Transport for the North

Cash still accounts for 48% of transactions in the UK, according to Moneybox on BBC R4 just now. As part of this programme, Shashi Verma from Transport for London was being interviewed about the acceptance of contactless payment cards (which we helped him design and implement from 2008-2014) on TfL modes of transport. The interviewer asked about the famous ‘capping’ provided by Transport for London (TfL) to all travelling customers using contactless. Shashi explained that using contactless bank cards is guaranteed to be cheaper than buying a ticket. Not just the same price, but cheaper. Guaranteed.

But what about the “Premium on the Poor,” as the programme called it? Now that buses in central London do not accept cash how can those without contactless cards travel by bus. Shashi’s answer was simple: they can use cash to buy an Oyster card. I believe they can also use their cash to buy tickets in ticket machines off the bus, but this was not mentioned and would also be more expensive than using Oyster.

But why was I so interested in this programme about things I already know about?

It’s because Chyp have been appointed Development Partners to Transport for the North (TfN). Since 7 December 2015 we have been working with TfN in Leeds to help them prepare designs, implementation plans and business cases sufficient to inform George Osborne’s budget in March 2016. Assuming all goes well, in March, the Chancellor will allocate sufficient fund to TfN to allow improved smart ticketing systems to be delivered across the north of England.

My particular role in the TfN project is to lead the Design stream of work proposing what should be implemented, where and when. It is a really interesting project and in many ways it will be more challenging than London. Will it be ITSO, or EMV? We’ll have to wait and see. Que sera, sera …


Technology roadmapping

In 2005 when we performed an update to our biometrics and identification technology roadmap for the UK police, body odour was a ‘technology’ that was looking interesting, but not mature enough. The idea was that if dogs can do it, why might it not be automated. And identical twins have a unique smell, apparently.

Police biometrics techs 2005

We identified policing applications of biometrics and identification technologies, one of which was automated identification of police officers. At that time, each Force had it’s own warrant cards (so there was no confidence in what they should look like) and there was no way of using them with machines to authenticate the cardholder as an ‘officer of the lieu’ and grant them access to building and machines.

Automated identification of police officers

We foresaw the benefits of a national police warrant smart card and were retained to specify the standard which is used today across the Forces.

More recently, the technology roadmapping I have been involved in has been for transport applications. As well as the usual technologies in this space (mobile apps with 2-D bar-code; contactless payment cards; NFC mobile devices emulating contactless cards) we have also been thinking about more interesting stuff. Such as USB contactless readers used at home for fulfilment of tickets or value direct to smart cards. Or mobile devices with Bluetooth Low Energy (BLE) interacting with beacons waking the app up to present the appropriate form of ticket for the time and place. And, or course, NFC devices with the Host Card Emulation (HCE) API allowing them to escape the tyranny of the Secure Element (SE) and Trusted Service Managers (TSMs).

You’ll not be surprised to hear that we are still tracking the technology of person identification via body odour. I look forward to being sniffed by a transit gate before being allowed onto the train platform in the near future.

Managing the join

Since 2008 we have been working with Transport for London to allow contactless payment cards (CPCs) to be accepted wherever Oyster cards are accepted. This was first achieved in December 2012 on buses (which are flat fare in London) using a retail payment model. The next step was to introduce a distance-based payment model to allow all the other transport modes to be included which have zoned fares. This was launched in September 2014.

All the convenience of Oyster (such as not having to queue to buy tickets and fares capping so that you do not need to understand the fares structure) but using a card already in your pocket. Whether you are local or just visiting. But this is for London only. And the solution is based on a risk model that knows the maximum charge for a single journey is not very much. The delivery of such a solution relies on the intelligence migrating from the card to the back office. TfL’s back office to allow acceptance of CPCs for transit is complex and took several years to build.

