As Consult Hyperion, and as many other analysts, predicted, Covid-19 has driven the adoption and use of contact-free technology at the point of service. A recent survey funded by the National Retail Foundation, found that no-touch payments have increased for 69 percent of US retailers surveyed, since January 2020. In May, Mastercard reported that 78% of all their transactions across Europe were contactless.
Fraudsters are always looking for ways to take advantage of potential weaknesses or even inexperience in new payment devices. A recent news story promoted a man in the middle attack in which two phones are used to transfer and manipulate the transaction message between a stolen contactless card and the point of sale terminal.
I rarely recommend reading the reader comments at the Guardian Online (or indeed any other newspaper site) unless you need a fast cure for low blood pressure or get a kick out despising your fellow man. However last week I did actually learn something interesting from the comments to a Guardian article about Bitcoin.
In common with countries such as Iceland, Scotland now has its own cryptocurrency – Scotcoin.
It’s not altogether clear from the Scotcoin website (http://scotcoin.org) exactly how Scotcoins are created but in contrast to Bitcoin they are pre-mined and will be distributed free to anyone in Scotland who wants some. At present they cannot be exchanged for other altcoins and they have no value in fiat currency (unless the free market decides otherwise, according to the website). Nor is it entirely clear whether the founder is actually based in Scotland but he was, he says, born there. The purpose of Scotcoin, he says, is to provide a plan B currency for an independent Scotland.
Now, as someone who is not by nature a libertarian, at least where others are concerned, I’m a bit suspicious about cryptocurrencies. I don’t own any Bitcoin and feel slightly seasick at the idea of an asset whose value fluctuates more than the waves on a bad ferry crossing. Here at Consult Hyperion thought we generally believe that the technology behind Bitcoin, the blockchain, is a lot more interesting than the currency itself.
Nonetheless I felt moved, as a Scottish resident, to obtain some Scotcoins. Purely out of professional curiousity, you understand.
This involved downloading and installing the Scotcoin wallet. In other words downloading and installing an executable file from a non-https website I’d previously not heard of. As an IT security graduate this made me feel even sicker than the Bitcoin exchange rate but I did it nonetheless (to an old laptop) and I now own 1000 shiny Scotcoins.
Now what? It’s hard to say. Is it for real?
I feel obliged to report that not everyone is convinced about Scotcoin (see http://loggingoff.tygabitworks.com/) but then there’s a lot of negativity about Bitcoin too. I’m absolutely not endorsing that view, merely reporting it but the Scotcoin website certainly displays a creative attitude to punctuation and spelling, whether that means anything or not. On the other hand around 100 or so other Scots seem to have downloaded the wallet so presumably they think it’s fine*. And my virus checker (paid for AVG) hasn’t picked up anything feeding my online banking details offshore.
In any case there’s absolutely nothing wrong with the concept of a Scottish cryptocurrency, irrespective of whether Scotcoin is it or not and Alex Salmond would be well advised to consider it. If you’d like to know more, Dave Birch will be talking about the idea of a Scottish virtual currency to the Financial Services Club Scotland in Edinburgh on 29th April.
*I’m enchanted to note that one of the first power users is called Dug. Dug of course is Scots for Doge.
The US should take a bold step forward and forget about patching up the old, creaking ACH infrastructure. Build something for the 21st century!
Google Wallet is back! They have moved away from a focus on NFC to an e-wallet that will work with all mobile phones and have drastically reduced the friction with merchants, banks, mobile carriers and customers.
Downloading the Google Wallet app to my iPhone was quick and easy. After downloading the wallet, it asks you to “sign in with your Google Account” or “create an account”. The tag line is “One Google Account for everything Google”…you don’t see sign-in with Facebook here!
As someone that is exposed to the payments industry, attends conferences, reads the industry publications and generally interested in all things payment related, even I am surprised at the number of mobile wallets that are available. Everyone wants me to download his or her e-wallet to my mobile phone – from Starbucks, to Square Wallet to Isis and the list goes on. So I have decided to take a journey over the next few weeks and experience a variety of mobile wallets that are available in the US marketplace. And here is the real challenge – I carry an iPhone!
