A way to embrace “over the counter” mobile money transactions

As one of the pioneers of mobile money (cutting my teeth on the initial service proposition and business model for M-PESA, way back in 2004, three years before commercial launch), I’m always naturally inclined to see its potential in a positive light. But I’m starting to wonder if maybe we need to give it a bit of a nudge – realign it, if you will.
One of the more interesting phenomena we’ve seen in recent years is the rise of Over The Counter (OTC) transactions – those transactions carried out by agents on a customer’s behalf, in many cases without any link to the real people relating to a transaction. We’ve seen cases where agents maintain four or five mobile money accounts, on different phones, so that they can spread their customers’ transactions across accounts and so avoid transaction limits.
The reasons for OTC can be various, but certainly include illiteracy, lack of appropriate language support on mobile handsets, and – fairly commonly – liability (after all, if things are going to go wrong, you want someone else to blame, don’t you?). But the obvious potential for money laundering means that this situation can be a financial regulator’s nightmare.
Of course, it doesn’t have to be this way, and there are examples of it being done properly, with even in some cases biometric authentication of all parties to an OTC transaction. Worldwide, however, this is rare.
But I digress. What I really wanted to talk about was the somewhat self-congratulatory attitude we in the industry are all guilty of at some time – after all, an industry that has grown from nothing to something more than 270 services in over 90 countries in only fifteen years is undeniably impressive. But I do wonder if we’re all kidding ourselves sometimes. I mean, sure, for the middle classes, and for many of the employed poor, it has been an amazing opportunity, and has transformed access to financial services. But there are gaps – possibly some big gaps.
As an example, I’d like to relate a recent experience. First, you have to understand that I believe you can’t develop anything new without spending time with the people who are going to be using it; so I like to go out to the field, and see what people are actually doing, not what the research tells me. Just sit and watch, and ask the occasional question. It can be very educational.
So we were working with this mobile money operator (MMO), who has a deal with an MFI for the delivery of MFI services through MM. On paper, it all looks very good, plenty of transactions, lots of people receiving loans and making repayments, all through MM. I was very keen to go to a group meeting and find out what the customers thought, how they used it, what else they did – the usual.
We turned up at the meeting, and the first thing that was happening was training from the field officer. Great. But there was a surprise in store; the training included the following advice about security: “Always keep your PIN secret. Never tell anybody. EXCEPT the Agent – you should whisper it quietly into his ear” – uh oh. The alarm bells started to ring.
And then the Agent turned up. At this point the field officer started to gather repayments, in the traditional way for group lending – laboriously entering everyone’s name into a list, checking that they have the cash to make the repayment, noting down the repayment amount, all at a glacial pace (now this is one area where investment in IT could make an immediate impact) – and then the mobile money part started. Each person making a repayment took their phone and their cash, one by one, to the Agent – who took their phone, ‘deposited’ the cash for them, then forwarded the repayment to the MFI.
There were also three loan disbursements that day, and the process was much the same: hand your phone to the Agent, whisper your PIN to him, walk away with a wad of cash.
All of these people at the group meeting are in the MMO’s books as active mobile money subscribers. So I have to ask: in what way are these people mobile money subscribers? How is this empowerment? All that I can see is that the MFI has outsourced their cash management problems to the Agent, who walks the streets with a bag full of cash. Glad that’s not me.
So there are clearly a large number of people, down towards the bottom of the pyramid, for whom the step from a pure cash environment to being asked to use a mobile money wallet or account to manage their finances is just too big. Expecting people who’ve never had a bank account to make the conceptual leap from paper cash to mobile finance in one step is asking too much. Without help many of them will never do it.
Maybe the way forward is to make the steps a little more manageable. Introduce an intermediate step. And I think the way to do that is to embrace OTC, but to do it in a way that formalises it and addresses the concerns of the regulatory authorities: give this section of customers a card, which identifies their account. Maybe secure it with biometrics, if you want. Let them visit an agent, and get the agent to do the transactions for them, but now with all transactions linked to the card/the account. Link it to their mobile phone, so that the more adventurous can see their balance via the MM service. Make sure they’re comfortable with this, and make sure there’s a migration path that leads to the full MM service over time.
After all, this is the long term migration path we’ve seen in Europe over the course of decades; the move from cash, to bank accounts, to debit and credit cards, to Internet banking and mobile payments has happened, of course; but with each step taking years or even decades. Expecting people immersed in a world of cash to make the leap in a matter of days or weeks is just unrealistic. Why should they be any different?

