Games are fun and payments are fun so when you put them together you get doubleplus fun.
Special Feature: Playing games with payments
Tag: payments
Why are efficient payments subsidising inefficient ones?
To what extent should society tolerate people using expensive and inefficient payment mechanisms when more cost-effective (to society as a whole) alternatives are readily available?
What will the new UK Payments Regulator change?
You may think payments regulation is a rather dull subject, but it isn’t. Angus McFayden from Pinsent Masons spoke about the changes to the regulation of the UK payment sector at the Westminster e-Forum on “Digital Payments in the UK” [PDF] that I spoke at last November. As I remember him pointing out, with characteristic accuracy, these changes are not going to drive down costs (there is nothing in the UK National Payment “Plan” about this anyway), which I would have thought to have been a reasonable goal. So what are they going to do? Well, they are supposed to improve competition while simultaneously ensuring stability and so forth.
How? You may remember that HMT (Her Majesty’s Treasury, the UK’s Ministry of Finance, essentially) had a public consultation on the options for UK regulation a while back, and…
So given it was what the government said they wanted, want the respondents said they wanted and, most importantly, what I said that I wanted… the government has decided to choose an alternative path and it now says it will create a new payment regulator
[From You searched for response to consultation – Tomorrow’s Transactions]
So we are going to have a new payments regulator, and this will improve competition and ensure stability. Angus explained that this regulator, expected to be operational in April 2015, will have a number of powers and that one of them will be to mandate access to payment systems. This means for schemes, rather than direct access to accounts, and is laudable. If more organisations have access, there will be more competition and therefore, hopefully, reduced costs. So far, so not particularly interesting.
However, under proposed reforms to PSD2 things might move a little further and, somewhere downstream, there may be changes following on from the European Commission’s consultation on third-party access to the bank account, known as “XS2A”. In this scenario, I would be able to grant a licensed third party (a Payments Institution or bank, essentially) access to my bank account so that they could get the balance, look at transactions and perhaps even trigger FPS payments. Now this is really interesting. The potential for new services here is obvious and by removing an intermediary layer there should be a reductions in costs. But, and this is a big but as far as I am concerned, without the right identity infrastructure, the right security and the right compliance regime, this could be another Chernobyl.
I imagine that this is the sort of thing that will be discussed in London in February at the forthcoming “Payments Intensive”, where you can listen to Consult Hyperion’s Anthony Pickup and Adrian Kamellard, the Chief Executive of the Payments Council, amongst others, talking about payments regulation in more detail.
Payments Intensive 2014: Future Development and Regulation, will bring together key figures from business, legal and regulatory backgrounds, to discuss the most pressing issues in the payments sector today.
[From Payments Intensive 2014: Future Development and Regulation | Cecile Park Conferences]
The magnificent group of gentlepersons and scholars at Cecile Park have very kindly given Tomorrow’s Transactions a complementary delegate place at this event to dispose of as we please, so we’re having one of our blog competitions. If you are going to be in London on 6th February and would like to attend the Payments Intensive, then all you have to do is be the first person to comment on this post with the name of the British record label that has just released a version of Bach’s Wurttemberg Sonatas performed by the Iranian-American harpsichordist, Mahan Esfahani, and you will be given entirely free a place at the event (worth an astonishing THREE HUNDRED AND FORTY FIVE of your English pounds).
As always, the judge’s decision is arbitrary and capricious.
Paying in the pub of the future
We went off to Britain’s first robopub to have a pie and a pint and to watch the Blues demolish West Ham. Oh, and to see next-generation hospitality retailing in action.
By happy coincidence, the evening that we decided to go and try out Britain’s first robopub – The Thirsty Bear in Southwark – solely in the pursuit of retail payments knowledge, and incurred certain entertainment expenses wholly and necessarily in connection with our principal business, was the evening that Manchester City were playing their League Cup semi-final second leg against West Ham. Perfect. We had a lovely pint or two, an excellent helping of haddock and chips with New Labour guacamole (or mushy peas, as the dish is known in the far North) and excellent company and conversation for the night. And as if we couldn’t have made the event even more English had we tried, the footie was live on the big screen in the upstairs lounge.
