Will they or won’t they pay?

The outsourcing company Accenture conducted a survey to find out if consumers want to use their mobile phones for payments. Unsurprisingly, there is a strong correlation between countries where people have already used their mobile phones for payments (eg, China) and where people wanted to use their mobile phone for payments (eg, China).

Overall, 69 percent of survey respondents in Asia indicated they favored using mobile phones for most payments, led by Chinese consumers (76 percent) and India (75 percent), followed by Korea (56 percent) and Japan (47 percent). Outside of Asia, the next highest positive response was in Brazil, where 70 percent of consumers favored using mobile phones for most payments… asked if they had used a mobile phone to make purchases in the past six months, nearly half (47 percent) of tech forward consumers in China indicated they had, followed by Korea (42 percent) and Japan (33 percent).

[From Interest in Mobile Phone Payments Strong Among Most Active Mobile Users Despite Security and Privacy Concerns | Business Wire]

Now, the figures cannot represent a desire for mobile out of a lack of alternatives. I’m in China right now, where China UnionPay already has gazillions of cards out there and I’ve been using my splendid Travelex prepaid Visa card all day without a problem (some shops just wanted signature, some wanted online PIN and signature, I don’t know why). Meanwhile, back home, the situation looks rather different.

In the U.S. and Europe, combined, however, only 26 percent of respondents favored using mobile phones for most payments.

[From Interest in Mobile Phone Payments Strong Among Most Active Mobile Users Despite Security and Privacy Concerns | Business Wire]

Oh well, I guess there’s no need to spend much money on m-payment solutions in Europe or the US then, when only a 100 million or so people will want to use them, especially so in the US where another survey shows that few consumers are prepared to pay for m-payments.

However, the [Yankee Group] consumer survey results also indicate that less than 10% of respondents would be willing to pay extra for mobile transaction services such as mobile banking, mobile coupons and mobile payments

[From Less than 10% of US consumers willing to pay for mobile payments • NFC World]

But hold on, I thought. If you asked consumers in the US if they were prepared to pay for debit cards then only 10% would have said yes. Yet everyone has (and uses) a debit card. Hhmmm…

So who does pay for debit cards then? In the US, where the merchant fees are much higher than in Europe, transaction fees are the major source of income. But the economics of debit are different in Europe where the already lower debit interchange and fees mean that in some countries (eg, the Netherlands) the banks lose money on every debit transaction, whereas in some countries (eg, the UK) they make a small but vanishing margin. Yet debit is profitable for banks. Why? It’s because the major component of income from debit schemes is not the transaction fee but

  • The interest foregone on current accounts. Consumers who use their debit cards keep money in their current accounts to fund and the bank earns interest on that money.
  • The fees earned from unauthorised overdrafts and such like. If you are out spending on your debit card and you see something that you want, you might go into the red to get it. Or you might make a mistake.

This led to an interesting twitter conversation with Forum friend Scott Loftesness. As Scott pointed out, people do, of course, pay for debit cards, but they just don’t see explicit pricing. But they might, if the “Durbin debate” ends with issuers being forced to reduce interchange. The National Retail Federation (NRF) in the US has told Congress that delay to debit card swipe fee reform will save banks and their customers more than a billion dollars for every month of delay. Actually, that’s not quite what they said…

A postponement of the debit card swipe fee reform could cost US retailers and their customers more than $1bn per month, the National Retail Federation (NRF) warned Congress.

[From Debit fees regs delay could cost $1bn]

I wrote before that if retailers think that they are being so grotesquely overcharged for debit schemes then they should start their own, and I do have to say that I am puzzled that more of them haven’t already gone down the decoupled debit route, especially those with strong loyalty databases (eg, Tesco).

My wife’s visit to Target this week prompted a revisit to the decoupled debit space. Target’s value proposition: hand me your check and sign a release form, you will then receive a RedCard linked to your checking account and good for 5% off all future purchases

[From Decoupled Debit « FinVentures]

Retailers in the US, it seems, prefer a different kind of competition. A little while ago I read a piece in the Financial Times, which I couldn’t find given five minutes googling, that said that the regulatory capture of $1 billion a month, most of it going to America’s biggest retailers, wouldn’t make any difference to the prices that consumers pay. I’m sure that’s true, and I don’t suppose banks pass on all of that billion to customers any more than retailers would, but let’s face it: someone has to pay.