Footnote: Yes, the author is well aware of Safaricom’s moves to issue a companion card for the use of M-PESA for retail transactions. That’s somewhat different to the case described here, though in itself interesting.

Inclusion, identity and privacy

Financial inclusion is necessarily built on a foundation of customer identity, but the rush to inclusion and the consequent focus on mass registration in many countries has placed at risk the citizens’ rights to privacy – even where these are recognised in law.  But the mere fact of being excluded should never mean that someones right to privacy is in any way diminished.

With support from Omidyar Network, Consult Hyperion has undertaken a global review of the privacy and data protection aspects of digital identity services, with particular reference to their relevance for financial inclusion. We have reviewed the various digital identity initiatives around the world from a privacy perspective. Building on this framework, we have developed a ‘roadmap’ for digital identity that ensures that privacy, and the needs of regulatory authorities, can be built into digital identity services, ensuring the drive towards financial inclusion can be at its most effective. We hope that this roadmap will be a useful contribution to the industry as it considers how best to deliver digital identity to those most in need.

The key elements of this roadmap are as follows.

Put the individual at the centre of privacy protection

This does not only mean giving individuals control over how their personal data is used; it needs to be reflected in the entire approach to the digital identity system. In order to avoid low levels of take-up and use, it is essential that the emphasis be placed on user needs, rather than vendor-driven use cases or so-called “gold standard” solutions.

Provide an effective legal environment

An effective legal environment must be in place that contains, and can enforce, legal remedies to prevent or punish abuses of personal data.  An effective legal environment will also increase confidence that any contractual measures put in place as part of the trust framework to ensure privacy can be enforced.

Design in privacy from the start

There is widespread recognition that privacy should be designed into any system from the start rather than bolted on as an afterthought.  Privacy–by–design requires a careful understanding of the expected goals of the identity system, an appreciation of the distinctive characteristics of the context of use and an awareness of the technological capabilities and privacy risks associated with proposed next generation digital identity systems.

Separate identification from authentication and authorisation

Many existing identity systems combine identification and authentication activities within the scope of the identity provider. Separating out identification from authentication allows for the relatively rapid roll out of basic digital identity credentials, perhaps issued to all but based on low assurance identity data. The quality of the digital identity can be enhanced over time, in part simply through a history of ownership and use or by incorporating additional data points.

Furthermore, if the basic digital identity credentials only show that the citizen is unique and identifiable and not include other data attributes by default, this will allow future developments to minimise disclosure of data. Today identity systems often include a default data set that is always shared, even when it is not necessary for the service being accessed.

Improve authentication then identification

In an ideal world, it would be desirable to move directly to high quality identification and high quality authentication.  In practice, however, the time and effort to improve the quality of these aspects of digital identity are different.  In general, improvements to authentication quality are likely to be quicker to achieve than improvements in identification quality.

Provide a viable commercial model that disincentivises abuse of personal data

Whilst the monolithic identity providers like Facebook and Google offer easy to use digital identity credentials, their business models could run counter to consumer privacy as key revenue streams come from sharing individual and aggregate customer data. Whilst it is possible to constrain such actions contractually and technologically, long term the commercial model must be designed so that incentives to protect privacy are aligned.

Consider who will pay for the identity system

If identity credentials are to become a key infrastructure for a society, then important questions of how they are to be paid for arise.  There are different models of charging for infrastructure provision that can be drawn upon, but choosing the right payment model can be problematic whether the identity provider is a government agency or a commercial body.

Address questions of liability

Service providers should not be held liable for actions based on properly authenticated identity claims. What then of the liability of the identity providers?  Here the complexity of the liability model grows as benefits and risks are shared unequally.  In extremis, the identity provider privatises the some of the benefits (e.g. payments for authentications) but socialises the risks (e.g. complete failure of trust in the identity system as a whole).

Review the role of compulsion

For countries introducing new identity credentials, questions of consent and compulsion become particularly significant from a market and rights perspective.  They may cause significant disruption to the roll out of system.  In such cases it is frequently stated that the new identity system is voluntary, not compulsory and that individuals can always choose not to have an identity credential. In this case, as the critical mass of credential holders develops, effective compulsion can arise. However, evidence from Europe suggests that the various electronic identity cards are used infrequently because most people have infrequent access to public services and those that do have more frequent access rarely need to formally identify themselves each time.

All of the underlying issues, and the elements of the proposed roadmap, are explored in detail in the report available here. It’s very detailed piece of work, so you might want to being with the Executive Summary that is available here. We are genuinely curious about your views and look forward to all feedback.