In early 2012 the TfL payment and security models for contactless payment card acceptance in London where pretty much complete and the rest was ‘mere implementation’. TfL asked us to help them consider how it might work if they offered their back office as a service to transport operators outside of London. These might be in the UK, or potentially anywhere in the world (though different payment model are likely to apply outside of the UK). We discussed at length the notion of using your ‘card as a token’, be it a payment card, Oyster, ITSO or, potentially, other secure contactless tokens. Eventually, the ideas were parked to allow TfL to focus on delivery of the system for London in conditions of extreme austerity.

Meanwhile, we were hired by the SEFT (South East Flexible Ticketing) programme to specify the rail validators that could accept ITSO as well as contactless payment cards. At the time, Transport for Greater Manchester was just starting to procure such a back office for their region. We pointed out to SEFT that this CPC back-office-for-tranist stuff is complex and not standardised. It was therefore decided to not include any interfaces to the payment card back office at that time and the SEFT validator specification was ‘mothballed’ for the time being.

Spare a thought for the traveller buying long-distance rail tickets that include travel within the London area. London supports Oyster and CPCs (and a few specific train operator ITSO products, but not many at this point in time). Some train operating companies are implementing 2-D barcode, and some are trying ITSO. But the only technology commonly read across the UK currently and for the foreseeable future is the cardboard ticket with magnetic stripe. Basically, any ticketing innovation is scuppered at the boundary between London and the rest of the UK. This problem is what our friends at Trainline call ‘managing the join’.

Hopes for contactless payment being accepted for transit outside of London were recently dashed with the announcement that Transport for Greater Manchester has sacked their back office supplier. And anyway, it has been speculated that CPCs only work within London because London is a special case and it could not work anywhere else because the operators will not co-operate and/or the fares are too high for the risk model to work.

Enter the cavalry in the form of the UK Cards Association. They are leading a project with the Department for Transport and others (including representing train and bus operators) to develop a contactless transit framework for the UK by the end of 2015. The project to date has identified three contactless transit models:

  • Standard retail model for transit: pay as you go model with a known fare, for buses and trams (like TfL bus retail model).
  • Contactless for transit model: pay as you go model where the fare is aggregated at the end of the day or journey leg, for multi-mode operators (like TfL distance-based model).
  • Card as Authority to Travel (CAATT) model: pre-purchase model.

This last model could be just what we need for ‘card as a token’ or ‘managing the join’ as we have called it. The idea is the customer:

  1. Purchases their ticket online and associates it with their CPC.
  2. Can view their purchase on their statement.
  3. Uses their CPC as their ticket on a train.

Watch this space …

Secure-enough transit mobile ticketing

ITSO with HCE app and Handy

This year, I’ve been mostly working on ITSO ticketing in NFC mobiles devices with HCE and without secure elements. ITSO is the e-ticketing specification supported by the Department for Transport in the UK.

So far, high level design, risk analysis and proof of concept have been carried out by our team. Suitable controls are being developed. We are heading towards a trial this year on live schemes. More details to follow in next few weeks. But for now, see page 10 of the latest ITSO News.


You can take a gift horse to water, but you can’t make it fill out an HMRC declaration

[Dave Birch] Consult Hyperion has been providing some pro-bono consultancy support to Comic Relief. For those of you who do not live in the UK, let me just say that comic relief is one of the most important and recognised charitable organisations in the country. Their 2013 “red nose Day” campaign raced almost £100 million for a variety of good causes. As part of our work for them, we helped organise a technology forum meeting between Intellect, the U.K.’s technology industry trade body, and the Payments Council around the specific topic of charitable giving and, in particular, the issue of gift aid. I just need to explain why before I talk about the event.

Charitable giving and the issue of “third sector” payments probably doesn’t get the attention it deserves from the financial services side. Charities have particular and in some cases unusual requirements around payments but most of them share a desire to make the process of giving frictionless and painless. For that reason, Comic Relief and other charities are very interested in a variety of emerging payments options out there and especially interested in the opportunities around the mobile. But there’s a particular issue around charitable giving in the UK because of the thing called “gift aid”. When UK taxpayers donate to charity, the charity can claim tax relief at the basic rate. So if I give a pound to charity the charity will actually get £1.20 provided that they can show to the tax authorities that I am indeed a UK taxpayer and that I paid more than 20p in tax last year.

