[Dave Birch] We were chatting in the office earlier about something I saw on the Niall Ferguson series on the “Ascent of Money
” on Channel 4. Well, actually I watched it on Virgin V+ “Catch Up TV”, but you know what I mean. It’s not bad. In one of the episodes (about property) he said in passing something like “it’s always happened before”. In the business of money, unlike the in technology of money, no-one ever learns. I made this point over on Kashklash recently, using the story of Northern Rock and the Goldsmid brothers to illustrate the point.
Note that this case of the Goldsmids is not “similar” to that of the Crock, nor is it “analagous” to it, nor is it a “metaphor” for it. It was exactly the same. In every respect.
[From kashklash:: exchanging the future » Blog Archive » Technology is progressive, finance is cyclical]
Anyway, with my current focus on innovation — I’m helping the CSFI to plan the first round table in the Visa Europe Research Fellowship series for 22nd January — it set me thing (again) about the cyclical nature of the finance business. Is there something I need to take account of here: I haven’t quite put my finger on it yet, but is there a connection between the stepwise march of technology and where it intersects with the circle of financial services evolution? Perhaps there are some points on the circle where the new technology gains purchase, and some where it is flung away. I need to work on my analogies!!
[Dave Birch] The evidence coming back from the marketplace is that contactless does, in fact, have the predicted impact on transactions in the relevant retail categories. It speeds transactions and simultaneously delivers an increase in average transaction size. Interestingly, it seems that the use of open (ie, Visa/MasterCard) contactless delivers a transaction uplift over the closed stored-value cards used on many education, corporate and government campuses.
Greater success occurs with the complete replacement of aging stored value card systems, resulting in lifting cashless sales from less than 10 percent of total sales to an average of 38 percent with credit/debit cards;
[From Payments News: New Cashless Vending Research – September 11, 2008]
This, to me, reinforces the rather obvious link between contactless and prepaid: a contactless platform for a prepaid product would mean that the two were mutually reinforcing in the assault on cash for low-value transactions, because of the increase in convenience (at both levels) over conventional card products. A contactless offline transaction is the fastest possible to way to pay for something, faster even than getting coins out of your pocket and throwing them at the shopkeeper.
[Dave Birch] The European Commission has, admirably in my opinion, been trying to introduce competition into the payments world, hoping that competition can deliver a better payment system. The Electronic Money Directive and the Payment Services Directive have opened up new regulatory categories for non-banks and while these have yet to make much of an impact, recent events may well have persuaded the public that money issued by, let’s say, Vodafone or Virgin is worth a try when compared to the money pouring out of government printing presses to bail out the bankers! Current issues aside, though, anyone looking at long term business trends must be wondering to what extent the payments industry will remain part of the banking industry.
[Dave Birch] An interesting anecdote from one of the contactless payment roll-outs in Europe, as reported to me from a credible source. A student was overhead talking to a friend, saying that he had got up, taken the subway into college, worked all morning, gone out to get a sandwich and juice and lunch time, worked in a lab all afternoon and then taken the subway home. On arriving home, he found his wallet on the kitchen table. Amazing story, I think. And while it certainly has some hard to believe aspects (working all morning — yeah right), the fact that the student was telling someone about this strikes me as an interesting confirmation that pockets, albeit small pockets, of cashlessness are beginning to emerge.