Beacons in Transit

You’ve probable heard about Bluetooth Low Energy (BLE) Beacons being used to help the visually impared navigate on their own around public transport systems. This has been trialled in Bucharest on buses and in London Underground. These are examples of relevant information being pushed to users’ smart phones based upon their location. Other similar use cases might include telling passengers when they are approaching the stop at which they plan to get off, or telling them that their selected vehicle is about to arrive.

The use case I am more interested in is the one that allows passengers to travel without paying upfront and be charged afterward based on the journey that they took. We implemented this with TfL in London using contactless bank cards and it has become known as ‘Aggregated Pay As You Go’. This works well, but relies upon the passenger rembering to ‘tap in’ and ‘tap out’ to mark the end point of each leg of the journey in order that the back office can calculate the journey taken. Appropriate charges are made to the passenger’s bank card account at the end of the day.

Beacons could be used in implementations for this use case. Such a beacons trial is to be carried out in 2017 in West Yorkshire as part of the Transport for the North’s Integrated and Smart Travel (I&ST) programme.

The aim is to automatically determine the bus journey taken by the passenger and charge on a PAYG basis. Therefore, we need to know accurately where the passenger gets on and off the bus. This information will be determined by a smart phone app by interacting with beacons and sent to the back office where the charge is calculated and payment taken.

The trial, commissioned by West Yorkshire Combined Authority (WYCA), will be used to determine:

  • whether the passenger experience is favourable;
  • whether BLE technology can deliver sufficient location accuracy; and
  • how the journey timestamp and location information sent to the back office in such a way that can be trusted and not open to fraud.

Identity and inclusion, an ongoing case study

America is a strange country to foreigner such as myself. And one thing that is particularly strange about it is the constant demand for identification in a society that lacks an identity infrastructure. The most obvious manifestation of this, as I’ve written before, is that when I am asked for identification (in order to get into a building in America, for example) I can present documents that the security guard cannot conceivably verify or validate (e.g., my UK driving licence) or documents that are not identity documents at all (e.g., my expired building pass for our office in New York) and gain entry. This is, as is often remarked, security theatre not security. It’s like a play about security where we all say our lines and play our parts but there’s no actual security involved at all. When it comes to identity, there’s definitely something odd about America.

Buying an assault rifle is easy. You need not show formal identification… Opening even the most basic bank account is far more arduous. The process begins with a rigorous ID check…

From It’s easier to buy an assault weapon than open a bank account. Really. – The Washington Post

Now, I don’t want to get into the madness of KYC/AML here as that’s not the point I want to make, although I will flag up the fact that America has something in the region of a hundred million unbanked people. The point I’m making here is that I don’t understand why we can’t implement a universal risk-based approach for “small” accounts in order to get people into the financial system (not necessarily through a bank account, of course). In Europe, we have a very interesting case study unfolding in front of us right now.

When Anas Albasha arrived in Germany after fleeing Syria in late 2014, one of the first things he tried to do was open a bank account. “In Germany you need a bank account for everything,” he says.

From Without German bank accounts, refugees are stuck in limbo – FT.com

Indeed. Rich Germans and people smugglers might well keep their cash in 500 euro notes, but poorer law-abiding Germans use debit cards and direct debits. If you don’t have an account, you have no access to the infrastructure of daily life. And, in my opinion, if you keep everyone out because one or two of them might be terrorists, then you don’t get to track, trace and monitor the terrorists anyway. Hence the German plan to give refugees a sort of provisional identity so that they can enter the financial system makes complete sense.

But it has been a struggle to persuade banks, which have to verify their customers’ identities, to open accounts for refugees. The heart of the problem is documentation. “Many refugees arrive in Germany without a passport or ID card; that’s just the way it is after the journeys they have been through,” says Katharina Stamm, an expert on migration law at the charity Diakonie.

From Without German bank accounts, refugees are stuck in limbo – FT.com

In September 2015, the Federal Financial Supervisory Authority (“BaFin”) relaxed the KYC requirements for refugees so that they could gain access to formal financial services.

With immediate effect and for a transition period, refugees will be able to open a basic account even if they cannot produce a document satisfying the passport and ID requirements in Germany.

From BaFin – News – BaFin makes opening bank accounts easier for refugees

Later last year, in October, the German government went further and passed a law requiring banks to offer these basic bank accounts to refugees. Unfortunately, and despite that law coming into effect in June of this year, “

Germany’s anti money laundering law still contains a clause that effectively requires a passport or ID card to open an account.