It occurred to me, and other people too, that if some of the new payment systems under design right now could be “nudged” to deal with this particular requirement of the charity sector, including gift aid in their design somehow, then we (i.e., the payments industry) would have a genuine win-win to be proud of. For a relatively small cost we could generate a lot of additional money for charities. The Payments Council have been extremely supportive of this idea and I hope I won’t embarrass Miles Cheetham by singling him out as having done a terrific job in talking to the stakeholders — including Unicef, Verizon and Her Majesty’s Revenue and Customs (HMRC) — to open up the conversations. There has been real and significant progress at that level. Example: the HMRC “proposal 4” on digital platforms would allow for organisations to remember gift aid declarations. Therefore one might imagine Braintree style back-end payments integration which matched the proffered identity and the device to attributes on file to bundle the donation, the declaration and the personal details in an appropriate form (i.e. in a usable open data format for customers so that they can generate one simple report to fill out tax return at the end of the year and as PDFs on a CD for posting to the HMRC).

So to the technology forum. After an initial talk by Amanda Horton-Mastin, the Innovation Director at Comic Relief, we broke up into smaller groups to discuss the problem from different directions and come up with some ideas and we then reassembled to share the ideas in the traditional fashion.

My preferred solution would be to either add gift aid eligibility as an attribute to a financial services identity (but since no one is listening to my idea about a “money name” I think we will call that Plan B) or to create some sort of “charity name”. So just as my twitter name is at @dgwbirch and my Facebook name is [redacted] and my PayPal name is, so why couldn’t I create a charity name, say “»dgwbirch” and use that? We discussed a number of ideas around creating an infrastructural solution to support the immediate requirements of the M S (the (mobile front end to the Faster Payments Service), under development by Vocalink and PayForIt, the cross-industry direct-to-bill solution, but obviously any solution that we came up with would have to be available to other payment solutions. I should note that we had representatives from the “new” payments world (e.g., Paddle) as well as representatives from the mainstream at the meeting.

My take on all this is that it is an identity problem, not a payments problem. Therefore the right place to look for a solution is in the emerging identity sector and I rather bullied our group into agreeing that we should talk to the Governments approved identity providers (there are eight of them in the current IDA framework) to see if they might be able to provide a federated ID solution so that eligibility for gift aid could be determined automatically as part of the payment process. The idea of course is to stop requiring customers having to fill out gift aid declarations which in many cases they either don’t do or can’t do. A couple of the identity providers attended the meeting (Experian and PayPal) and I’m looking forward to seeing their feedback on some of the ideas that were raised.

Without stepping into more controversial territory, but in the interests of public understanding, I should flag up that the Payment Council’s previous attempt to build a bridge between the payments world and the identity world (what was then known as Project Gaia) didn’t get terribly far and so I think I sense a natural reluctance to want to dip a toe in that particular water again, but chatting to one or two people after the meeting I got the feeling that the time might be right to start work on the foundations of a new bridge. Identity has become such a problem (identity fraud is half of all fraud in the UK at the moment) that the need for a co-ordinated payments industry roadmap is now pressing.

I was very pleased to see that Miles had put up the suggestion of coordinating a discussion with the identity providers as one of the proposed next steps I have to say that I strongly support this idea and I hope to support to forthcoming discussions in a useful way. 

This is a terrific opportunity for the UK payments industry to do something really good with little effort and marginal cost. Many thanks to Intellect and the Payments Council and the payments organisations that came along for contributing to a worthwhile and productive set of discussions.

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

Even if we could police some kinds of spending, we shouldn’t

[Dave Birch] A couple of the projects that we are involved in at the moment are at the intersection of financial and social inclusion, which is a topic that interests me greatly. One of the aspects of the technological changes afoot at the boundary (between financial inclusion and the beneficial social infusion that it facilitates that deserves more discussion) is that of control. Where should we set the “dial”? Remember this?

