- Asking for zip code as authorisation seems pointless – if I’ve stolen a purse or wallet with cards in, I’m likely to have either the zip code already or have enough info to find it within seconds on the internet
- Asking for a signature, yet not even checking it seems odd. Perhaps I have an honest face or perhaps the risk didn’t warrant the effort
- Photo ID, at least for non-US, seems pointless. How many people can spot fake ID, or know what a, say, Latvian national ID card looks like?
August 27, 2015 by Leave a Comment
In my last post, I talked about the experience of using my credit card in the US, and how just inconsistent it feels. Some of it was undoubtedly tied to security – using photo ID or entering zip codes – though I’m far from convinced that they provided any security at all. In some conversations we’ve had, there has been a feeling that US fraud is actually manageable at an industry level – a belief that they are in line or better than in many other countries. Yet the recent figures from Nilson seem to paint a very different picture. Whilst accounting for 21.4% or $6.187 trillion of total volume last year, the US accounted for 48.2% or $7.86 billion of gross losses worldwide on plastic cards. Zil has – and will! – discuss the implementation of EMV at length with anyone, so I won’t discuss that here. What struck me was how ineffective the checks were currently. As a consumer (rather than a payments geek) it struck me:
June 11, 2015 by Leave a Comment
About a year ago, I decided to embark on a journey of researching vendors and service providers in card management and transaction processing (CMTP). While I have been writing extensively about emerging payments (and will continue to do so), the reality is that many of these payments still rely on cards and the supporting infrastructures. Yet, as the transaction types proliferate, some of those older infrastructures are struggling to cope. If I were at a bank looking to either establish or upgrade our CMTP capabilities, I would want to know: What options do I have? How should I approach the challenge? Who can I turn to for help? The good news is that banks and other institutions seeking help with card management and transaction processing technologies don’t have to face the challenge alone. Depending on their requirements, they can enlist help from packaged software vendors, issuer processors and professional services firms. It has been a massive undertaking, but I am pleased to announce that today Celent published four new reports with details on CMTP vendors. We engaged with over 30 vendors and there is a lot of detail – the reports collectively go to nearly 300 pages. Part I is an overview of the vendor landscape, and Parts II-IV have detailed vendor profiles for 27 companies below:
- 11 packaged software vendors: ACI Worldwide, BPC, Compass Plus, CSC, Intellect, NCR Alaric, OpenWay, Sopra, Sungard, TAS Group and Tieto.
- 8 issuer processors: First Data, FIS, Fiserv, HP, Jack Henry, MasterCard, Nets and TSYS.
- 8 professional services firms: Accenture, Capgemini, Cognizant, HCL, Infosys, Mphasis, TCS, and Wipro.
January 8, 2015 by Leave a Comment
I travel. A lot. And in the spirit of full disclosure, Delta and Starwood are my go-to airline and hotel chain. It helps that they have a mutually reinforcing arrangement whereby I receive miles for my Starwood stays and SPG points for my Delta flights. It just so happens that I’d already settled on these two, so I didn’t have to change my alliances, but on balance, even had I been another hotel patron, this alliance would have weighed heavily when deciding where to lay my head on the road. It helps, too, that Delta status gives me SPG benefits (late checkout, etc.), and vice versa. This is a nice extension beyond the airline code-share alliances of OneWorld, StarAlliance and SkyTeam. Because of my travel I tend to pay attention to emails and offers that many might ignore. The most recent was a note that I recently received from Hertz offering to bump me up in Hertz status if I had a certain level on Delta. I rent cars much less frequently than I fly or stay at hotels, but it’s easy to guess which car rental company I’ll be sure to use in the future. What does this have to do with banking? Credit card companies already partner with airlines (e.g., Delta and AMEX, American and Citi) and banks cooperate with merchants to offer Merchant Funded Rewards, but these are relatively superficial. What might the next, more substantive, level of partnering look like? Are there opportunities for deeper symbiotic relationships with retailers, phone or cable companies, or the like? The details will vary depending on the industry, but as we kick off the new year, it’s an interesting strategic question for banks to consider.
May 2, 2014 by Leave a Comment
I just spent a couple of fascinating days attending Finextra Future Money in London. The content of the event has already been well covered via a Twitter feed, and Finextra’s own live blogs and a post-event summary. I would strongly encourage to click on those links, as the discussions have been interesting, informative, sometimes provocative and always lively. Rather than trying to summarise all the ideas over the last couple of days, I just wanted to highlight and give thanks to:
- Everyone at Finextra, but especially Liz Lumley and Nick Hastings, for putting together a great event and for inviting me to moderate a panel on Convergent Commerce.
- All my panelists – Danielle Anderson (Harris and Hoole), Arun Glendinning (Birdback), Eddie Keal (IBM), Peter Keenan (Zapp) and Paul Thomalla (ACI) – for their insights and making the hour allocated to the panel fly by.
- Richard Brown (IBM), as I never heard anyone speak so clearly and eloquently about cryptocurrencies and their impact on the future of finance.
- Dave Birch (Consult Hyperion), who could probably moderate a panel of actuaries and still make it informative AND entertaining (with apologies to any actuaries!) Given that here both his topic (banking apps and APIs) and panelists were genuinely interesting, it is no surprise that it was perhaps the best session over the two days.
- Bankers, such as Alessandro Hatami (Lloyds), Pol Navarro (Banco Sabadell), Brigid Whoriskey (RBS) and others who bravely presented, engaged and sparred with an audience and sometimes even fellow panelists feisty enough to suggest that “PingIt is nothing more than a PR exercise” or that “Western Union/ SWIFT shouldn’t/ won’t exist in the near future.”
- Everyone with whom I had the pleasure and privilege to chat during the networking breaks.
March 21, 2014 by Leave a Comment
Last week I had the pleasure of attending BAI Payments Connect. It is one of those events that has always been on my radar but for one reason or another I never had the opportunity to go. And I was very impressed with it all, particularly with the quality of the conference sessions, which seemed to have been well curated by the organizers. The event was just the right size – not too big to be overwhelming, and not too small. It also had the right balance between “new and shiny”, i.e. things that will matter tomorrow and “down to earth”, i.e. issues that matter today. With four parallel tracks, there was no way to attend all the sessions. As a result, I didn’t attend too many sessions in the fraud or payments operations & check image tracks. So below is definitely not a full summary of the conference, but just a few of my personal key takeaways:
- Real-time payments are firmly agenda for the US. There is still much debate about what ‘real-time’ really means and what is the best way to achieve it, as indicated by Bob Meara’s blog about the same-day ACH initiative. At the conference the Fed representatives shared the results of the public consultation on payments system improvement. The Fed received about 200 responses. More than three quarters of respondents agreed that ubiquitous participation, confirmation of good funds and both speedy payment settlement and delivery of information would be important. However, many also suggested that near real-time confirmation of good funds and notification are more important than near real-time posting to end-user accounts and interbank settlement. And opinions certainly were divided on how to achieve near real-time delivery of payments. Some advocated limiting any future faster payment options to credit (push) payments to help prevent fraud. The Fed is going to work on defining and prioritizing the US payment system improvement initiatives and expects to communicate these plans in a paper to be published in the second half of 2014.
- PIN debit networks are continuing to promote PIN-less debit transactions, including at the POS. Visa and MasterCard implemented signature-less transactions at merchants a few years back and raised the limit to $50 in 2012. PIN debit networks responded by also allowing PIN-less routing for transactions under $50. PIN networks tend to have lower interchange rates, but also lower overall fees to stay competitive for the issuers. Nevertheless, it was intriguing to hear one credit union CFO saying that their revenue per transaction declined from 114bps to 94bps. While some of the decline can be attributed to a rising share of PIN-less debit transactions, another reason is PayPal. Having managed to convince a large number of customers to register their bank account as a funding source, PayPal now tops the ACH transactions, above billing, for that particular credit union. Which is related to the next point below…
- Decoupled debit is not dead. While some decoupled debit initiatives, most notably Tempo, have disappeared off the market, PayPal and ACH cards, such as Target Red, are arguably very similar products. With retailer-led mobile initiatives coming into play, such as MCX, “decoupled debit”, i.e. replacing a card transaction with direct debit on a bank account, may have a meaningful impact on the growth of card transactions.