Travelling home from a meeting at the Payments Council on Monday afternoon, I was enjoying the peace and quiet of the train gradually emptying as it drew further out of town. At Sunningdale, a station normally notable only for the most prosperous passengers, a group of excitable teenagers joined the train obviously looking for trouble. Brandishing camera phones, they seemed more of an irritant than a threat.
Avidly reading advice on strategies to avoid arrest by over-zealous US police officers, quoted in an article from the latest edition of Cryptogram, I felt comfortably detached from my surroundings. The luxury of a half-empty train on the Reading line is a rare treat.
The author of the article advised that unlawful activity is best indulged in from the comfort of your own home. If you must commit crimes in public, avoid drawing attention to yourself. In particular, even if you become aware of an officer while performing an illegal act, it is better to continue rather than raise suspicion through a sudden change in behaviour.
At this point I became aware that I had unwittingly become the focus of the gang, who had moved on from threatening to punch random strangers to wielding newspapers and cigarette lighters while daring each other to take my phone. Suddenly alert to the situation, I put my phone away, muttered ‘excuse me’ and wandered gently up the carriage. They left the train at the next station.
I’d made the mistake of forgetting that my brand new phone which I regarded as a standard device for accessing content and keeping in touch, could also be seen as a status symbol with significant market value. On reflection, it gave me a tangible example of one of the key risk concepts being investigated by the TREsPASS project: attacker motivation. This had moved from the general to the specific, as an opportunity was spotted and the incident unfolded. It was clearly unpremeditated and yet in many ways predictable.
As my brother commented the next morning, teenage gangs in our area just aren’t what they were in our youth, when they would steam the length of trains in groups of twenty or more. He also gave me a great tip for protecting my phone in future, which in his experience deters all potential muggers. Waterproof, costing only a few pence, with the option of additional cotton wool for extra authenticity: an attractive little black plastic bag with yellow drawstring, as commonly carried by dog walkers.
[Jane Adams] I’ve got a sore back. Or to be more precise I’ve got a sore tail bone. I don’t know whether it’s from being thrown in a fight or from the amount of time I spend on trains commuting between home (Edinburgh) and work (Guildford) but sitting down has been painful recently. Last night I felt moved to Google the problem on my phone to see what could be done.
Google did its job with a multiplicity of results. But I couldn’t access any of them because my MNO blocked them all as adult content. I didn’t use *rse or b*m as search terms but anything below the waist appears to be out for this MNO.
What I was presented with was a tiny, barely legible (even on my Samsung S3), barely branded screen asking me to input my credit card details to prove that I was old enough to read about what is probably age-related spine degeneration.
On an Android phone? You must be kidding.
And why is this necessary? I have an account with my phone provider (one of the big 4). I’ve had a business account with my phone provider for something like 10 years. Until recently, when I got my proper job with Consult Hyperion, I was VAT registered and the MNO had that information in its system. If, as the phone owner, I’m old enough for a VAT registration, I’m old enough to read about bottoms. And if I’m not the venerable phone owner and I’ve nicked their phone, I’ve probably nicked their credit card too.
There’s a lot of talk about big data at the moment. Proper use of data could considerably improve the prospects for mobile wallets. However if this is indicative of what mobile operators are doing with data, I’m not optimistic.
Frankly, I rather hope that the screen was malware generated rather than genuine.
[Paul Makin] When you use the term ‘mobile money’, your audience generally assumes you are referring to the phenomenon of mobile phone-based money transfer schemes in emerging markets, in particular its poster child, M-PESA in Kenya. And there’s good reason for this; most press about mobile money focuses on emerging markets and if you visit the GSMA’s Mobile Money Tracker (http://www.mobileworldlive.com/mobile-money-tracker), it lists a large number (182 at the last count) of mobile money deployments around the world, all of which are in the emerging markets of Latin America, Africa, and South and Southeast Asia.