Birmingham council, which represents around 1 million people, said that from 1 April Monday it would give out crisis welfare payments in the form of prepaid cards that could be redeemed only in Asda supermarkets. The Labour authority said the cards – which Asda said were similar to their gift cards – would restrict spending to a list of predetermined goods, which would exclude tobacco, alcohol, phone-related expenditure and fuel.

[From Asda welfare cards to be given to Birmingham’s poor | Society | The Guardian]

You see the dynamics around this. If I were Asda, or any other retailer, I would be happy to cut a deal like this. I don’t want to deal with cash, and I don’t want to pay merchant services charges to banks, so running my own payment card suits me just fine. And better still, cutting a deal with a state agency to drive welfare recipients in through my door with money to spend is a win-win. This subject of control did come up a couple of times at the Tomorrow’s Transactions Forum this year because we had an excellent presentation from Claudia Wood, the deputy director of think-tank DEMOS. Claudia was discussing her excellent report for DEMOS on the use of prepaid cards in public services.

A particularly important thread in the report is the once concerning this issue of monitoring and control of card spending. The authors note that there might be benefits to using prepaid cards to deliver financial services to vulnerable groups and that we should begin a debate on balancing the complexities and ethics of safeguarding spending balanced against “nanny state” interference.

[From Prepaid and social payments make a genuine win-win]

Round about the same time that Claudia’s report was published, the Conservative MP for Elmet and Rothwell (no, I don’t know where that is either) had proposed a “ten-minute rule” bill in Parliament under which UK welfare claimants would be issued with a card instead of receiving their benefits in cash.

Benefits claimants should be banned from spending welfare handouts on alcohol and cigarettes, a Conservative MP has said. Alec Shelbrooke wants to prohibit benefits being spent on luxury items by introducing electronic cash cards which could only be used for essential items such as food and clothing. The cards would be similar to a chip and pin debit card but with a blocking function for non-essential items, the MP for Elmet and Rothwell told the House of Commons.

[From Tory MP calls for law change to prohibit state welfare being spent on non-essentials | Mail Online]

As I said at the time, you can’t do this with open-loop debit cards and basic bank accounts (“four-party schemes”) because the bank doesn’t know what you are buying. In the case of the Asda example, above, however, the retailer’s own three-party payment card has access to data that the four-party schemes do not: specifically, the “Level 3” POS data on what you’ve actually bought. So while Barclays could block my debit card by MCC and (potentially) by location based on Terminal IDs (TIDs), they can’t block by item. They can see that I’m shopping at Tesco not whether I’m buying own-brand value tea bags (which might be allowed under Mr. Shelbrooke’s stringent governance of benefit expenditure) or Duchy of Cornwall luxury leaf tea (which might be allowed under the wife of the Governor of the Bank of England’s stern governance of nature’s bounty). Even if it were possible, I’m not clear how the payment system would maintain and resolve these complex rules and interactions. Who would have precedence? The Health Czar might want people to buy gooseberries but the Benefits Czar might insist on blackberries and the Foreign Office might insist that Egyptian soft fruit is left to rot while Syrian soft fruit is pukka.


I am allowed Duchy of Cornwall luxury leaf tea because I am not on welfare benefits.

I’m not advocating this blocking even when it is feasible. Just because we can do something, as in so many walks of like, it does not mean that we should do something. As reactionary a bastion of the establishment as I am, I still think it’s a bad idea to attempt to police the spending of benefit recipients in this way. It may well pander to our sense of moral rectitude but it would be ineffective at best.

All it means is that benefit recipients will have to trade (inefficiently and at a discount) to get the booze, fags and weed. Given the entrepreneurial nature of the criminal underclass, a likely outcome would be the invention of an intermediate currency for the black economy (e.g., detergent bottles).

[From Welfare dependence]

What this story is about, to me, is not the restriction of welfare recipient’s spending but yet another confirmation of some of my long-held views about the future of retail payments being more about a multiplicity of retailers apps that can provide more functionality in-store and the related drivers for multiple three-party payment schemes. Having half a dozen different retailer cards (that you have to manually load in the case of pre-pay) in your wallet is a pain, but having half a dozen different retailer apps using bank APIs to auto-load as required is not. And better still a retailer app that makes a noise when your welfare arrives and helps you to budget your spending and plan meals and spread the cost of school clothing and .. and.. and for double loyalty points, I’m in.

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

Prepaid and social payments make a genuine win-win

[Dave Birch] I’ve been reading an excellent new publication from the think tank Demos. It’s called “The Power of Prepaid” by Claudia Wood and Jo Salter. In essence their well-researched and interesting report recommends that the UK government extend the use of prepaid cards at both central government and local government levels to deliver social benefits more efficiently and more effectively. I wholeheartedly agree.

The heart of their argument is that prepaid card-based systems deliver more information to all of the stakeholders than cash does. Both the cardholder and the organisation managing the cards are able to view balance information on past transactions online. Spending can be monitored in real-time online which is important safeguarding benefits. The data coming back from cards on what and where people spend could be shooting valuable in a range of fields, and was certainly help researchers to better understand the “poverty premium” and the limited access to retail financial services mugs low income families.

But most importantly, Amex finally finally finally frames prepaid for what it should be, a checking account replacement, instead of a glorified gift-card.

[From Bluebird vs Greendot. Prepaid wins. – Forbes]

I couldn’t agree more. Prepaid cards have moved on a lot in recent years. Technology means that they can be given standing order and direct debit-like layers forming a sort of “bank account lite”. But we need still more functionality. There are a particular set of problems to do with subsidiary, companion and delegated cards which need to be addressed to overcome real problems in services for excluded groups. Quite often temporary fixes are found by adding companion cards (for carers, or dependents for example) but I think more generalised solutions, which would have to be connected in some way with some form of identity infrastructure, are what is really needed.

But back to the report. There’s no need for me to repeat all of the findings, as sure you want to read them for yourself, but I do want to highlight one or two things from the report, which makes some very sensible and reasoned recommendations that I suspect more than one of our clients will be able to respond to with new prepaid products and associated services.

The starting point for the report is that, excluding savings accounts which are not transactional in the sense that you cannot link them to a debit or credit card or pay benefits into them, the number of people without a current or basic account stands at more than 2.5 million in the UK today. (This excludes people who have bank account but for whom prepaid might be a better alternative). Therefore, the report recommends that the government address the problem of the unbanked by adopting fully functional chip and PIN prepaid cards. These cards can then be used for welfare and benefit payments of all kinds, and not only for the unbanked. The report says that the public sector should avoid the temptation to use simpler and less functional alternatives. They note that less functional cards keep the unbanked in a cash-based economy and that maintaining cash-based withdrawal systems using “one-dimensional” cards, the unbanked will not be to make the savings associated with shopping online, or pay bills direct debits, and so have a limited impact encouraging claimants into mainstream financial habits.

The authors say that people who were already using a prepaid card for social care direct payments spoke very positively about them when interviewed and they give a number of detailed case studies of existing schemes that I found very useful. I particularly liked the case of the Utah State card, delivered by JP Morgan Chase, which holds up to five separate pots of money on one card. This “jam jarring” of funds is a critical kind of functionality needed for the systems and not found in current implementations. When I interviewed Claudia for the podcast in our Tomorrow’s Transaction series I didn’t want to be a bore her with nerd interjections about this, but from reading the report I wasn’t sure if the authors were aware that it’s part of the EMV specification to allow multiple payment applications on the same card. The terminals have to implement this functionality there is no reason why a single card couldn’t be issued with say three or four payment applications on board each one storing a different pot of money. Thus, when the benefit recipient presents the card at a point-of-sale (POS) terminal they would be asked to select between different pots. As is discussed later in the report this will make it possible to have some pots restricted by merchant category code (MCC), or by time, or by terminal ID, or by velocity, or by maximum amount or whatever, and have other parts that are unrestricted. As an aside, one of the other learnings from the systems already in place was that councils experienced a high frequency of lost cards and/or lost PINs.