- Bitcoin: forget the currency, focus on technology. This is the same message I already highlighted in my recent report on Top Retail Payment Trends, but was reinforced again in a hugely informative and entertaining presentation at the conference. Blockchain, a distributed open public ledger with appropriate cryptography, could be used to prevent “double spending” of any digital asset, not just money.
January 13, 2014 by Leave a Comment
Last week I published a new report called “Retail Payments Market in Japan: A Land of Contrasts and Opportunity” – an overview aimed primarily at those seeking to get an introduction to payments in Japan. Our clients know that we don’t publish country-specific reports that often; instead, we tend to focus on themes and topics that have relevance in multiple markets. However, I had the opportunity to take a closer look at the Japanese retail payments market as part of a consulting engagement last year. Given how different and interesting the market is, I couldn’t resist the temptation to share the findings with our clients. It really is a land of contrasts. Despite Japan’s deserved reputation as an advanced payments market, it remains a cash-heavy society. Credit cards are popular, although the numbers have remained flat in recent years. On the other hand, transactions on debit cards are virtually non-existent. Credit cards are issued by a broad range of companies, not just banks, and most serve as both issuers and acquirers. The e-commerce market is large and fast growing, and it has a number of unique payment methods, such as konbini. Japan is often presented as an advanced case of mobile contactless payments, but those have been based on a proprietary standard (Sony Felica) and only now the country is starting to migrate to NFC payments. The report explores all these and other trends in much more detail. It’s also a land of opportunities. Based on our analysis, we see opportunities falling into three categories with different risk and investment profiles:
- A mobile app with sophisticated capabilities for cardholders to manage their cards and engage with their finances should be a “no regret” move for nearly all issuers.
- Some opportunities require a clear business case decision. Examples include card-based money transfer services, m-POS services, and targeted offers, coupons and rewards.
- Finally, Japanese issuers and their partners should make careful decisions where to place their bets and what kind of business model to pursue in mobile payments, as those opportunities represent relatively high investment and risk.
November 15, 2013 by Leave a Comment
In the last day or so, the news of Isis national launch (see my earlier blog) nearly got drowned by all the excitement generated by Coin. Dubbed as an answer to “Costanza wallet”, it is a single card to which you can link up to eight of your regular payment and loyalty cards. At a checkout you decide which of those cards you want to use by pressing a button on your Coin card, which instantly re-programs the Coin’s magstripe with appropriate details. From then on, the transaction is exactly the same as with a regular card, which is a huge benefit, as it minimizes what you as a customer have to learn and merchants don’t have to change anything to accept it. To link the cards in the first place, you get a Square-like dongle, which allows you to swipe the cards to capture the details into the Coin app. Add the card image to help you choose between cards, and you are good to go. The app would only accept cards issued in the same name as the one registered on the app. The idea is not entirely new. For example, it is very similar to the Dynamics card which can also re-program a magstripe at the touch of a button. Wallaby Financial also offers a single card to replace all other credit cards, and in fact, promises to add intelligence by automatically selecting the card for the customer based on optimizing the rewards. In fact the similarities with Dynamics are such that Sean Sposito, an American Banker journalist, tweeted yesterday asking if there might be some patent-related issues here. However, the big difference between the two offerings is that Dynamics has been working with the issuers and has in the last year re-focused its efforts on loyalty play via its ePlate card. Coin is a consumer-oriented product – a customer has to buy it just like they would buy a leather wallet. And that is one potential challenge Coin will face when trying to gain mass adoption. When it launches in 6 months, it will cost $100, although it is possible to pre-order one now for $50 plus $5 shipping charge. The company exceeded its pre-order target of $50,000 in just 40 minutes, so it clearly captured the imagination of a 1,000+ early adopters. Whether the average “man on the street” will be willing to fork out remains to be seen, although I suspect the prices will drop with scale. Also, apparently the card’s internal battery will last for 2 years, so the customer will have to replace the Coin card more frequently than their regular plastic cards… In addition to reducing the bulge in consumer wallets, Coin seeks to solve a familiar problem of customers leaving their cards behind after a payment (e.g. at the restaurants). The Coin card communicates with the customer’s phone via Bluetooth and automatically disables itself if the phone is out of reach for more than 10 minutes. Which is great for security, but might present problems for customers when their phone battery runs out. There is also a question of branding. The prototype card looks very simple and cool, but understandably does not carry any network or issuer brands. In that sense it is similar to PayPal and other digital wallets which can carry multiple cards, but at least with digital wallets, the customer is still exposed more frequently to the card image and related branding via the phone screen. In this case, once the cards are loaded, they are replaced with a short nickname which is used to select the card when pressing a button. Finally, I am aware that there has been slow progress on EMV migration in the US so far (look out for my upcoming report on that subject), but 6 months down the line when Coin is due to start shipping, we should have a better sense of when EMV is going to arrive at scale in the US. And when it does, I don’t think the issuers will want their expensive EMV cards be hidden behind a fancy although still magstripe card. Will Coin have to be upgraded before it gains any real traction? Undoubtedly, Coin is a slick product and certainly got our attention. I am sure there will be quite a few real customers that will want to have it as well. However, the payments Holy Grail might be as unattainable as the real one, and my prediction is that Coin will simply join the growing plethora of solutions that the customers and merchants will be choosing from.
July 22, 2013 by 2 Comments
On Wednesday, July 24th, the European Commission will publish 2 widely anticipated documents. The first is the PSD II, updating the existing PSD (Payment Services Directive). The second is a new piece of proposed legislation around interchange. Interchange in Europe has long been an area of focus for the Commission, with over 30 significant investigations in the last 15 years at either country or European level. Many of these have been very public and, perhaps “personal”, with Visa and MasterCard receiving the majority of the attention. The interchange regulation therefore is anticipated with some trepidation as the Commission is seeking to draw a line under the investigations once and for all. Last week, the FT ran article based on a leaked copy of a draft of the proposal. That draft contained a range of issues, but those that have grabbed the biggest share of attention are:
- Domestic interchange rates for debit and credit to be capped at 0.2% and 0.3% respectively
- Legal separation of schemes/networks and processors
June 14, 2013 by 2 Comments
I wanted to share the exciting news that we have just published a new report called “Using Data to Create Value for All Customers: A Case Study of Bank of America’s BankAmeriDeals Program.” As many of you know, I have been following the merchant-funded rewards (MFR) space for some time now. The scale of BankAmeriDeals, Bank of America’s online and mobile cash back deals program, makes it one of the flagship implementations of MFR initiatives. I was very keen to understand what it takes to implement such a program at a large bank, what can be achieved, and what lessons can be learned. The objective of this case study was to explore these issues, specifically:
- The genesis of the program: rationale, guiding principles, and vendor selection
- Value proposition
- Technical solution
- Project timeline and program rollout
- Project team and governance
- Results and operational metrics
- Running the program within “business as usual”
- Plans for the future
May 16, 2013 by Leave a Comment
Last week saw a number of important developments at Google Wallet. Let’s recap what we’ve learned:
- Osama Bedier, the Head of Google Wallet, left the company.
- Google Wallet scrapped its plans to introduce a physical card to support purchases at the physical POS.
- Then, at Google I/O Developer conference, the company made a series of announcements about new features, such as:
- Ability to send money to friends with Gmail and Google Wallet.
- Instant Buy Android API designed for merchants and developers selling physical goods and services who are looking to simplify the checkout experience for their customers.
- Storing of payment credentials in Chrome browser to speed up check out online.
- Wallet Objects API to connect any loyalty programs, offers and more to Google Wallet.
- With email payments, Google takes on PayPal, but also many other P2P players, from Popmoney to Dwolla.
- Instant Buy Android API sounds remarkably similar to V.me and other digital wallets designed to help customers fill out their payment and shipping details at a click of a button.
- Leveraging the browser to facilitate check-out reminds me of what Dashlane is offering via its browser API.
- And Wallet Object API is almost a direct take on Apple’s Passbook down to notifications using the location services.