Mobile Payments Come to Canada

Mobile Payments Come to Canada
I recently blogged about all the different mobile payments initiatives in the UK. As if not wanting to be left behind, this week Canada had a few announcements of its own. On Monday, the Canadian Bankers Association (CBA) introduced mobile payments guidelines. And on Tuesday, Rogers Communications, a Telco, and the Canadian Imperial Bank of Commerce announced that they would be launching a mobile wallet later this year. Canada seems to have many of the ingredients for mobile payments to succeed. The banking and telco markets are relatively concentrated making it (in theory) an easier task to cooperate on industry-wide initiatives. The country has implemented EMV and is boasting one of the highest use rates of contactless cards – according to MasterCard, over 10% of their transactions in Canada are contactless. And the smartphone adoption is already high and continues to rise. However, I couldn’t help but shake off a bit of a “me too” feeling about the announcements. While the guidelines are obviously a welcome document for the Canadian market, it follows a long line of similar documents from EPC, GSMA, SCA, MobeyForum and other organisations. And the wallet announcement reminds of a Quick Tap from BarclayCard and Orange, one of the first NFC initiatives launched in the UK – it’s a single MNO, single bank and a single platform (Blackberry) solution. Given that it is a SIM-based solution, scaling on other platforms, particularly Android, should be possible. Adding more banks and more operators might prove to be more difficult. So, congratulations on taking the first steps. However, more will be needed to make mobile payments ubiquitous in Canada.

Celent Innovation and Insight Day – Panelist Sneak Peek and Registration Discount!

Celent Innovation and Insight Day – Panelist Sneak Peek and Registration Discount!
Celent Banking Innovation and Insight Day is around the corner! The response so far to this event has been tremendous and we are expecting a full house. Come join us in Charlotte on June 13th to gain a fresh perspective on the future of mobile banking and payments, tablet banking, industry disruption, and more. Celent will also be recognizing the Model Banks selected for inclusion in our annual report. I am pleased to announce that we have secured some great panelists and presenters for this event. I will provide a sneak peek for the moment, others can be found by visiting our event site. A few others are going to be announced shortly: Tablet Mania: Banking Will Never be the Same – Jimmy Dinh – Senior Director, Mobile Banking Strategy and Planning, CIBCJeff Easley, Deposits Product Manager, USAA The DisruptorsAntonio (Yobie) Benjamin – CTO, Managing Director, Citi Transaction Services and Global Enterprise Payments Yobie is also the Chairman of Citi Innovation Labs. The event is free for Celent clients. Non-clients can save $125 by registering with the following discount code: celent2012 Discount is valid through May 22nd. Full event agenda and registration can be found here.

UK Mobile Payments

UK Mobile Payments
In the last few months the UK mobile payments scene has really come alive. Assuming I have the right combination of phone/ card/ MNO/ etc., as a consumer today I can already sign up to and start using:
  • Quick Tap, an NFC payments solution from Barclaycard and Orange
  • PayTag, a contactless sticker from Barclays
  • PingIt, a mobile P2P service from Barclays (see my earlier blog)
  • Simply Tap from Mobile Money Network (see my earlier blog)
  • PayPal mobile app
  • O2 wallet, launched just last week
… and I can also look forward to the future services:
  • Mobile wallet from Vodafone and Visa partnership announced in February
  • V.me wallet from Visa – UK will be one of the first countries to launch in Europe
  • Bank account-based P2P services built on the Mobile Payments Platform being developed by the UK Payments Council and VocaLink
  • Any services built on top of the infrastructure provided by Project Oscar, a JV from the leading MNOs, provided they get the necessary approvals from the EC (see my earlier blog)
I am sure I probably missed something, but in any case, the picture is clear – many competing iniatives, both at the infrastructure level and at the consumer level. With the exception of Quick Tap and PayTag, none of the other solutions today is very useful at the point-of-sale, as most of them are either designed or launched so far as wallets for P2P money transfers and online shopping via mobile. And many suffer from early glitches around registration, or consumer experience around the application itself. I was at the UK Payment Council’s Driving Change in Payments Conference yesterday, chaired by a well-known BBC technology correspondent Rory Cellan-Jones, who joked that “you should try everything once, except for incest, line-dancing and mobile payments.” I know Rory was being deliberately provocative, but he was also highlighting some of the real issues and frustrations consumers have experienced with some of these new offerings – “1.5 hrs to register”, “days until the payment even leaves your account”, etc. Some of the challenges are understandable – if the registration process was too easy, there would be those that would complain that it’s not secure enough. Others are less so. Gareth’s 13-year-old daughter perhaps summed up the consumer sentiment best with her very sensible question “why anyone would want to deface a beautifully designed iPhone with a sticker?” For now, many consumers are hungry for new products and are willing to try things out. But if they continue to be bombarded with offerings that don’t quite deliver, there is a risk that the consumers switch off and their goodwill evaporates by the time the industry is truly ready. Many of us remember a WAP banking disaster, which put mobile banking back by nearly a decade. Today’s mobile payments don’t deserve the same fate.