A particularly important thread in the report is the once concerning this issue of monitoring and control of card spending. The authors note that there might be benefits to using prepaid cards to deliver financial services to vulnerable groups and that we should begin a debate on balancing the complexities and ethics of safeguarding spending balanced against “nanny state” interference. (It was interesting to note the focus group participants tended to support the idea of other people having their benefits monitored, but not themselves.) Restrictions in the USA, like in the UK, are currently implemented by some blocking specific MCCs which identify types of shops. Since the card companies have no access to the level III POS data, nor would the retailers want them to, I don’t really see MCC blocking as a viable way forward, and as I’ve written before I’m sure it would have negative consequences as “legitimate goods” were traded away a discount for “illegitimate goods”.

I found some of their ideas about managing and restricting spending pots for rent purposes quite interesting — I would prefer a more radical solution, making it illegal to pay rents in cash at all — but there you go. Incidentally, and I don’t want to touch on politics of UK welfare payments, which are not the subject of this post, but the authors note in passing that when they interviewed people about the new universal credit shift to paying housing benefit to recipients rather than landlords, not a single person interviewed could see the benefit of doing so. Yet one of the reasons why the report is so timely is that the UK is about to undergo this transformation in the way that welfare benefits are paid.

The welfare system in the UK is switching to a new “universal credit” system where all benefits will be unified and paid monthly in arrears.

claimants will receive just one monthly payment, paid into a bank account in the same way as a monthly salary
[From Universal Credit – DWP]

If you’re wondering why our clients care about this, it’s because it represents a money flow of around £2 billion per month that is up for grabs.

[From Who wants low-cost bank accounts?]

They authors also recommend that the government create a targeted savings encouragement scheme. Our experiences down in Kenya would seem to support this conclusion. Simple savings products offered to the unbanked have tremendous social benefits, but that’s a subject for another post sometime.

Finally, I want to highlight that when the authors were talking about their areas for concern, the areas where the existing prepaid card infrastructure would ideally need to be improved to provide better solutions to the specific problems, I couldn’t help thinking that they were describing a kind of “Holvi for social care”: that is, a white-label payment institution that provides very specific and targeted functionality. Just as Holvi provides group accounts and the functionality that goes with them, you could imagine a similar system providing care accounts and the functionality that goes with them. I would have thought this might be a very fruitful area of investigation for the government and other stakeholder groups.

I thought the report’s conclusions and recommendations were excellent and make complete sense and I would only add additional recommendations around the use of communication channels — specifically mobile phones and digital television — to deliver budgeting and value-added management services around the prepaid cards. I think this is where we really could use new technology to make a difference. A prepaid account managed by mobile phone has greater utility and is far more powerful than a prepaid account managed just through a card.

Demos recommends that the government reviews its financial inclusion and digital inclusion activities and creates greater synergies between the two. I was very happy to read this, because we have been of a similar mind for some time. One or two of the projects that Consult Hyperion has been working on, including the current Technology Strategy Board project on using mobile and digital television to deliver financial services to socially excluded groups, have indicated precisely the same.

All in all, an excellent report and props to MasterCard for sponsoring it. In fact I was so interested in all of this that I have invited Claudia along to our Tomorrow’s Transactions Forum in March where she will present alongside the Department of Work and Pensions (DWP) in a session designed to explore some of these issues in more detail. This is precisely the kind of area where some innovative use of new technology a little bit of out-of-the-box thinking about new services can intersect to bring about radical improvement, forming a genuine win-win for the government, the payments industry, taxpayers and benefit recipients.

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

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