From Without German bank accounts, refugees are stuck in limbo – FT.com

Incidentally, we have the same problem here in the UK because the only ID document that refugees have is the Biometric Residence Permit (BRP) and many bank staff refuse to accept this as an ID document for opening an account. As the British Banking Association point out, “banks have to undertake thorough checks before opening accounts in order to comply with strict anti-money laundering rules”. Once again, as in Germany, it is AML rules trumping KYC rules. And I don’t want to point the finger as to the origin of the problematic AML rules, but the Centre for Financial Inclusion do note that it might be better for society to have people inside a system where they can be monitored and risk managed. 

Lower [KYC] requirements also means that governments concerned with international security (particularly the U.S.) must determine how they will mitigate the risk of new financial services innovations.

From Financial Inclusion and Immigration in Europe – Disrupting Identity Norms | Center for Financial Inclusion blog

I’m writing about this because I’m in Ivory Coast for the International Finance Corporation (IFC) and MasterCard Foundation conference on “Partnership for Financial Inclusion”. I was here to keynote about risk management for digital financial services (and how “fintech” and “regtech” can help) but I’ll definitely be hoping to learn more about the relationship between identity and inclusion from the experts here. 

IFCMCF2016 Q&A

I’ve already had a couple of pretty interesting discussions about the idea of building “bottom up” (i.e., attribute-driven) identity to help with inclusion and the relationship between such identities and those KYC/AML issues discussed above. I’m genuinely curious to know what you all think about this stuff – please get in touch – and how some of this thinking might connect with initiatives such as Identity 2020.

Financial inclusion and the power of little things (and no Blockchain!)

I went along to my first NYPAY event in New York this week, called “Innovate or Abandon: The Business of US Financial Inclusion”. This was the first time that I had been to an event organised by our good friends at NYPAY and it was very enjoyable.

According to the CFSI (Center for Financial Services Innovation), research shows there are 68 million un-banked and under-banked people in the US. The panel discussion formed around the financial problems of these people, the importance of certain financial products and failures of the industry incumbents to deliver these services to low-income parts of population.

I was waiting for someone to shout out “Blockchain” at a random point in time, but no one did! Even the “marketplace lending” discussion (formerly known as peer-to-peer lending), brought up by one of the guests, was rapidly exhausted and put aside for “the better times” – regulatory uncertainty makes business cases around these topics quite elusive. And NYPAY event was very much oriented toward practical business model discussions.

Talking about the importance of the key financial attributes, Vinay Patel, CEO and Co-Founder of Bee Financial (One Financial Holdings), hilariously pointed out that the expected lifetime of a joint checking (current) account of a married couple is probably longer than the expected lifetime of their marriage.

This could easily be true. Checking (current) account is a very “sticky” financial product due to the cumbersome on-boarding process, credit score building models surrounding it, loyalty programs and simple habit. However, this product is not available for some parts of population; as is credit. Ability to take credit was seen as a crucial, even key to better financial inclusion by the vast majority of the NYPAY event attendees. But whichever financial product is in question, there is one important observation made by Celia Edwards-Karam, MVP Consumer Deposits from Capital One:

“Payment fees are not the problem – it’s the surprise!”

– Celia Edwards-Karam, MVP Consumer Deposits from Capital One

The surprise charges make a huge difference for low-income, less financially educated, people. This is why understandable fees, even if they are higher, are preferred and more trusted. (Professor Lisa Servon of The New School has detailed research on this and you can hear here talk about it in our podcast with her in 2013).

New business models and new institutional forms are emerging to address this and many other problems of the un-banked and under-banked. For example, Vinay Patel, CEO and Co-founder of Bee Financial, says that during thousands of interviews with potential and existing customers, the start-up team realised that it is crucial to ease up the registration process and on-board people in a way that encourages certain financial behaviour in the future. He shared this insight from the start-up’s research:

“One of the reason low-income people don’t put mobile apps on their phones is because their phones are full of stuff… Good phones, like iPhones and Galaxies come blank. [Bad] phones like $40 Samsungs are pre-loaded with lots of native apps… People are trying to download new stuff – it doesn’t download. So one of the things we’ve learned is that one thing you do for a customer is you check if they have native apps on their phones, look at the apps they never use and delete for them.”