This may be because the data is supplied by the GSMA’s Mobile Money for the Unbanked (MMU) team and focuses on the community that the MMU team engages with, so perpetuating the view that mobile money is exclusively an emerging market phenomenon – a view that I disagree with, if not in actuality, certainly in potential.
Consider what constitutes a mobile money scheme:
· Customers’ access to their account, for carrying out transactions or for managing their account, is primarily through the medium of the mobile phone;
· Cash can be deposited and withdrawn via the intermediary of human ‘agents’ in local shops;
· Cash can (sometimes) be withdrawn at ATMs;
· Transactions are fast, and tariffs are low;
· Registration is simpler and faster than for a local bank account.
In addition, it is fair to say that mobile money schemes are generally aimed at the unbanked market – that is, people who are unable to access traditional banking services, however basic – but I would argue that that is a characteristic of the available, under-served market, rather than any law of nature.
The dramatic growth of mobile money services in the emerging markets is a consequence of the huge size of the unbanked market in those countries, coupled with the launch of services that provide them for the first time with readily accessible basic financial services.
But there are mobile money services elsewhere, and they certainly occur in the so-called emerged markets. In the UK, for example, we have seen a number of such services being launched in recent years. A prime example is O2 Money, launched in Q2 2012. This has all of the characteristics of a mobile money scheme, as described earlier, but with one important extension to ensure its applicability to the British way of living – it has a companion card, a plastic card which allows O2 Money to be spent in shops, and which can also used for ATM withdrawals.
It must be said, though, that none of the schemes in the emerged markets have broken through in quite the same way that M-PESA has in Kenya. This is principally due to the differences in the markets. As an example, in the UK (as in other “developed” countries), people with a bank account can access the services offered by mobile money using cards on line or in person and most have access to mobile banking.
So people with UK bank accounts are unlikely to be regular users of a mobile money scheme, and therefore a strategy needs to be developed to recruit customers that offers something beyond the basic financial services. I am of the firm belief that such a strategy can be developed, and that a successful strategy would embrace elements aimed at three different groups: the mainstream banked; the not yet banked (teenagers); and the unbanked (the poorer sections of society).
The mainstream banked will be the most difficult to attract, and the key here will be differentiators from the mainstream banks’ offerings. As mentioned above, mobile money offers little advantage to them.
The not yet banked are a slightly easier proposition –almost all of them have a relationship with a mobile phone operator, and are very familiar with buying things with their mobile phone. A proposition is required to meet their needs, by incorporating elements such as entertainment tickets (discounts are the key) and products linked to stadiums and venues (such as closed loop payments), and the option of a companion plastic card is essential. But ultimately, whether or not this supports an attractive business case is another matter.
But the UK unbanked are a proposition with great potential. There are around 1.25 million unbanked households in the UK, equating to around 4.5 million unbanked individuals. There is a real need here, and the unbanked could form a valuable element of a broader model for a mobile money operator. And you can bet that, in modern Britain, the vast majority of these people have a mobile phone.
To those who would say that the unbanked have no money, and cannot therefore be of interest, I would point out that, in common with poor people the world over, they pay significantly more for financial and other services than any other segment: fuel, cheque cashing, and short term loans are all examples of the amount such people are forced to pay for services that the mainstream gets either for free or at very low cost.
At the core of any unbanked proposition must be the facilitation of social payments. The majority of social payments in the UK (including pensions) are delivered directly to bank accounts, and in a cost-efficient manner that is at least competitive with any mobile money offering. However, the 4.5 million unbanked recipients receive their payments by alternative means, and at significant expense to the UK Government. Giving these recipients a mobile money account, and facilitating these social payments, should be at the core of any strategy.