Banks have never lost out because of their gracious generosity in allowing customers to use cheque books, debit cards or cash machines for free.

[From The end of free banking would be another slap in the face | Chris Leslie | Comment is free | guardian.co.uk]

This is what people in the UK genuinely believe. As Scott says, they see debit cards as free. There’s no way you can now charge them for them. So why wouldn’t mobile payment cost be bundled into the bank account fee just as the debit card cost is? Actually, I suspect that it won’t be, for the simple reason that I don’t believe that consumers won’t pay. Mobility has value. If you had asked me whether I would be happy to pay an 8% transaction fee for using mobile payments a few months ago then I would have told you no way. But that’s exactly what I did last week when I went and parked at Woking station, cheerfully paying a 40p extra charge for using RingGo (a mobile payment for parking scheme) rather than use cash for a £5 parking charge.

Scott asks how mobile payments can deliver additional value to the merchants. I would say that in my recent dealings with issuer/acquirer/merchants, three general themes have emerged (I stress that these are general: they don’t relate to any specific project we are involved in).

  • The first is that retailers like mobile wallets. anticipate lower online abandonment rates with mobile wallets and I suspect they may also anticipate a higher average sale than with cash in physical environments.
  • The second is that retailers expect to be able to use these mobile wallets to interact directly with consumers through loyalty products, coupons, special offers and so on.
  • The third is that mobile should mean fewer disputes and chargebacks, which cost retailers time and money.

All of which means that the retailers will incentivise customers to use mobile, so customers will use it even if it costs them an explicit fee versus the implicit fee associated with debit. Ultimately, I’m pretty sure, that the fact that only 10% of consumers say they will pay doesn’t mean anything.


It’s that time of year again, so along with many of my peers I went to the GSMA Mobile World Congress in Barcelona, the annual festival for the mobile industry. There were 60,000 people there this year. You can’t not go, even if you don’t look forward to trudging around with 60,000 fellows. At least we had an eventful start to the trip. I bumped into Claire Featherstone from Maxis at the gate and we sat next to each other on the bus chatting. When the bus was almost at the plane, it was clipped by one of those trolleys that carry the baggage containers and the window right next to Claire shattered! When we got on the plane she was a little nervous about sitting next to the window…

MWC is getting to be a bit of a pain, to be honest. It’s just too big, but for a company in our market you just have to go, because that’s where everyone wants to arrange their meetings. Maybe it’s time to split it into two different events and have all of the mobile infrastructure at one event and the mobile software, services and solutions at anotherSince some of our biggest customers are there, we’re there, and that’s all there is to it. Actually, there was an extra factor: the GSMA had kindly invited me to be one of their awards judges — I voted for Colin Firth in the King’s Speech (just joking, I voted in the “Best Mobile Money Product or Solution” category) — so I was there for the awards dinner as well*.

The big news was, of course, the whole Nokia/Microsoft thing. But the news that I was really interested in was the stuff about shaping and control the value network around secure transactions which, in the first instance, means getting decent penetration of NFC handsets and, in the second instance, the war over the secure element (SE). This was a good show for NFC. NFC isn’t new to the show — or to Spain, where Visa has been running a trial in Sitges for a year.

The phone for the Telefónica trials, the Samsung S5230, known as the Star or Player One, is an EDGE handset–not a 3G phone. But Samsung said it is one of the handset maker’s top sellers.

[From New Samsung NFC Phone Gets First Trial in Spain | NFC Times – Near Field Communication and all contactless technology.]

It’s also a Single Wire Protocol (SWP) handset that implements the “GSMA NFC” model where the SE is on the UICC and under the control of the mobile operator, who hopes to rent security domains (SDs) to banks and others. And this is where things were different at the show this year: SWP/UICC isn’t the only game in town any more because of the spread of embedded SEs and removable SEs (eg SD cards).