– Vinay Patel, CEO and Co-founder of Bee Financial

A crucial takeaway for me from the event was that income level is just one factor that influences “financial health” of a person. According to CFSI research, there are two important aspects to person’s financial behaviour that also contribute to his or her financial health: to plan ahead and to save regularly.

All of the comments made by the panel supported the idea that little but targeted changes in provision of financial services could lead to drastic changes in financial behavior of customers and therefore can make a big difference for the country’s overall financial health.

A very useful event: many thanks to everyone at NYPAY for putting it together.

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 …

 

Our live five for 2016

Well, however superficial they might be, there’s no doubting the popularity of the end of year roundup and predictions for the coming year. We don’t argue with the box office down at CHYP End, so here we go with our now-traditional “live five” transaction technology trends for 2016. But, first of all, I think we need to take a look at how we did with our live five for 2015 before you can decide whether to pay any attention at all to this live five! Let’s see how we did!

  1. In-App Payments. This was a good shout. The discussions around payments becoming invisible and vanishing into apps are now common currency and the trend toward retailers wanting to shift payments inside their app so that they can deliver the best service to customers was well established before Walmart Pay came on the scene.

    Target is reportedly developing a mobile wallet that customers can use to pay for goods with their smartphones, according to three unnamed sources who spoke to Reuters… also confirmed that Kohl’s plans to release a payment service called Kohl’s Pay in the fall of 2016 that would be part of the retailer’s existing app.

    [From Target thinks it has enough customer trust to get into the mobile wallet game – Quartz]

    It seems natural to me that retailers will take advantage of mobile technology to get closer to customers and there are plenty of opportunities to provide services into their apps. Just recently, McKinsey called in-app “the new battleground” for shopping (McKinsey on Payments, October 2015) and noted that what they called “repetitive interaction” (what we call “relationship” in the Consult Hyperion “3Rs” model) is way to generate more value for customers.

  2. The Three Party Party. I think we scored a bullseye here, with ChasePay the surprise announcement of Money2020. We knew nothing about the ChasePay plans when we predicted big moves away from the traditional four-party model in retail payments, we based the prediction on work that had been underway for some other clients, particularly in the field of mobile options for domestic schemes.

    Gordon Smith, CEO of Consumer & Community Banking at JPMC Chase Cards, introduced Chase Pay as a mobile payments solution that provides a “true omnichannel” payments experience – in-store, in-app and online purchases – and built the case for why he believes Chase Pay will be a formidable force in payments… Chase Pay will not support NFC.

    [From Chase Pay Mobile Wallet Launches — With MCX As A Partner]

    In a world of mobile phones there just isn’t the same pressure for global solutions as there has been in the past and if you look around the world you can see a clear resurgence in bank-centric three-party schemes: Russia, Turkey, India and so on.

  3. Privacy as a Proposition. This didn’t develop as we’d expected, despite the increased pressure because of massive, continuous and damaging data breaches throughout the year. I’m not entirely sure why (e.g.) banks didn’t develop more privacy-centric propositions — a good example being tokens for adult services — but I suppose they have decided that there are other more strategically important parts of the identity business to focus on.
  4. Blockchain. Wow, Another bullseye. It was definitely the year of the replicated distributed shared ledger formerly known as the blockchain, although I must agree with this commentator on the Innotribe conference that it is not wholly clear to many people exactly why:

    In front of a large group of finance professionals, “blockchain experts” and audience alike agreed that blockchains were the wave of the future – despite a complete lack of consensus on what a blockchain is. Or even why one is needed.

    [From Why Big Banks Got Blockchains Wrong in 2015 – CoinDesk]

    We are a small company, and statistically insignificant in the great sea of IT spending. But the nature of our work makes us a useful weathervane for clients and I can tell you that we have had way more blockchain-specific consulting work this year than even a reckless hypemerchant like me would have predicted (and not only in financial services). Luckily for us, being early into this space allowed us time to develop a more general approach to thinking about shared ledgers from a business perspective that has worked well in helping our customers to evolve their positions.

  5. ID for the Internet of Things. I think we can claim that there is widespread recognition of the problem now and a first few steps towards a solution with the major chip platforms working to bring secure hardware (e.g., Intel’s Enhanced Privacy ID) to devices. Given some of the work that Consult Hyperion has been doing for clients in this area, I think I might go so far as to say that I finished the year more optimistic about the possibilities here although I still think we have a long, long way to go to make the thingternet as safe and productive space.

Having looked back, then, and established that our live five does indeed have some value for organisations looking to establish their strategic priorities, I’ve had a look at the projects that Consult Hyperion has been working on around the world and identified what I think are five key transaction technology trends for our clients in the coming year.