Access to cash is also an issue. In many of the poorer areas of the UK bank branches have been closed, and the only ATMs that remain are private ones in small shops that typically charge around £2 for a withdrawal. By adopting the agent approach of emerging markets, access to cash from the mobile money account would be greatly facilitated, and drive additional revenue into the local community.
By definition, unbanked people do not have access to the conventional banking system, and there is an opportunity for a mobile money operator to facilitate that access and so enhance their own proposition. Basic functionality, such as direct debits, should be offered in order to address, for example, fuel poverty (if you cannot pay for fuel – gas and electricity – by direct debit in the UK, you will be paying a lot more for the fuel you use). Another aspect of being unbanked is the lack of access to loans at reasonable cost (hence the controversial rise of the so-called ‘payday loan’) – there is an opportunity for a mobile money operator to create a portfolio of relevant of financial services for their customers here, in which partnerships could be formed with local organisations, such as credit unions, in order to promote savings and loans. I am sure there are lessons that can be learned from the experiences of microfinance institutions (MFIs) in the emerging markets.
In summary, I do not believe that mobile money is exclusively a phenomenon of the emerging markets. There are significant populations in developed markets that closely match the characteristics of mobile money customers in the emerging markets, and there is a clear opportunity for the right mobile money propositions.
Defined as households without access to a bank account – savings accounts are excluded.
I really enjoyed the first Finovate Europe in London. We had an excellent couple of days, because we had BarCampBankLondon the day before (I’ll write something about it later), and lots of folk came in for that too.
Although it was in London, three of the UK’s four biggest banks had just one person at the event. Three of the others didn’t send anyone at all. Barclaycard and Santander sent six each. Hmmm. Perhaps the others are just being careful with taxpayers’ money. I wish the head of eBusiness from my bank had been there.
To be completely honest, I was looking at most of the presentations in horribly mercenary terms: asking only which of our clients might be able to exploit this? As a consequence, I wasn’t really grabbed by what one of my fellow delegates called the “wheelspinning” around personal financial management (looking at pie charts of your overdraft and that sort of thing). Our space is the secure electronic transaction space, so I enjoyed the presentations from our friends at SecureKey and VoiceCommerce. It’s that kind of thing that is hot, I think. I’m going to find out more about Miicard as well.
I liked the StockTwits presentation, which probably combined innovation in technology and innovation in business model in the most interesting way, targeting a specific niche in an engaging way. There’s a lesson for me here: if I used Twitter for something more than moaning about South West Trains, I could have been a contender. Boku were great and so were Ixaris: I understand what they are trying to do in payments and I’m sure that both of them will succeed. None of my picks made it in to the delegate’s top three in the final vote, but I’m happy to stand alone.
All things considered it was a super day, an excellent opportunity to connect with clients and colleagues, and an energising look around the space. Jim and all of the chaps should be very happy with it.
The presentation that I probably thought about the most after the event, though, was the one from Fidor Bank. They have integrated a variety of alternative currencies into their online banking platform. These are presumably attractive to German consumers fleeing the euro, with folks memories of hyperinflation pushing them toward non-fiat stores of value.
The partnership will enable Fidor’s customers to buy gold, silver, platinum and palladium without completing any GoldMoney application forms. Orders will be processed daily through the FidorPay Account at the bank and then placed with GoldMoney through an ‘Omnibus-Holding’ in the name of Fidor.
If you want to find out more about GoldMoney, forum friend James Turk, their CEO, will be at this year’s Digital Money Forum. Although only precious metals are live at the moment, Fidor are planning to integrate virtual currencies the future. I didn’t get a chance to talk to them to find out what the mechanism for this is: as far as I know there’s no API for accessing your Everquest platinum (or, literally, a payments wizard) so it would have to be done using screen scraping with usernames and passwords, just as it is for other services with no security (eg, banking).
I’m naturally fascinated to see how customers respond to this. If you can shift from euros to gold to World of Warcraft gold in a simple and friction free way, then we might see some interesting markets emerging.
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers