Political, legal and regulatory - Consult Hyperion

Education policy

10th July 2007by Consult Hyperion1 Comment

[Dave Birch] As was discussed here absolutely ages ago, something has gone fundamentally wrong with the payment schemes efforts to cut card-not-present (CNP) fraud on the Internet by introducing 3D Secure (in the form of Verified by Visa and MasterCard SecureCode) to the masses. It’s this: reasonably intelligent customers who are concerned about the security of their internet payment transactions find it impossible to distinguish 3D Secure dialogues from phishing attacks. They can’t tell whether the request they get when shopping to register their card with Visa or MasterCard is a scam, or for real! So what are consumers to do? They can’t tell the difference between a site that’s doing what it should and a phishing attack, they see crashes when they visit financial services organisations web sites (which must undermine confidence) and even if they take the trouble to understand SSL and certificates, they are presented with meaningless gibberish from companies they have never heard of (what does “Verisign” mean to my Dad?).

Technorati Tags: credit cards, debit cards, internet, security

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More on Moore’s Law

1st June 2007by Consult Hyperion3 Comments

[Dave Birch] Money used to be stuff, now it’s data. Some people are sad about this, nostalgic for the good old days of the Gold Standard: As John Maynard Keynes once lamented, when "it appears that value is inherent in money as such", governments are able steal from the populace by inflation, which is sort of a bad thing. On the other hand, when money is minted from silicon, the economics of handling cash (which today involves armoured vans and security guards) are driven by Moore’s law. As that commentator notes, electronic information is instantaneous, weightless and exact. No longer the fumbling through coat pockets while a line of waiting customers quietly fumes. He goes on to point out that retailers get rid of both cash floats and cash frauds such as charging $4.99 so that the $5 bill most people hand over has to pass through the till for one cent change rather than being trousered by a shop assistant (my italics). I have to say, given the discussion about 99p coins, this had never occurred to me until I read it in this article, which I came across while searching for something else entirely. Is it really true? I had always thought that the origin of this irritating practice was to make goods appear cheaper, because 4.99 somehow sounds a lot less than 5. But the anti-trousering theory sounds, frankly, more plausible. Does anyone out there know?

Technorati Tags: cashless, coins, fraud

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Real law, virtual property

1st May 2007by Consult HyperionLeave a comment

[Dave Birch] A famous entrepreneur in Second Life, Anshe Chung, convinced YouTube to pull down an off-color video of her virtual self being harassed during an interview, an action that raised some interesting questions about the legal rights of the inhabitants of virtual worlds. Anshe Chung Studios demanded that YouTube delete the recording, citing the Digital Millenium Copyright Act (DCMA), which generally requires Web sites to remove material that infringes on copyright laws. The harassment took the form of animated penises attacking her avatar during an interview in front of dozens of audience members. It looks as if real law and virtual worlds are going to be inseparable.

Technorati Tags: games, identity, regulation, virtual worlds

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Extending debit

29th April 2007by Consult Hyperion4 Comments

[Dave Birch] Our good friends at Edgar Dunn have produced a study showing that more consumers prefer debit cards than any other type of payment for point of sale purchases for the first time. So it looks as if the march of debit at POS continues. It may well continue beyond POS as well now that the the Star EFT network plans to start testing PIN-less online debit payments. The test will run about four months and involves Solana Corp., which will act as an aggregator of $25-and-under transactions generated by the online merchants. The idea is that customers can buy digital junk like ring tones or cartoon subscriptions from PCs. Through Solana, participating merchants will be required to register and authenticate consumers for the payments and bear the risk in disputed transactions. If they are happy to do this, then presumably the consumer preference for debit will begin to extend into cyberpsace. It looks as if debit cards are set to displace cash even further, with PINless transactions to eat into virtual cash transactions and contactless interfaces to eat into real world cash transactions.