The NFC interface is all the rage. ZTE said all of their new handsets would be NFC, Nokia had already said that all new smartphones announced in 2011 would be NFC, Blackberry said NFC was central to their strategy, an NFC iPhone is rumoured. Some of these handsets contain their own SEs. For example, the Android Nexus. How many times have I bored people to death on this blog, and at conferences, by complaining that the business side of some organisations (and their management consultants) don’t understand the relationship between nerdy technical decisions being made over the last couple of years and the business models that they enable or constrain? One of the first of the mass-market NFC_enabled handsets, the Google Nexus S, illustrates this rather well. The onboard SE is the widely used SmartMX.

The Nexus S comes with a PN65N from NXP. This chip is a combination of the PN544 NFC controller and an embedded SmartMX secure element.

[From Uncovered: The hidden NFC potential of the Google Nexus S and the Nokia C7 • NFC World]

This means, of course, that anyone with access to the SmartMX embedded SE can run secure applications (eg, credit cards) without going through the operator’s TSM etc. You may even have applications split between the two, so your O2 Money prepaid card is on your UICC (say) whereas your Visa debit card is in the handset. Both of them could be accessed through the same mobile wallet. Note that in order to create and access SDs you need keys — a big part of of our work on other mobile secure applications to go into various handsets (eg, for banks) is working out the key management strategies for these Global Platform (GP)-based SEs — so someone is still in control of the SE (hint: not the operator), but the framework in which you can do this is there.

Here’s what we did next: Download the source (actually from CyanogenMod 7 to have the full build environment for the new Nexus S), make the appropriate changes to the code, recompile everything and put it back into the phone and it works — Nexus S supports card emulation and SWP… Then we developed an Android app which we call “The Secure Element Manager” that gives the user full control over the secure element in the phone as well as the NFC chip.

[From Uncovered: The hidden NFC potential of the Google Nexus S and the Nokia C7 • NFC World]

This is getting so interesting. In the early days of NFC, I wrote once or twice about the need for “open” SDs (that is, SE SDs that are not under the control of the mobile operator) because I suspect they will be the home of innovation. Perhaps all Android handsets should come with one open SD on the SE for people to experiment with. Of course, there still has to be a structure for, say, banks to obtain their SDs (you wouldn’t want to share an SD with anyone else, because the SD contains things like security keys).

Talking about Android, that really was the story of the show, I think. (Someone joked that next year they should call it the Android World Congress.) I even know a couple of people who have switched from iPhones to Android, which seems to be a barometer of change!

All in all, the show was a great place to catch up with a whole bunch of friends from around the industry and the exhibition was mildly interesting (to me, I stress, since I don’t really care about adding Facebook buttons to phones and that sort of thing), but satisfactory progress on the inevitable march towards mass-market digital money and victory in the war against cash** that has been made winnable by the device formerly known as the mobile phone.

* The awards dinner featured: Jonathan Ross, who was less objectionable than I had expected, and entirely unknown to the majority of the audience; a Canadian indie rock band called Metric, who I’d never heard of but were mildly interesting; and the Welsh singer Duffy, who I’d never heard of, and was OK but not really my cup of tea (I’d been listening to Molotov on the subway on the way over). Many thanks to Rory Cellan-Jones from the BBC and Matt Warman of The Daily Telegraph for the company and conversation.

** The war on cash wasn’t going very well in Barcelona. In one of the bars, I saw a chap pay with a €500 note. I was sure it would be refused, but the patron accepted it cheerfully and returned the 480-ish euros in change. Either the customer was a regular or I stumbled across a rather blatant money-laundering operation.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

Price in practice

When I was checking in to a hotel the other day, I saw a sign on the counter advising that there would be a £2.50 surcharge for paying by credit card. Naturally, I asked the receptionist about the impact of explicit pricing of payment instruments on customer preferences (remember, I do this so you don’t have to). I’m interested in both why retailers do this and what impact it has on their customers.

She told me that it made no difference to business customers, because they aren’t paying the bill and they always pay with credit cards anyway, and many of them pay with corporate credit cards and there are no corporate debit cards. For personal customers, most of them paid by debit card anyway, but the surcharge had pushed even more of them in that direction, to the point where probably four-fifths of personal customers paid with debit cards. Of the remainder, most paid with credit cards but some paid with cash. I thought it would be impolite to enquire further as to whether the cash payers were predominantly drug dealers, prostitutes or (given the location of the hotel) politicians.

Are these results typical? To what extent pricing drives payment choices is uncertain. In some cases (remember the case study of IKEA steering customers to debit in the UK) it clearly does, in other cases — such as my favourite case study of the parking at Woking station, where it costs 40p extra to pay by mobile, and half the customers do it — it doesn’t. In theory, though, there’s nothing wrong with the idea of making the costs explicit and then letting the market choose. Except… A little while back, Deborah Baxley of Capgemini (talking about the US environment) wondered if the appearance of explicit pricing for payment instruments (in itself, a good thing) might lead to a perverse outcome as merchants seek to externalise the cost of payments.

Merchants benefit from lower acceptance costs for debit cards. In a surprising twist, incentives and steering could have the perverse result of driving consumers toward cash and checks.

[From Changing the Game in Cards – pymnts.com]

I think this is a realistic projection, especially given that merchants don’t care about the costs they impose on the rest of society by driving up the use of cash and because customers simply do not pay the real cost of cash or checks. I would love for this to change, but it’s not going to. It’s reasonable to wonder, in response, whether banks can use EMV, NFC, SMS or some other TLA (three letter acronym) to generate added-value around payment transactions and thus stem the shift to cash. In the case of NFC, I think they probably can. Since NFC is now entering the consumer market, it might be time to firm up on some value-adding plans. This has been clear, I think, for some time.

Last week Google confirmed that Android 2.3 will support Near Field Communication, as will Nokia and RIM smartphones, starting next year. And judging from Apple’s recent hiring of an NFC expert, and patent filings for a probably-NFC-powered iTravel app, the iPhone 5 will boast NFC too.

[From I Have Seen The Future, And It Looks A Lot Like Bump (Without The Bump)]

But just because the idea has been around for some time, that doesn’t mean that finding genuinely value-adding applications around technologies such as NFC is easy. But I digress: the clear problem is that when you make the pricing of things explicit, then that pricing appears in the first instance to show an increase. Hence the perverse thinking that emerges.

Banks have never lost out because of their gracious generosity in allowing customers to use cheque books, debit cards or cash machines for free.

[From The end of free banking would be another slap in the face | Chris Leslie | Comment is free | guardian.co.uk]

This is what people in the UK genuinely believe. I have no idea who they think pays for all of this stuff (hint: you do) but it does make it very difficult to introduce “real” pricing that allows consumers to make informed choices. This real pricing would take offline prepaid debit as the benchmark and then price everything else from there: debit, then probably cash, then credit, then cheques, that sort of thing. Then the consumer preferences would be meaningful.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

The magic number

William Long and Kai Zhang, from our friends at Sidley & Austin, present a typically good summary of the main issues raised in the consultations preceding the implementation of the new E-Money Directive (EMD) in the UK in the recent issue of E-Finance & Payments Law & Policy (December 2010).

Generally speaking, things look very positive. The capital requirements are being relaxed so that anyone who wants to provide e-money services probably can do with too much trouble, so I predict that you’ll see some major companies moving in now. The prime candidates to offer services are probably telecommunications operators and retailers, but transit operators, event managers, corporate “campus” suppliers and others will surely seize the opportunity. Some have already declared their intentions.

O2 will apply for an e-money licence this year, signalling its commitment to support contactless payments in the UK in the near future.

[From O2 to apply for e-money licence to support NFC payments – 2/2/2011 – Computer Weekly]

The French operators announced a similar move this week. I can’t resist noting that this is precisely the strategy that we recommended to mobile operators a couple of years ago (that is, use the upcoming PSD/ELMI changes to start their own payment businesses). Competition is good for innovation, and bringing these new players into the payments business will be very positive for all of us.

The interest of mobile operators is natural, and they have to move quickly to avoid being cut out of the loop by handset-based secure element providers (eg, Apple) who may move quicker than the UICC-based secure element providers (eg, mobile operators). The interest of the transit operators is also natural, since they have the cards out there in peoples’ pockets. I still think that we’ve yet to see the really big plays yet: these will come from the retailers, just as they are in the US.

Kmart has begun testing check cashing, money transfers and prepaid cards in stores in Illinois, California and Puerto Rico, with plans to roll out the services nationally later this year. Best Buy has installed kiosks in its stores for shoppers to pay utility, cable and phone bills. Wal-Mart has opened roughly 1,500 MoneyCenters that process as many as 5 million transactions each week.

[From Retailers offer financial services to ‘unbanked’]

The use of retailer-issued e-money pre-paid products as a low-cost alternative to bank accounts for the excluded is a win-win. It takes unprofitable customers away from the banks and gives those customers more convenient services. And the retailers could steer customers to use these products at POS, thus saving on their payment processing costs. Personally, I think the prepaid market is not competitive enough (the charges are still too high) but new entrants enabled by the ELMI, new entrants with economies of scale (such as high street retailers), could open up the market and drive down costs very quickly.

Finally, I was also very excited to note in the article that the Treasury is considering my idea of making the balance limit for simplified due diligence (under the Third Anti-Money Laundering Directive) for low-value electronic money “accounts” the same as the value of the largest banknote: in this case, €500. Although they are only looking at this for non-reloadable devices, I think this should be the guiding principle for reloadable devices as well. The link between the two, the “magic number”, is entirely symbolic: it doesn’t mean anything at all, but it’s a good focus for debate.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

It’s a card Jim, but not as we know it

[Dave Birch] The issue about EMV migration continues to attract attention and discussion as the US and EU become two regions divided by a common standard, as one might say. The problems with using US-issued magnetic stripe cards (dynamic or otherwise) elsewhere are becoming more common and more serious. Take this representative tale of woe from Business Week, concerning an American stuck in Europe following volcanic misbehaviour in the North Atlantic.

Burke stood in line for more than seven hours at an Amsterdam train station in April as he sought passage to Belgium. He watched European travelers, also grounded by the eruption, buy tickets at automated kiosks that accepted microchip-embedded credit cards. Burke’s Bank of America (BAC)-issued Visa (V) card, with the standard magnetic stripe on the back, was useless. When the 64-year-old retired economist from Bandon, Ore., returned home, he called Bank of America to ask whether he could get a chip card. The answer disappointed him: “They have basically said, ‘Sorry, but you’re out of luck.’ “

[From Why U.S. Credit Cards May Not Work Abroad – BusinessWeek]

How they resisted the temptation to say “it’s card Jim, but not as we know it” I’ll never know. But there’s a serious point to all this: the end of the universal acceptance. It’s always been a pretty fundamental consumer characteristic of the international card schemes that customers expect to be able to use the cards wherever they see the acceptance mark, but how much longer can this last? I mean, I know it’s my business to mess around with different, new cards (and near-cards) all the time, but I do find it slightly worrying that I can no longer tell when going to buy something whether my cards will be accepted or not. It’s worse for our American friends, because the transition to chip and PIN makes it more attractive to have unattended POS for higher-value transactions.

The problem is particularly acute at automated kiosks in Europe, such as the vending machines at regional rail stations and bicycle rental racks in Paris, parking meters in parts of London, toll roads and gas stations, all of which accept only chip-and-PIN cards. And the problem could get worse. More unattended pay stations are appearing in Europe.

[From Americans abroad run into trouble using credit cards – USATODAY.com]

I don’t know what proportion of US cardholders travel to Europe, or indeed anywhere else, but I imagine it’s quite low. So, we’re soon going to see a situation where unless US issuers provide chip and PIN cards to those cardholders, they will start to find their cards useless. At which point, they might be vulnerable to an assault from Bling or Isis or whoever.

In line with Europol’s stance on the future of the magnetic stripe and in support of the industry’s efforts to enhance the security of cards transactions by migrating from the “magnetic stripe” to “EMV chip” cards, the Eurosystem considers that, to ensure a gradual migration, from 2012 onwards, all newly issued SEPA cards should be issued, by default, as “chip-only” cards.

[From The end for the magnetic stripe on payment cards?]

Of course, the reverse will also be true. Persons such as myself who travel to the US will have to obtain magnetic stripe cards from their banks. I already have a Travelex $ Cash Passport stripe-only prepaid card that I take to the US with me, and I really wouldn’t have a problem with paying a couple of quid to my issuer to get a stripe-only limited-time card for use in the US when I travel there. I would also like the ability to limit my Barclays Visa debit card to ATM-only use in the US. I’m not alone in thinking about this sort of thing.

In the first poll 60% of the respondents felt that European EMV cards should not hold sensitive cardholder data as standard in a magnetic stripe, and in the second poll 28% indicated that they would be happy to contact their bank to activate the stripe on their card before travelling outside of Europe, 12% were happy to carry a Chip only card, and to apply for a separate stripe card should they need to travel outside Europe, and 20% were in favour of both.

[From The end for the magnetic stripe on payment cards?]

How do we balance this out? What is the appropriate strategy in the US? We might categorise the broad options as migrate to EMV (very expensive), keep stripe and issue EMV to international travellers (very inexpensive) or forget about stripe and chip and (via contactless) let them fade away as we move to NFC, mobile, biometrics and other forms of 21st-century payment (costs utterly unknown).

Clipper chips

[Dave Birch] I've read quite a few stories about the new Citi card with a chip in it. Not an EMV chip, of course, but a chip that allows the cardholder to dynamically rewrite the "magnetic stripe" on the back of the card so that it can switches between a credit card and a rewards card.

Next month, Citibank will begin testing a card that has two buttons and tiny lights that allow users to choose at the register whether they want to pay with rewards points or credit, at most any merchant they please.

[From The Mundane Credit Card Gets a Modern Makeover – NYTimes.com]

These are the "dynamic stripe" cards from Dynamics. The idea of them is that since US retailers are not going to replace magnetic stripe readers with chip readers, the way to deliver new services to customers is by emulating the magnetic stripe.

Called “Redemption,” the cards will work at any merchant where mag stripe readers are used. The new cards include programmable and electronic components such as a battery, an embedded chip, buttons and a card-programmable magnetic stripe.

[From Citi’s Pushes Buttons With 2G – Bank Technology News]

You can see how this kind of thing might have a window in the US where the retailers don't have chip terminals. It would make no sense anywhere else: in the UK, for example, Barclaycard's new Freedom rewards programme works at the POS so when you put your card in it asks you if you want to pay with Pounds or Points, which seems much easier than press a button the card, but anyway. And if you try to use a magnetic stripe card in a UK terminal, whether it's dynamic or not, they'll assume you're a fraudster and call the police.

So why do I say that using this kind of technology in the US may have a window?

Well, consider the example of the Cutty Sark. The Cutty Sark was a tea clipper, built for speed, and at one time was the fastest ship of its size afloat, famously beating the fastest steamship afloat and doing the Australia to UK run in 67 days. At the time, get tea from Asia to Europe at high speed was economically important and so there was pressure from the tea companies to get the fastest ships (so they weren't built just for the fun of it, or to show off the technology, but because of the economic imperative.

What's the point of brining this up? Well, it makes the point that the fastest sailing ship was built after the steamships arrived. In Christopher Freeman and Francisco Louca's "As Time Goes By: From the industrial revolutions to the information revolution" they note that

However, it had taken a fairly long time for the steamship to defeat competition from sailing ships, which also began to use iron hulls. The competitive innovations in sailing ships are sometimes described to this day as the 'sailing ship effect', to indicate this possibility in technological competition for a threatened industry.

In the long run, the sailing ships vanished, except for leisure, and the steamships took over. But when the steamships first came on to the scene they stimulated a final burst of innovation from the sailing ship world, which was then stimulated into building some great ships as a kind of "last hurrah".

