Archives for February 2013
- Would the QR code identify the customer, the merchant’s payment request or just the merchant?
- Would the customers be asked to register their bank account details with MCX wallet in the cloud? I can imaging this would be a big stumbling block for many consumers.
- Will the transaction be based on ACH debit or credit?
- If it’s debit, how will the authorisation happen? If there is no authorisation, will the fraud costs just become unacceptably high negating any savings on the interchange? There is speculation that consumers would be asked to register their debit card, which would be used for authorisation over card network rails, and then the transaction would convert into an ACH debit for clearing and settlement. If that’s the case, the overall transcation costs need to include the authorisation fee as well. And it sounds very similar to many decoupled debit propositions, most of which have failed to ignite the market so far.
- If it’s credit, the authorisation challenge turns into the authentication challenge. One way to solve it would be to ask a customer to log-in to their bank account (e.g. through a mobile banking app) and authorise a payment to the merchant. Somebody would also need to pass a token to the customer’s bank with the payment request details. This is pretty much how Online Banking ePayments (OBeP) networks work; however, attempts to build such a network in the US (e.g. NACHA’s Secure Vault Payments) have again had limited success so far.
The last Government let the established players off the hook by failing to implement the conclusions of the review they themselves commissioned, and allowing the big existing banks to regulate themselves.This is somewhat fudging the issue. The recommendations were from the OFT, who are supposed to be independent and apolitical, and most of the recommendations were put in place, despite many in the payments industry being unconvinced that these changes would actually improve matters. Indeed, there is, so far as I am aware, no definitive study to have even measured whether the changes had achieved what they had set out to do. Indeed, I would suggest that the cheque debacle was in part due to the changes, and that the Government cannot and should not continue to try and use sloping shoulders to absolve itself from its role. But the most telling point was this statement:
And it’s a bit like the electricity grid, every person and every business needs to be plugged into them to enter the banking market. ……And it other walks of life, like telecoms, we don’t operate like that.In both cases (electricity and telecoms), the infrastructure piece of the puzzle is moving in the exact opposite direction to that George is proposing. The electricity market structure was created by the Government, and is widely perceived to have failed the customer. The telecoms market is seeing that either it’s a specialist market with each building their own network (dataworks, landlines) or that the infrastructure isn’t a competitive differentiator, and are moving to sharing, or even selling their networks. Now there are some broad brush statements but far more granular than those George made. Indeed, some other statements were laughable, but more worryingly showed a complete lack of understanding of even the basics or business sense. So here’s my manifesto, assuming that this is happening regardless.
- A clear statement of objectives, because currently they aren’t and are just populist in nature
- A clear statement of assumptions. They seem to want the infrastructure to be both commercial and nationalised. It patently can’t be both, so which is it?
- A clear statement of the costs and benefits, and to whom, for making the changes. For example, cheques are free to consumers. They could be cleared faster, but that will cost A LOT of money. They’d also, probably, have to legislate/force/bribe a private company, Unisys, to do it! So – who pays? And will that really matter? And what are the consequences?
- Be bold. Every other country bar one in the world is to trying to, or already has, abolish cheques, yet it seems George wants us to invest massively in them. Do the right thing, not the vote winning thing.
ATM sales have stalled over the past few years to no surprize. We probably have enough of them deployed – in developed countries at least. But what if there were a credible alternative to ATMs for cash dispensing? Apple apparently thinks it has one. It has filed a patent application accordingly. I was made aware of this courtesy of Janney Capital Markets.Forget Digital Wallet. Apple Wants to Turn YOU Into an ATM Via Ad-Hoc Cash Dispensing Network A recent patent application filed by Apple (AAPL – $456.83; Buy, Janney analyst Bill Choi), describes an iTunes-based ATM network. “Need some quick cash right now and there’s no ATM around? Launch the Cash app, and tell it how much do you need. The app picks up your location, and sends the request for cash to nearby iPhone users. When someone agrees to front you $20, his location is shown to you on the map. You go to that person, pick up the bill and confirm the transaction on your iPhone. $20 plus a small service fee is deducted from your iTunes account and deposited to the guy who gave you the cash.” The patent application makes 24 claims and makes interesting reading. The idea invites a few questions…
- Could Apple pull it off? Effortlessly! It has all the requisite components: a critical mass of iPhone users, geolocation enabled on the vast majority (I think), a distribution mechanism for the requisite apps and its iTunes accounts each iPhone user must maintain.
- Would anyone use it? That invites a less obvious answer. Both Apple and the cash provider would need some incentive. Research suggests consumers aren’t fond of ATM surcharge fees, particularly as they grow over a couple of bucks. The fee structure would be key as would the user experience. A few attempts with poor response, or fast response by a total jerk, for example, would likely present an adoption barrier.