The first thing that you will notice about The Thirsty Bear is that the tables have one iPad and two beer taps (one bitter, one lager) on them. The two are interconnected in an Internet of Grog, as will be revealed shortly. In the centre of the table is small credit-card sized recess. Here’s how it all works…
When you go in, you give them a payment card and they give you a contactless card, called a “Tab”. I assume they auth the card at that point but forgot to ask. You find a table and sit down and put your Tab in the recess in the centre of the table. At this point the table is activated and you can either pull your own pint from the on-table taps (the iPd displays as flow meter so you can see how much you are pouring) or you can use the iPad on a rotating mount in the centre of the table to order food, drinks and sundries. The iPad showed you customer ratings for the ales on offer and we could have punched up a couple of pints of wallop but we preferred the time-honoured method of asking me in host to recommend beverages. He suggested real ale for the men and white wine or a fruit-based cocktail for the ladies, so we went with the darker of Windsor & Eton Canberras on offer. I can personally attest to its quality.
If you go to another table, you can buy the drinks there by putting your Tab down. Similarly, if its someone else’s round at the table, you pick up your Tab and they put down theirs. Whatever is ordered/pumped at the table is added to the Tab. Simple. The table tablet has other functionality, aside from Facebook and Twitter access. A couple of twitter correspondents asked if there was a pub quiz or similar and there wasn’t, although I mentioned this to the software guys and they agreed this might be a good idea. It did have a jukebox app connected to the pub sound system but, oddly, it didn’t have any Hawkwind on it.
We then chose some food from the attractive and well-presented screens. A great system, especially because the menus are updated in real time so as they sell-out of various dishes the menu reflects this. I can see that, if properly handled, the use of differential pricing might be a very interesting development.
A great pub with great beer, great food and great technology. When we were chatting about it afterwards, a couple of people did wonder why they bothered with the Tab card, since everyone in the pub had a smartphone (so an HCE pub app would have done the trick) and most of them would have had a contactless card as well, so why not just use those? I expect they’re right and in time the tablets and the card will probably vanish. But for the time being, this is a pretty convenient way to order and pay.
I had the opportunity to chat to the manager of the pub and he told me that 55% of sales come through the tablets and 45% over the bar. He was very enthusiastic about the infrastructure. These are tough times for pubs in the UK but here they have year-on-year growth in sales. The manager attributed this to uplift at the tables (especially amongst groups after work or watching the football) and more room at the bar (since the bar is not as crowded there is more walk-in trade). I liked it a lot. We’ll be back.
Mobile payments: back to the future?
A guest post from a CHYP Friend for many years, Leo van Hove, Professor of Economics at the Solvay Business School of the Vrije Universiteit Brussel, looking at the issue of costs and consumer choice in retail payments.
‘Tis the season to take stock of the past year and look ahead to the next. As far as the payments sector is concerned, picking the Technology of the Year is a no-brainer. Or perhaps 2014 will prove to be Bitcoin’s year. Time will tell.
Whatever the outcome, the Bitcoin hype has had one beneficial effect: heightened interest in the hitherto unsexy topic of payments and, in particular, in the efficiency gains that innovation might bring.
For payments in the off-line world, surely with all the QR, RFID, NFC and Bluetooth experimenting going on, a bright and wonderfully efficient future awaits us. That remains to be seen. Under the hood, many of the new mobile payments initiatives look decidedly un-novel. Worse, in the current setting there is no guarantee that the payment instrument with the lowest social cost will prevail.
Take PayPal’s Check-in. In order to be able to use it, you need to download the app to your smartphone and upload a selfie. Once you have the app ready and fired up, you can check-in to a store that accepts PayPal by selecting it from a list and swiping a button from left to right. As soon as you enter the store, your name and picture then appear on whatever touchscreen the shop uses as a point-of-sale system. When you reach the cash register, you simply say you would like to pay with PayPal and the cashier clicks on your photo. The receipt is sent via e-mail. You also get a notification on your phone but during the payment there is no need to pull it out – or perform any other manual operation.
Fascinating stuff, you say? Indeed. Will I give it a try if and when it reaches my favourite shops? Absolutely. But because my PayPal account is linked to my credit card, as is the case with most PayPal users, my seemingly state-of-the-art payment will, behind the scenes, actually be a run-of-the-mill credit card payment – with all the costs that entails.
Indeed, PayPal basically piggybacks on the existing credit card back-ends and has simply added a new front-end: my phone and picture replace my card as the authentication device. The problem is that a longer payments chain, with an extra intermediary, translates into higher social costs – and higher merchant fees.
On the Internet, PayPal has clearly generated added value. It has made it possible for mom-and-pop businesses to accept electronic payments. But in the off-line world, do we, as a society, really want to displace, say, existing debit card payments with more expensive payments of the kind just described?
The problem is obviously not limited to PayPal. The bank-driven scan-to-pay or tap-to-pay solutions are, for example, not necessarily faster than ordinary cards. Especially not if customers end up typing in a PIN or signing a receipt after all. Hence, in stores that already accept cards increased customer throughput may well be illusory. For tap-to-pay to benefit society it would need to be successful in penetrating as yet untapped sectors, and provide a cost-effective alternative to cash there.
