Bearing in mind that credit cards are about to disappear as mobile wallets take over, I thought it would be nice to share this infographic of the history of the credit card.
Image courtesy of Sainsbury Bank
Bearing in mind that credit cards are about to disappear as mobile wallets take over, I thought it would be nice to share this infographic of the history of the credit card.
Image courtesy of Sainsbury Bank
The real way to crack the onboarding and criminal activity is to create strong and secure digital identities. We are moving in that direction, but it’s a long slow process. For ages now, I’ve written about getting rid of passwords and improving authentication using mobile technologies:
... and more.
When you talk non-stop about digital, it sometimes gives you a reality check when you actually live life in a physical world. The frustrations of crashed systems, products that don’t work, call centre operators who aren’t co-operative and check-in staff who can’t check-in. Equally, there are the moments of pure bliss such as the smell of freshly cut grass, the first coffee of the day, the sight of a butterfly and the feel of the hot sun on the back of your neck.
We must not forget these realities, as digital should be all about making our physical world experiences even better. Digital should be resolving the frustrations and augmenting the bliss. However, the reason I mention this is that I also realise how far we have to go in some of my travels. Two cases in point.
I often talk about how our work-life balance has disappeared and that we now have just a tech-life balance. Social and professional have merged. What was personal is now shared, and things that would usually be private are now public.
This is clear from the way we seamlessly move between our social and professional lives electronically. One minute we’re posting work news on twitter, then next a shared joke. One moment we’re updating our facebook friends with our latest experiences and our linkedin colleagues with a more formal view. Before going to bed, we probably check our emails for work news and social media for friend’s news before we go to sleep and do the same in the morning.
24 by 7 we are morphing between work media and friends’ media and, as a result, banks and other corporations are starting to invest big time in being relevant in our social spaces.
There are many ways to defraud people.
These scams all play on human greed, fear and emotion, and use social engineering to con folks out of their cash.
A good example is this scam from The Real Hustle where they take a car straight off the showroom court without the salesman even realising what was going on:
I remember in one of our early Financial Services Club meetings, a member of the UK Government’s Treasury Select Committee asking our attentive throng: can any of you explain APR to me?
Not a single person in the room raised a hand. This is either because no-one wanted to answer the question or no-one could.
I suspect the latter as APR is still a complex area, made more complex by regulations.
Unsurprisingly, my Friday blog entry got some backlash on twitter and through direct comments on the blog itself.
The original blog entry proposed that people do not want transparency, as unbundling costs makes them angrier than if they are bundled.
The feedback tells me that's not quite right:
I’m glad you pulled me up on this blog entry, as I was actually talking a load of claptrap.
We had a good debate this week about the future for multilateral interchange fees (MIFs) amongst the card companies.
The argument made for change by regulators appears to boil down to that the card operators and issuers are ripping off customers by taking percentage fees opaquely. These fees are applied throughout the process, and the lack of visibility of charging means that customers don’t know they’re being ripped off.
The solution: more transparency.
Now I can see the argument and solution rationale, but I fundamentally disagree with it.
I was just surfing the BBC news for information about the new Governor of the Bank of England and found this as the #1 most viewed video clip today.
The story is about a Romanian fraudster who admitted to stealing £3 million from a card-skimming scam. He couldn’t exactly deny it, as he was caught red-handed on CCTV when he returned to collect his high-tech skimmer.
After his arrest, police discovered he had obtained about 9,000 bank card PIN numbers.
The only thing that gets me is that I’ve seen these skimmers for years, and would have thought that the ATM technology would have developed far enough by now to stop such fraud happening.
We just need to upgrade those ATMs.
Andrew Vorster, Vice President of R&D and Adam Banks, Chief Technology Officer for Visa Europe delivered a fascinating double act at the Financial Services Club the other night.
The theme of the presentation was: the future of payments and technology, and covered seven key trends that Andrew and Adam have identified that will disrupt payments:
I’m speaking at a conference on the future of payments today for one of the world’s largest suppliers of payments terminals.
They asked me my views on the future of the point-of-sale, and I said that it would disappear.
Not a good position to take when you’re the keynote speaker at a conference for a payments terminal supplier.
So we debated the point and here’s the reason why payments terminals might have a long-term future.
The real challenge for the banking system is how to protect their firewalls from attack by hacktivists, goverworms and cybercriminals and, conversely, how to deliver easy access to online banking for their clients and customers.
It’s a real dilemma.
On the one hand, everyone wants mobile access to his or her account balances and to make payments; on the other, no-one wants to consider the issue of haemorrhaging losses if they don’t protect their account properly.
Whilst consumers are electing the next major political leader via crowdsourced populism, governments and companies begin developing cyberarms.
This cyberwarfare is already rife, with a host of malware targeting middle eastern nations (see end of blog entry).
What is obvious from these developments is that cyberattacks are the new form of warfare that evades direct hand-to-hand or nuke-to-nuke combat.