The New EC Green Paper: Missed Opportunities?

The New EC Green Paper: Missed Opportunities?
It was interesting to read the European Commission’s Green Paper “Towards an integrated European market for card, internet and mobile payments” published a couple of days ago. My colleague Gareth has already provided some insightful commentary in his blog below, and I wanted to add a few further points. My first reaction was to applaud the Commission for recognising the increasing convergence of physical and online worlds and deciding to cover in this paper three types of electronic retail payments, namely cards, internet and mobile payments. However, my excitment waned as I continued reading, as the paper is mostly dominated by card-related issues with relatively little attention on internet or mobile payments. Also, in contrast to some very specific issues around cards, such as MIF, cross-border acquiring, specific scheme rules, etc., the questions related to e- and m-payments are rather vague and quite high-level. As a result, we probably shouldn’t expect the consultation feedback and responses to be concrete and actionable proposals. The paper envisages that “an integrated EU market for payment services could also produce, as a by-product, administrative data that could be used for the production of harmonised statistics.” However, it completely misses the opportunity to recognise the complexities of gathering payment statistics in the converged world, where a card payment might be initiated via a mobile phone, or where an e-wallet might be used to pay for a purchase online, whilst at the same time trigerring a card transaction to fund the wallet. Harmonised payments market by itself will not be sufficient – a common taxonomy and agreement is needed to differentiate between payment instruments and channels, and how various transcations are going to be accounted for. I couldn’t help but think that a lot of the questions and phrasings in the paper were a thinly veiled swipe at Visa and MasterCard, two recognised international schemes on which Europe also relies to provide SEPA-compliant international payment instruments. It again raises many of the sensitive issues around MIF, surcharging, co-badging, Honour All Cards rule and others, and the reader is left with a feeling that the Commission would like to see a change in many of today’s practices. I could imagine that the schemes must feel rather aggrieved and probably feel that their efforts and investments in maintaining and innovating the payments infrastructure are underappreciated by the authorities. Continuing with the theme of what’s missing from the paper, one of the most interesting ommissions to me was the fact that nowhere in the document there is any mention of the need for a third European card scheme. There are probably good reasons for it – we have been conducting some very interesting interviews in the market and will summarise our views in a forthcoming report – keep an eye on it over the next month or so. This is a consultation document and interested parties are encouraged to submit their responses to the Commission by 11 April 2012. The Commission expects that any new proposals would be adopted by Q4/12 or Q1/13, and that “any future legislative or non-legislative proposal will be accompanied by an extensive impact assessment.” In other words, it will take some time. And the risk is that the grander the vision, the bigger the likely gap between that vision and the reality, and the longer until the actual changes take place.