Deep Purple

Now, of course, I’m playing a game here. I don’t want to give away any of the really cool stuff that our teams are working on for clients in business, NGO and government sectors right now, but I do want to make predictions that I already sort-of know will come true because we are already working with the technologies so that I can look clever! So, with that in mind, here’s the new live five that you can expect to see organisations focus on in the coming year:

  1. Amazonisation. Now that everyone is agreed that APIs are the right away to deliver services into the marketplace, some organisations are going further and structuring themselves around APIs, helping not only external customers but internal functions to benefit from a more flexible and functional mechanism for co-operating. Now, in 2016 it will be PSD2 that will undoubtedly spur many of our clients to develop strategies for either providing or consuming bank APIs.

    Successful internet giants, like Salesforce, Amazon, Google, Twitter, and Facebook, have been active to offer APIs to third parties. Salesforce has earned more than half of its revenue through APIs, not from its own user interface. Twitter, Netflix, and Google handle billions of transactions through APIs daily. And we can say Amazon has been a pioneer with open APIs – the online retail giant already had an Amazon Store API back in the early 2000’s.

    [From APIs – the core of a new economy, really? : DisruptiveViews]

    It is really interesting to try and think what this kind of restructuring around APIs will be mean for financial services organisations, and I’m looking forward to working with our teams to find ideas for transforming their businesses.

  2. Mobile ID and Authentication. The focus for solving “identity problems” is shifting to the mobile device. Whether it is in payments, ticketing, inclusion or in straight identity applications, the mobile phone will be the mass market solution to the problems of recognition, relationships and reputation (those “3Rs” again). We have said repeatedly that a model based on strong authentication against a local revocable token held in tamper-resistant memory deliver the right platform. The announcement of Google’s scheme for replacing passwords with mobile phones is sure to be followed by a similar announcement of an “Apple Smart ID” or something similar, the mobile operator’s Mobile ID Connect service is being deployed and I’m sure that other schemes will be launched.
  3. EMV Next Generation. You might be thinking that it’s all quiet on the EMV front now that the US roll-out is under way, but some of our clients have started to develop their strategies and tactics around the EMV Next Generation specifications and I expect to see momentum grow throughout the year. There are, as far as I can see, three strands to strategy for them to consider: first is that we are reaching the limits of the cryptography currently employed and must look at replacing it long before it becomes a vulnerability in the marketplace, second is that there is pressure for value-added merchant propositions (e.g., coupons, loyalty and so on) within the standard and the third is that “legacy” EMV (which still hasn’t been fully rolled out in the US) will be with us for another fifteen years or so. For each organisation, looking at the drivers and blocks around each of these is central to its retail payment strategy.
  4. The Push for Push. In the UK, the faster payment service (FPS), is well established, has been fantastically successful and has enabled things on top of it already, like Pingit and Paym and so on, and there’s more to come. That is also happening in other countries have started to go down that route. The one great exception was always the US because the Federal Reserve has no regulatory mandate to make the banks there implement an instant payment system, and so we all thought it would be some time before instant payments appeared in the US. Actually, however, in the last couple of months there has been raft of announcements coming out of the US: The Clearing House (TCH) is working with VocaLink, Dwolla are experimenting with APIs, NACHA is moving to same day and so on. Even in the US instant payments will feature heavily across the next year and as they spread they will shift industry focus to push payments. As Tom Noyes said earlier this month,

    As I’ve stated before, no engineer would design a payment system to operate the way we do today (see Push Payments).

    [From Changing Economics of Payments – Noyes Payments Blog]

    I agree. There are good reasons for thinking that pull payments are a hack to get around the dumb payment networks of the past and, personally, I see push dominating in the long run.

  5. Transparency as the “win-win-win. Given the considerable confusion about what shared ledgers are, how they work and what the impact of different architectural choices on business models is, you might be forgiven for thinking that the technology will stall. But we think that there has been a focus on the wrong drivers. Blockchains are only one form of shared ledger and they aren’t automatically cheaper or even more efficient than (for example) databases. Shared ledgers do, however, have a couple of interesting characteristics that will reshape some markets. One of them is transparency and, in the short term, this can be the core of a win-win-win involving customers, institutions and regulators.

I’m naturally very curious what you all think about these choices so please do not be shy in the comments below! Along with our other consultants, I’ll be speaking on these themes at a number of events across the coming year and really look forward to discussing them with you.


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