Like the classic 1983 film War Games, you don’t need to have war with weapons anymore, just cyberweapons.
And no nation is immune from attack.
I ‘ve been talking about contactless for years now - I remember talking about the Octopus card system about ten years ago after it launched in Hong Kong in 1997 – and still find it surprising how invisible it is.
Sure it got some coverage at the Olympics but some, like Forrester, reckon that NFC mobile payments will not reach critical mass until 2020. Others, like me, say that this technology is already past its sell-by date, although I am open to persuasion.
In order to persuade me, Barclaycard sent me their latest research promoting the fact that everyone in Britain knows what contactless is all about.
I liked what Hillary Clinton said about data in yesterday's blog: “Data not only measures progress, it inspires it.”
The reason I liked it is that it brought me back to the basics of what I do in banking: data leverage.
There’s an old chart we used to knock around about data creating power:
The whole idea is that the more humans add context and interpretation to raw data, the more powerful you become.
By human interpretation, it can be programmed too, but it’s the human spin on data that creates leverage.
It’s what I’ve blogged about regularly:
And continue to do so.
You see, the thing that we keep coming back to is: why don’t banks get it?
Some do get it, but most don’t?
Leveraging data of course.
In the 1990s, I was working with one megabank on a re-engineering of processes project. We wanted to tackle the mortgage process as it was the easiest way to get quick wins. But no, we ended up doing the money transmissions process.
Because mortgages cut across divisions and money transmissions did not.
In other words, we were avoiding stepping on the toes of the baronial leaders of each silo of the bank.
These silos of the bank cut the data cake into pieces and the more pieces, the less powerful the data becomes.
The separation of information means that the information is a lot less meaningful than the picture you would gain from the whole.
But an enterprise view is not easy.
Again, it’s something I was heavily involved in the late 1990s, as we pushed data mining and propensity modelling to banks.
Leverage the data for a single customer view.
A wonderful idea, but the baronial silos stopped it again.
I’m not sharing my data with Joe’s division as I’m targeted on sales of my product, not his.
There’s the rub of the issue.
Each baronial head is protecting their turf and pay.
As Hillary Clinton also said in my blog yesterday: “what gets measured gets done”.
Yes, and what gets measured and rewarded, gets done first.
So if you measure a division on their sales performance, and they worry that they might underperform if another division had access to their customer, then they naturally block the sharing of knowledge and data with the other divisions.
That’s why banks have these silos.
But Amazon and Apple don’t.
If Amazon and Apple were run like a bank – something I explored a while ago – they would separate customer data.
The would organised themselves so that they have a book division, a music division, a film division and more, all competing against each other for share of customer wallet.
This means they would separate customer data, and keep it protected.
They would only know what books you buy and, separately, what films you buy and, separately, what films you buy and so on.
They might know you downloaded the latest One Direction tune, but would fail to grasp the sales leverage opportunities to also sell you the One Direction ebook and the One Direction video download.
It just wouldn’t happen.
But in banking it does and it still does today.
For example, when I saw the same bank recently, I asked if they ever did tackle the mortgage process.
The answer was no, for the same reason.
And even if they did create an enterprise customer view, could they use it?
I’m not sure.
I’m not sure in part, as the legal separation of some activities is always raised.
The Data Protection Act is often an easy way to say ah no, don’t go there and try that.
Alternatively, the rules about Chinese Walls across the bank are put forward as the challenge.
But it's not the real barrier however.
The real barrier is getting rid of the silos and re-engineering the legacy.
The legacy that is not only the retail bank silos, but the bank silos overall.
And this is where new banks have opportunity.
If you can create a new bank on a single data set, integrated with an enterprise view, then you really do have power.
Now I wonder who might do that?
In case you didn’t see it, Wired magazine ran an article about Jack Dorsey and Square this month. Throughout the article, they compare Jack Dorsey to Steve Jobs and Square with Apple. In a long opening – the first page is just about pouring tea! – they finally get to the crunch so here’s my shorter, edited version:
Square may be best known for its dongle, but Dorsey says that’s just the beginning. He envisions the company as a vast ecosystem that humanizes every act of commerce. Its current products and services have already made a lot of headway.
Dorsey first showed me his payment app in the summer of 2009. He took me to his apartment in a high rise overlooking the bustling plaza of the old US Mint. Hovering over the kitchen counter, Dorsey explained that he was going to empower everyone to accept cashless payments. He took a piece of white plastic shaped roughly like an acorn, jammed it into the earphone jack of his iPhone, and asked me for my credit card. When I produced it, he swiped it through a slot on the acorn. Then he had me sign the screen with my finger and enter my email. When I checked my own iPhone, I had a message noting that I’d paid Jack Dorsey $1. A Google Maps image marked the location of the transaction. Dorsey was beaming like a proud parent.