Source: Historic Naval Ships Assocation (2004).

Perhaps we should look at the Citi initiative as the "last hurrah" of the magnetic stripe. I bumped into our good friend Adrian Cannon from Edgar Dunn while I was writing this, and he summed it up as "a very complicated way to achieve a partial answer" to the problem of card security, which strikes me as an accurate description.

Unprotected text

[Dave Birch] When I checked in to PayPal X "Innovate 2010" I was given a free "Bling Powered by PayPal" sticker with a free $10 on it to spend at local merchants (such as the diner round the corner). Hurrah!


A helpful young chap explained to me that I had to text the sticker number to 78787 to activate it, so I did, and then I got this puzzling response.


I showed it to the chap, and he explained to me that Bling and PayPal are discriminating against foreigners and that the short code only works if you have an American phone number: if you have an international phone number, you have to pay for you own breakfast at the diner! Fair enough: there is a bit of backlash against immigrants in the US at the moment. But they should have told me before I texted my Bling sticker number to a UK "dating" service. I just got this message…


Unlike e-mail, there's no junk filter for text so I can't put this number onto a kill list or send the messages into junk mail automatically. I hope my wife is reading this.

Cards on a plane

[Dave Birch] When I was last on a domestic US flight, I very much enjoyed hearing the announcement that beer and wine were available for $4 and $5 respectively but that “Continental Airlines is no longer accepting cash so please have your debit, credit or charge card ready”. Ah, music to my ears. When the stewardess came along with the drinks trolley, none of the passengers that I could see appeared to mind in the least. Perhaps they had given up complaining, but it’s more likely that there was no-one over 21 on the flight without a debit card and probably none of them without a credit card either.

In the closed ecosystem of the airplane, everyone can see that cash isn’t efficient. It has to be collected, transported, protected, managed and counted. A waste of everyone’s time. Electronic payments save money throughout the ecosystem. This is true for society as a whole, but in an excellent paper on “The Single European Cash Area” in the current issue of the Journal of Payment Systems and Strategy, Carlo de Meijer of RBS asks why we still use cash so much when it imposes such high costs on us all. He says that

…most citizens still believe cash is free of charge. That, however, is a misconception… Cash is expensive because it has higher production costs, costs of storage, distribution and security measures. And there are other costs for society, such a fraud and tax evasion.

He’s absolutely correct, of course. It’s reasonable to observe though, that not everyone has a card to pay with, and even I wouldn’t go so far as saying that anyone who doesn’t have a card is a drug dealer, corrupt politician or perhaps even a terrorist — unlike the British government, apparently.

A recent British radio advertisement for the anti- terrorist hotline urged listeners to call if they spotted a neighbour behaving unusually. Such odd behaviour included, “He pays with cash, because he doesn’t have a bank card”.

The advertisement has now been banned by the Advertising Standards Authority, because it encouraged listeners to report people for doing something which is perfectly legal

[From When cash is king | Stuff.co.nz]

But the day will certainly come when paying with cash is regarded as odd. Perhaps in my local Waitrose you will have to go to the special checkout to pay with cash, the plumber will refuse to accept cash because he think it may be part of an HMRC sting operation and the kids won’t want cash pocket money but it’s just plain uncool. We’re not there yet, but we should be.

Basic cash registers — and really, cash itself — are analog dinosaurs in the digital jungle of financial transactions. It’s time for them to check out.

[From Ten technologies that should be extinct (but aren’t) – Technology & science – Tech and gadgets – PC World – msnbc.com]

How true.

Contactless front line

[Dave Birch] You may have noticed the announcement of a new contactless purse/loyalty scheme in the UK.

UK coffee chain Coffee Republic has teamed up with electronic money operator sQuidcard to launch the Coffee Republic contactless prepaid ‘Payment and Loyalty’ card.

[From The Paypers. Insights in payments.]

I asked Forum friend Adam Smith at sQuidcard for a card and he was kind enough to send me one. I logged on to their web site, registered, loaded a tenner and looked forward to my first contactless loyalty experience.

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