lewis via Skype from a hotel lobby to complain and the nice woman on the phone said that the card was blocked because they monitor many different kinds of suspicious activity. Whatever. I didn’t want to moan at her about their risk management system’s general hopelessness and the idiocy of blocking chip and PIN transactions (I’ll bet they’re using some US software package that doesn’t understand the difference between stripe and chip transactions). She told me that I can send them an e-mail when I’m going to be abroad to let them know and that will stop the problem from recurring. I told her I’m abroad in September, October, November, December, January and February. She said I had to e-mail. I think I’m going to give up on that and only use my Amex card when in the US. I’ll go with BA miles and less hassle vs. cash back in John Lewis vouchers. I will bring my contactless Barclaycard with me next time and see how that goes too.

Next down, I had a couple of meetings a various places down the peninsula so I thought I’d give Square and Google Wallet a try. I’d forgotten my Square username so I created a new account and then linked it to my Simple account. I got an e-mail from Square saying that they had sent two deposits of random amounts to my Simple and that the money would appear in my account in five days. Five days? I began to picture the guy setting off from San Francisco on his Pony Express charger with my money in a leather sack. Five days? In 2012? Unfortunately I never got to try Square because none of the places I went to took it. I did notice a couple of places in SF that were using iPads as POS terminals but they weren’t using Square.

I did have a major success though. I stopped in Peet’s Coffee and noticed that not only did they have a contactless terminal, they had a contactless terminal with a Google logo on it! Hurrah! And so it came to pass that I made my first successful Google Wallet payment. Wonderful.

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None of this is to say that card payments don’t work very well indeed across a very wide range of retail payment needs.Incidentally, the day after I returned to the UK I went with my wife to pick up a new (used) car. I asked the dealer how to pay, and he said that I could pay with a credit card (for a 2.5% surcharge) or with a debit card or by bank transfer. I worked out that a surcharge of 2.5% meant I would be paying £200 for 8000 BA miles, which isn’t a great deal, although the idea of charging it back if I didn’t like the car was appealing. In the end, I decided to pay with my debit card, just to see what would happen. It worked, perfectly. I paid several thousand pounds for a car using my chip and PIN card as easily as paying for a pair of shoes. And it cost the car dealer, what, 25p?

When someone tells you that payments work fine, that cards work fine so why bother messing about with phones and that there’s no need for new mechanisms… they’re wrong. There’s plenty of room for improvement. Cards and cash are easy and acceptable, but they’re not perfect.

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

8 comments

  1. Hugely enjoyable. A masterly description of the shambles the world’s payments systems are in, 50 years after the introduction of charge cards, credit cards, cashpoint cards, debit cards, etc … I take it that you predict a similar monumental ghoulash in 50 years time with mobile phone payments – that is the point of your post, isn’t it?

    [Dave Birch] No, you know I’m an essentially more optimistic person David. I’m merely reporting the current poor show as a stimulus to future improvement.

  2. No doubt the providers of the payment services you lampoon in this post were and are optimistic, too, like you, but what you describe is something of a shambles nevertheless.

    The payment service suppliers don’t bank on optimism and neither do the consumers.

    Consult Hyperion – leaders in digital money and digital identity, securing tomorrow’s transactions with optimism?

    No. Come on Dave. You’re better than that. Much better than that.

    So are CHYP. You/they didn’t get the O2 Wallet work, the London Public Transport assignment and the Visa Europe/authentication of government services funding (c.f. news ticker) for optimism.

  3. Great great piece,
    highly enjoyable throughout and plenty of insights.

    I used my Italian, British and Dutch credit/debit cards in Europe and never had a problem. travelling to a different continent is ridiculously annoying because of all those stupid (and outdated) security measures.
    Will you remember to email them next time you have to go abroad?

    [Dave Birch] No, of course not!

  4. Another thing happening. As legit transactions get pushed to cash-based methods (debit card) only fraud remains using credit card — where the fee doesn’t matter because it is a fraudulent purchase.

    Credit card fees then need to rise (e.g., more and more merchants bumped to high risk category) so they stop accepting credit cards entirely.