Squaring Off Over Mobile Payments: Verifone Delivers Low Blow to Square

Squaring Off Over Mobile Payments: Verifone Delivers Low Blow to Square
It’s no secret that the mobile payments space is heating up and there is no question that security concerns are popping up. Today, Verifone took aim at Square over security concerns with its reader. Verifone’s CEO published an “open letter to the industry” at http://www.sq-skim.com. Here are a few excerpts:
“The issue is that Square’s hardware is poorly constructed and lacks all ability to encrypt consumers’ data, creating a window for criminals to turn the device into a skimming machine in a matter of minutes.” “Consumers who hand over their plastic to merchants using Square devices are unwittingly putting themselves in danger.” “Don’t take our word for it. See for yourself by downloading the sample skimming application and viewing a video of this type of fraud in action.” “We call on Square to do the responsible thing and recall these card skimming devices from the market.”
I have no doubt that the Square reader or any other reader for that matter can be compromised. That is a SERIOUS concern and Square’s lack of encryption needs to be addressed immediately. The security is only as good as those who created it. Since it has been created by a person it can be bypassed by an even savvier person. In fact, if a fraudster wanted to steal credit card info they don’t even have to resort to fancy technology – they could use carbon paper, take a picture of the card, write down the details, etc. The big question here is whether or not security should be actively used as a competitive differentiator. I’m a believer in collaborating to defeat fraudsters. Verifone is effectively enabling fraudsters by handing off instructions to them. IF Verifone’s offering is more secure, there are more appropriate ways to communicate this. I debated whether or not to embed Verifone’s video in my blog entry simply because I don’t want to promote it. However, I would like you to watch it and weigh in on if you think this is a productive competitive move for Verifone or a sad day in the war against fraudsters. Here is the video posted by Verifone.

Mobile Payments are Hard to do Right

Mobile Payments are Hard to do Right
In my younger days as a product manager in Silicon Valley, my engineering team often told me that I can induce bugs simply by looking at the software. The system they built would always work perfectly until I attempted to use it and then, voila, when it was time to show it to me, it would crash or behave strangely. It would appear that I haven’t lost the touch. Starbucks’ mobile payment app was no match for my deadly touch. I have had similar impacts on Chase’s mobile RDC. I downloaded the Starbuck’s new mobile payment app and it worked great. I could load my card, get my balance, view reward status. It’s only when I tried to pay using the app that I encountered failure.
The bar code shows but doesn't work

The bar code shows but doesn't work

I was able to get the bar code to come up, as shown below, but when the cashier went to scan the code it simply didn’t work. She rescanned multiple times at multiple angles to the same result. Knowing that leading edge equals bleeding edge, I had back up payment ready. For mobile payments to work right, a payment provider needs to be able to 1. Provision the mobile device with secure account information. 2. Enable the mobile device to transmit the secure information to a reader. 3. Have the reader be able to understand the information transmitted. 4. Have the reader transmit this information to a payment network for approval. We made it to step two, but failed at step 3 in this particular case. An end user doesn’t care. The payment failed. While the mag stripe on a card is not very secure, it does work pretty darn well. I have a better than 99.9% success rate with this technology, and I expect any technology that replaces it to do at least as well. With both Chase’s mobile RDC and Starbucks mobile app my success rate has been 0%. My advice to mobile payment vendors: Please don’t roll out products until you have at least two nines (99%) of reliability. You’re competing against mature and reliable technologies and will destroy the image of mobile payments before they launch. In the world of social media, word gets out fast. The ratings for the app on iTunes: One Star: It doesn’t work. Testing involves using the software on a variety of platforms iPhone 3G, 3GS, 4, any number of Android phones and RIM phones. The list goes on. This gets complicated and difficult if you want to deliver even two nines of reliability. Be prepared to invest or outsource.