Technorati Tags: cashless, debit cards, coins

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Credit, debit, prepaid

16th April 2007by Consult Hyperion11 Comments

[Dave Birch] I often find myself using "credit card" as a generic term for payment card. It’s a reflection of my age, I suppose, and a deep-seated response to the first payment card I ever had: a Barclaycard that I rather unwisely obtained as a student. But credit cards are in retreat online and shunned elsewhere, mostly in favor of debit cards. Visa says that about 55% of its e-commerce transactions are now debit cards rather than credit cards. This is more than double the proportion of just two or three years ago! Now, I don’t get this. I use my credit card for absolutely everything, but clearly I’m in the minority. In the U.S., debit card transactions grew nearly a fifth last year issuers expect continued strong growth this year. Bizarrely (to Europeans), signature debit grew 20%, PIN debit only 16% and active cardholders performed about 11 signature debit transactions and 5 PIN debit transactions. Anyway, I was wondering if in a decade or so, we might be seeing debit cards becoming the minority as prepaid products come to dominate globally.Visa debit card. “The platform is designed to instantly send (SMS) text alerts to the FaithFone handset anytime the accountholders VISA Debit card is used for purchases.Visa debit card. “The platform is designed to instantly send (SMS) text alerts to the FaithFone handset anytime the accountholders VISA Debit card is used for purchases.

Technorati Tags: banking, credit cards, debit cards, e-purse, prepaid

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Payments, profits, competition

6th November 2006by Consult HyperionLeave a comment

[Dave Birch] It’s a bit of a paradox. Lots of people want to get into payments. It seems as if a new scheme (especially around mobile) is announced every week. This is presumably because they think they will make money — as, in fact, Paypal have done with net income of $281 million last quarter — and can grow a business. Yet people who are in payments (eg, banks) don’t find it such a great business. Here are some rough figures for the spreadsheet: in Europe, payments account for a about a quarter of bank revenues and about a third of bank costs, contributing less than a tenth of bank income (in the US, payments account for a slightly bigger proportion of both revenues and costs and the contribution to income is slightly higher). The scale of the business is so huge, though, that this small net income is still in the region of 10 billion euros for EU-25 banks.

Technorati Tags: banking, cash, costs, debit cards, payments, SEPA

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Tim Jones

31st October 2006by Consult HyperionLeave a comment

This week, the first part of a two-part podcast with Tim Jones, drawing out key lessons from Mondex and Simpay.

Technorati Tags: banking, cash, debit cards, payments

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Cash is still king

29th September 2006by Consult Hyperion2 Comments

[Dave Birch] According to an Alliance & Leicester Commercial Banks Cash Survey published recently, nearly half of all UK retailers (actually 42%) say that cash is their preferred payment mechanisms. Perhaps I’m not reading it right, but the survey has some other surprising results: it claims that 12% of retailers prefer cheques, presumably for big ticket items, when I cannot understand why anyone in their right mind (or at least with any familiarity with the Consumer Credit Act 2006) would use anything other than a credit card. Even more surprisingly, only one in four retailers say that they prefer debit cards, which I would have thought were much more appealing than credit cards. The survey also notes that nearly two-thirds of small- to medium-sized retail businesses think that both cheques and credit cards are too expensive. In this group an even higher proportion (49%) prefer legacy wonga.

Technorati Tags: business, cash, costs, retail

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Monopoly e-money

25th July 2006by Consult Hyperion4 Comments

[Dave Birch] I suppose it had to happen. A new version of Monopoly has been released by Hasbro. Instead of paper money: electronic “debit” cards. Interestingly, newspapers are as bad at reporting on play e-money as they are on real e-money: one article says that the game comes with a “little machine that transfers money from one player’s bank card to another.” I wondered what had happened to these.

Technorati Tags: banking, games, p2p

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Divided by a common standard

10th March 2006by Consult Hyperion3 Comments

No-one (at least no-one reading this blog) can have failed to have noticed the story that’s been running in US on the apparently industrial scale card-skimming that’s been going on there. It’s so bad that Citibank has blocked ATM withdrawals from some MasterCard accounts after a series of fraudulent cash withdrawals in the UK, Russia and Canada. Wells Fargo, similarly, blocked ATM withdrawals in the UK. Gartner say that this is the “largest PIN theft to date”. While it’s difficult to determine exactly what has gone wrong, the general opinion seems to be that it is not bank systems but third-party systems (a processor or a retailer) that have been compromised (yet again), enabling criminals to manufacture counterfeit cards on an large scale and then distribute them for use at ATMs.

Technorati Tags: credit cards, debit cards

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