  5. This was painful to read. Why not just carry some freedom-lovin’ cash, David?

    [Dave Birch] Or maybe cartons of Marlboro and some hack silver !!

  6. When Bitcoin replaces credit cards, an experience like this will not be possible. Why? Because security and fraud prefention are not centralized.

    When you have your Bitcoins on your device, they are like cash. They are your responsibility, and you can spend them anywhere in any amount, either for a cup of coffee or to buy a carpet from half way around the world, all from the same device.

    The problem described in this chilling post is not one of simple broken technology; it is a problem of the State interfering in money, and its movement.

    Square and other companies would love to allow payments world-wide via any credit card, but they and other companies cant because the regulation forces them to artificially constrict what they can offer. Any article that fails to mention this is missing the root of the problem; regulation from the State.

    If electronic payments are ever going to be as easy as cash, then the State must be completely removed from the process. Once this happens, then anyone can offer services to anyone else, and interoperability will be the default. It will be seamless, instant, secure and very usable. You will be able to get off of a plane in Jodphur and use your Bitcoins without any problems. No one will be watching you, blocking your transactions or causing you any sort of headache.

    And this is another aspect this fine article fails to focus on; the deep and pervasive surveillance that these systems have built in to them. Everything this man did was being watched; where he went, what he spent money on and what he was doing was all recorded by the companies offering him their broken services. Then the most frightening aspect of all; these people can cut off your ability to buy anything or travel by blocking your card. They blocked his card, and his wife’s card also, preventing her from buying food. All thinking people should be very VERY frightened of this. At any time, for no reason whatsoever, your ability to buy food can be blocked by a nameless person in a call centre, or a computer programme.

    Bitcoin makes all the bad things associated with electronic money go away. There will be no blocked cards, no surveillance and no interoperability problems. It is cash like electronic money, available world-wide, instantly, anywhere, without friction or surveillance.

    Credit cards are a very bad thing, and thankfully they have reached the pinnacle of penetration into society. As they begin to decline and Bitcoin replaces them, we are going to see better security and less of these horror stories. This does not mean an end to call centres where you can scream and shout about payment problems however; what it means is that service centres will actually BE service centres and not surveillance centres.

    For example, lets say that you are using a Bitcoin wallet on your Android phone, and want to use Bitcoin to buy a parking space. The machine that takes the payment is broken. You call the service center; they can advise you how to pay, or where to go to pay, or can take payment from you right there and then. You can then have the attendant give you the keys, or in the further future, unlock the car with your phone.

    Service centres dealing with Bitcoin payments problems will be there to help you, not to receive your complaints, because Bitcoin is like cash. The power will be returned to the user, and will be completely drained away from the company. Of course, there will be ecosystems where, using the parking scenario again, the car you want to rent can be paid for instantly by transferring Bitcoin between your hosted wallet with Coinbase and the parking companies Coinbase wallet. This opens you up to the same problems as credit cards have obviously, but as is the case with cash, you are not compelled to use these services, and can hold the coins yourself in your own wallet. Bitcoin gives the consumer the ability to choose what way he wants to transact and how deeply he wants to integrate with systems. Credit cards work in the opposite way, its all in or not at all.

    These horror stories are not uncommon. Like the PayPal horror stories, they serve to wake people up to the real dangers of a society without cash or Bitcoin.

    [Dave Birch] Wait. So Bitcoin being like cash – if it gets lost or stolen, that’s just tough — is a good thing? I think I disagree.

  7. “No doubt the providers of the payment services you lampoon in this post…”

    Well, that’s a little harsh. I don’t think I lampoon anyone: apart from anything else Consult Hyperion provides paid professional services to almost every company I mention. The post is about being a critical friend: if I said everything was great and worked perfectly, clients would know I was lying. And since integrity is a very important aspect of the Consult Hyperion brand, I think tempered honesty in the right place is deserved and appreciated. I want payments to work better and I want all of our clients to have great payments businesses. My UK-issued contactless Barclaycard didn’t work in a US contactless terminal: if I don’t blog about it, it will still be true.

    I only post about this stuff because I care about it. Of course I don’t expect optimism to fix these problems. But given the projects we are involved in, I do have optimism about the folks who are fixing them, if you see what I mean.

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