This is not to say that m-payment technology does not hold much promise. My point is simply that one should not fall victim to ‘innovation infatuation’ and think that just because a new initiative uses the latest in technology it is by definition more efficient in all circumstances.
Now, why would a merchant in her right mind accept mobile payments if they are so costly and if the additional benefits are limited? The hip factor is part of the explanation. Also, in a competitive marketplace merchants are afraid of losing custom and will therefore tend to accommodate their customers’ preferences.
And this is where the fundamental problem lies: consumers are insufficiently steered in their payment behaviour. This is because in the payments sector pricing is pretty anomalous. Whereas both merchant and customer derive utility from a payment, in most countries only the merchant faces direct, per-transaction fees. Yes, consumers often pay annual fees, and, yes, in the end consumers as a group always foot the bill.
However, the reality is that at the check-out consumers do not worry about whether a specific payment instrument is costly for the merchant or for society; that is, unless the merchant passes on part of the cost. But most of the time consumers are not confronted with the consequences of their choices and do not realise that collectively they will, somehow, somewhere, end up paying for an inefficient payment system. In short, what is missing on the consumer side are cost-based transaction fees, as signals of underlying costs and set in such a way that the instrument that is most costly for society is also most costly for consumers.
So, will m-payment technology prove to be the game changer many pundits think it will be? Quite possibly. But in order to make sure that the future payments landscape is not only technologically advanced but also lower-cost for society, it would be best to first change the rules of the game and give consumers financial incentives to think about their choice of payment instrument. Only then will we have a fair beauty contest
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Target breach may have consequences beyond EMV
The Target breach will encourage the US to adopt EMV, but it’s not a magic bullet. However, the breach may have wider implications for the future of retail transactions than EMV adoption.
Cheques and checks are both going nowhere
The British government (inexplicably) want “cheques to have a crucial role in the ongoing success of the UK”. I don’t understand why and I strongly suspect they don’t either.
Banks, Bitcoin-killers and the DSM
I got caught up in Bitcoin media mania. Things are getting out of control. Doesn’t any of the media comment seem, well, just a little, oh, I don’t know, crazy?
Ancient and modern
[Dave Birch] I was totally shocked to arrive home from work the other day to find my good lady wife celebrating with her tax rebate cheque. Apparently HMRC miscalculated millions of Her Majesty’s subject’s tax bills and we were one of the lucky overpayers. We are a couple of gallons of petrol better off than before. But a cheque! HMRC must have our ethnic background on file as “Amish”. Despite the fact that since time immemorial (for me) we have paid our tax bill online via internet banking, the creaking hand-cranked contraptions at the Revenue are apparently unable to use any form of payment invented after the Act of Union (in 1701).
To be honest, I’ve always been puzzled by the Amish, the strange religious sect in America made popular by the noted screen actor Harrison Ford in his 1985 film “Witness“. The Amish reject “modern” technology, but they seem to me to have a rather arbitrary definition of what constitutes “modern”. Why, for example, do they use wheels? Or nails? Or chemical fertilisers? What’s the cut-off point? 1750? Why not the invention of the transistor in 1948? Or the synthesis of urea in 1828?
The Amish, particular the Old Order Amish — the stereotypical Amish depicted on calendars – really are slow to adopt new things. In contemporary society our default is set to say “yes” to new things, and in Old Order Amish societies the default is set to “no.”
[From The Technium: Amish Hackers]
Speaking of reactionary sects that eschew the modern world to remain in the comforting cocoon of a romanticised rural past, I read in the Daily Mail that
Plans to scrap the use of cheques from 2018 were dropped today after the UK Payments Council admitted there was no better paper alternative.
[From Cheques will not be scrapped in 2018 but because there are no better alternatives | Mail Online]
Well, the wrinklies have triumphed again. Another minor skirmish in the intergenerational war for resources has been won by Joan Bakewell’s generation and our children are going to be made to subsidise a paper cheque system that should have been a distant memory for them. The Payments Council has been forced to cancel the end of cheque clearing (originally scheduled for 2018) and promise to keep cheques
for as long as customers need them
[From Payments Council – Payments Council to keep cheques and cancels 2018 target]
Note that I am specific in the wording, as were the Payments Council. No-one was banning cheques: they were ending cheque clearing. If someone else — the Post Office, Age Concern or the CBI — wanted to run a cheque system, they were free to do so. And, to be honest, that would be a good solution, because then their members could pay for it and those of us who couldn’t care less if they never saw another cheque could have ignored them.