10 Reasons Check Volumes will Hasten their Decline in the US

10 Reasons Check Volumes will Hasten their Decline in the US
It’s certainly no news flash that US check volumes have been declining. Depending on whom you talk to 5% to 7% annual rates of decline (checks written) over the past few years seems likely. Another Federal Reserve check study is in the works this year to add precision since it has been since 2007 since the last data point. That Federal Reserve sponsored study concluded there were approximately 33 billion checks written in the US in 2006, down from nearly 38 billion in 2003. But what will the future hold? The tendency is to assume past performance is a good predictor of future results. In other words, many expect this rate of decline to continue. Here are ten reasons to suggest that won’t be the case. 1. CashEdge (www.cashedge.com) Perhaps best know for its online account opening capabilities, CashEdge has launched P2P payment products Popmoney and a suite of small business payment products. 2. Boku (www.boku.com) Boku is a relatively new player in the mobile payment arena. Its focus is on the payment of virtual goods and offers flexible pricing models tailored to micro payments. 3. FreshBooks (www.freshbooks.com) Boasting over 800,000 users, Freshbooks is a web based IBPP solution targeted to small businesses. It makes online invoice creation, presentment, tracking and reconciliation incredibly easy. Not surprisingly, payments aren’t by check. PayPal is a favorite option. 4. PaySimple (www.paysimple.com) is an alternative web based utility for small business bill presentment and payment. The application is payment system agnostic, supporting electronic check (ACH), direct debit and credit cards. 5. iPay Technologies (www.ipaytechnologies.com) is an online bill payment solution provider targeting community financial institutions. Its efforts are bringing check payment cannibalizing services to 3,700 community banks and offers solutions for both consumers and small businesses. 6. IP Commerce (www.ipcommerce.com) provides a “managed commerce services platform”. Its aim is to provide a platform for rapid development of commerce enabled applications. Said simply, IP Commerce is accelerating the development and deployment of electronic payment alternatives. 7. Mopay (www.mopay.com) is the Mobile Messaging and Payment unit of MindMatics AG. Unlike Boku, Mopay is a B2B enabler, with coverage in over 60 countries. 8. Square (www.squareup.com) Hype aside, Square’s aim is to increase the incidence of credit card acceptance by marrying an extremely easy acquiring process with tiny card readers that plug into the audio jack of any iPad, iPhone or Android device. Square’s micro business target market is known for its reliance on cash and check payments. 9. Vendorin (www.vendorin.com) is a trading partner network built to facilitate the easy opt-in for electronic payments. It vastly simplifies the challenge of migrating from paper to electronic B2B remittances. 10. PayPal (www.paypal.com) is the household name in our list. Once primarily associated with eBay, PayPal is quickly becoming a force in B2B payments. Its PayPal Mobile iPhone P2P application enjoyed more than 1 million downloads in its first three weeks. And, this is by no means the end of the list. Said simply, viable alternatives to check and cash payments are multiplying – at an astonishing rate. There has been activity in the B2B financial supply chain space for some time. Now, there are more options there than ever before, and it is becoming easier for smaller businesses to enroll than with earlier incarnations. Mobile payments, particularly P2P, are hot now with banks by the hundreds implementing solutions to adorn mobile banking platforms with P2P payments capability. I wouldn’t be surprised to learn of check volume declines of the order of 10% to 20% per year over the next few years given the accelerating activity among alternative. This would be roughly three times the historic rate of decline.

Celent Banking Innovation and Insight Day Recap

Celent Banking Innovation and Insight Day Recap
Last Thursday, we hosted our annual Banking Innovation and Insight Day at the Westin Times Square in NYC. Celent Senior Analyst Bob Meara opened up to a packed house with his presentation on top tech trends. This set the stage for the day as we moved into more specific subjects including, social media, risk management, core banking, mobile payments, and more. We had a good number of journalists in attendance to cover the event. Bank Systems & Technology was first out of the gate with a story, and wrote up a detailed piece on the social media panel that I moderated (Citi, USAA Execs Share Social Media Best Practices). I also had the honor of presenting awards to the 18 banks that were selected for our 2010 Model Bank initiative (group photo below). If you would like to obtain a copy of the 2010 Model Bank report please click here. If you are interested in submitting a nomination for our 2011 Model Bank report, or for more information on Model Bank, please visit www.celentmodelbank.com.

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All presentations from the event are available for Celent clients to download on our web site. We invite you to review what folks had to say about the event on Twitter If you would like to see a few photos from the event please visit our Flickr photostream.
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Feedback on the event has been extremely positive. I would like to thank all of our attendees, distinguished panelists, and dynamic presenters for contributing to a successful event!