I suspect that in the coming age riots of 2025, the cheque book will used as a rallying symbol of revolt by our impoverished offspring because the banks (ie, bank customers) are going to have to pay to support paper cheques into the foreseeable future. This is ridiculous. If some people (eg, my mum) want to carry on using cheques, it should be on the basis of full cost recovery: if you want a cheque book, you should pay for it, and if you want to cash cheques, you should pay £2 (or whatever) to do so.
The Government is aware that, although there are declining numbers, 54% of adults still write cheques, and on average every adult write 13 cheques and receives 4 cheques each year.
[From Frequently asked questions on the closure of the cheque system – HM Treasury]
Yes, but that misses the point. When I last wrote a cheque to my son’s school, I didn’t want to. I would much rather have used PayPal, internet banking, my debit card or M-PESA. I don’t want to receive cheques either, from HMRC or anyone else.
When someone sends you a cheque, it’s like being set homework.
[From Digital Money: I could imagine using this]
So what happened? In recent weeks I’ve had some conversations with people countries such as the Netherlands, Belgium and Denmark where no-one has seen a cheque for a generation asking me why the UK is different. It’s the British disease: faced with the end of cheque clearing in a generation, the British response is not embrace electronic alternatives, for charities to look at inventive and efficient online and telephone giving, for small businesses to exploit the Faster Payment Service (FPS) or for the Post Office to create its own paper-based alternative but to moan and complain and demand that everything be kept the same as it is. What happened was that reactionary press comment, entrenched interests, publicity-seeking MPs and a fragmented industry have combined to conspire against the forces of rationality and modernity. And they won.
But why stop there? Cheques are quite modern invention and I don’t understand why the Commons Treasury Committee and the Daily Telegraph want to turn the clock back only to the 17th century. They are not true conservatives, whereas I am. I have therefore decided that my only course of action is to appeal to the European Court of Human Rights to force the Payments Council to reinstate the tally stick system that was prematurely ended in 1834. My great-great-great-great-great grandfather was perfectly happy using tally sticks and was, I’m sure, most distressed by the end of the scheme and the burning of the sticks in the Houses of Parliament furnaces which, as you may recall, resulted in the fire that destroyed the medieval palace and a splendid painting by Turner. It is most unfortunate that Associated Newspapers and Saga did not exist at that time, since I feel they might have been able to spearhead a successful campaign against the introduction of foreign methods (such as double-entry bookkeeping).
Tally sticks had numerous advantages over paper cheques. They were much harder to forge, for example, and were understandable by a largely illiterate population (a situation soon to be restored in this United Kingdom). The sticks were far more durable than cheques are, cheques being made out of flimsy paper instead of fine English wood. Why was this sound and practical system swept away for the convenience of bankers! It is my right to continue to use the tally sticks developed under William I for as long as I need them and quite reasonable of me to demand that the rest of society bears the costs. I hope The Telegraph will support my campaign with vigour. And while we’re at it, why haven’t farthings been legal tender since 31st December 1960? I tried to use some when out shopping the other day and they were refused: outrageous.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]
Near and far
What is the leading edge in mobile payments? And where is that leading edge? I’m always scanning for new ideas to bring back to our clients and I’m always looking out for ways to exploit new technology in the transaction space.
Doug Busk, mobile brand strategy and global connections at The Coca-Cola Co.,was one of the participants in the “What’s on the Horizon with Mobile Payments: How All the Pieces Come Together” session. He pointed to a vending machine that uses mobile SMS to enable payment
[From Coca-Cola SMS-enabled vending machine changing future of mobile payments « Near Field Communications / Smart mCommerce]
You’ve got to at least raise an eyebrow at a talk about the mobile payment horizon that uses SMS payment for Coca Cola as an example of the brave new world just around the corner since, to the best of my knowledge, the very first mobile payment ever made (in Helsinki, in 1997) used SMS payment for Coca Cola! But not a million miles away from this birthplace of a new economy,
Meanwhile, Denmark’s banks are also working together on a different sort of mobile payments system, using text messaging. BankSMS is slated to launch later this year, enabling users to initiate purchases of things like train tickets by sending a text message with a product code.
[From Finextra: Danish telcos team on NFC payments; banks put faith in SMS]
Maybe I’ve totally missed the curve on this one, what with getting distracted by these new-fangled proximity interfaces. But further afield, an astonished correspondent writes (28th June 2011) to say
I am in Jakarta right now and am seeing an NFC terminal for payment at a coffee shop
What’s going on? The developed world is going back to the future with the SMS while emerging markets are getting in touch with NFC?
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]