Its name—Squirrel—was not particularly descriptive. Squirrel came about in a strange way. When Dorsey was growing up in St. Louis, he had a summer internship with an entrepreneur and glassblower named Jim McKelvey. Even at 15, Dorsey was impressive and he became friends with McKelvey.
McKelvey remarked during a phone conversation that he had lost a recent sale—a $2,500 blown-glass bathroom faucet—because his customer could pay only with a credit card. As McKelvey recounted this tale to Dorsey—both of them with iPhones pressed to their ears—they realized that a business was literally at hand. Those smartphones had more processing power than entire banks did decades earlier. Why couldn’t they process credit card payments?
(That story has attained near-legendary status, like Pierre Omidyar’s Pez dispensers or Steve Jobs’ visit to Xerox PARC. But the details are in some dispute. As Dorsey tells it, the customer was in the store and wouldn’t run out to get cash. McKelvey, however, says the customer was calling from Panama, and he couldn’t accept American Express.)
Not long after that conversation, in February 2009, Dorsey, McKelvey, McKelvey’s wife, Anna, and a friend named Greg Kidd drove north of San Francisco to a Muir Beach restaurant called the Pelican Inn. They spent the evening debating whether they should start a company based on the idea that the world needed an easier way to make payments in person. Eventually they decided to do it. On the way home, they stopped at a 7-Eleven to buy some water. Dorsey and Anna, who stayed in the car, saw a squirrel run across the hood. It got Dorsey thinking. Squirrels dart around and collect acorns—it’s sort of currency for them! And like the word twitter, squirrel can also be used as a verb—people “squirrel” away their treasures! Dorsey could instantly envision acorn-shaped hardware—awesome branding!
Within 10 days, Dorsey and his team had whipped up a prototype. Robert Andersen, a product designer for Apple who’d written an early Twitter app, was one of the first to see a demo. “I thought it was really bizarre that you would swipe a card reader through an audio jack,” he says. Actually, it’s brilliant—a credit card’s magnetic strip stores information much like the tape does on an audiocassette. Dorsey’s team also designed the device to be powered by the energy generated during the actual swipe. As a bonus, the sound it made when the card zipped through the slot resembled the squeak of a squirrel.
But the most outrageous part was how easy it suddenly became for anyone to accept credit cards, using a device they already owned. The process through which businesses are authorized to accept credit card payments is notoriously arduous and slow, particularly for small merchants. The issuing banks demand multiple proofs of creditworthiness and pile on extra fees. Square itself had difficulty negotiating that red tape—it took longer to get approval from Visa and Mastercard to accept a swipe than it did to create a prototype for the entire payment system. “Our sign-up process takes literally two minutes,” Dorsey says. “You download an app, put in your name and address, answer three security questions, link your bank account, and you’re done.” Andersen saw the potential. Just as Twitter democratized broadcasting, Dorsey’s new company would democratize the credit card industry. He quit his job at Apple and signed on with Squirrel.
Small problem: There was already a payment system named Squirrel. The team repaired to the dictionary and found, not far from squirrel, a new name. A square is a fundamental shape that suggests heft. A square deal is a fair one. And when two parties settle a deal, they square up.
Square was positioned to disrupt the payments industry, but it wasn’t out to topple the credit card companies. Indeed, it could be a boon to them; payments that were once made with cash could now be made with credit cards. (Square charges 2.75 percent per swipe and gives the vast majority of that fee—the company will not say exactly how much—to the card issuers.) So Dorsey met with some of the biggest names in finance, like JPMorgan Chase CEO Jamie Dimon and Visa head Joe Saunders. The demo won over the bankers. “Jamie has a Square reader on his desk,” Dorsey says. And Visa became an investor.
Since then, Square has signed up more than a million merchants; it expects to process more than $5 billion in transactions over the next 12 months. One symbol of its ubiquity can be found in the lobby of its headquarters: Anyone can come in off the street and grab one of the Square payment dongles that sit in a glass bowl on the receptionist’s desk, like lollipops in a pediatrician’s office. They’re free. And just like that, you’re a credit card merchant.
In early 2011 Dorsey became captivated by the idea of using a wallet metaphor in a Square app. William Henderson, a former Apple operating system specialist who now works as a software engineer at Square, says, “Jack got so excited that he came to work one day with a stack of 10 leather wallets.” For hours, Dorsey and his team deconstructed every detail. He was especially fond of the Hermès. (He adores the brand and pronounces its name “air-MEZH,” as if he were raised in a duty-free shop.) The team designed a digital wallet that faithfully replicated its austere majesty, down to the stitching. It even carried a monogram, extracting initials from the user’s registration information and dropping the trailing dot after the second initial, just as Hermès does. The credit cards, which fit into their slots at slightly asymmetrical angles, were stamped with holograms that changed color when the screen was tilted.
And, like Steve Jobs, Dorsey has a knack for disrupting entire industries and forcing them to follow his lead. The established companies that process merchant transactions—like PayPal and VeriFone—were caught off guard by Square. Now they’ve launched competing offerings. PayPal has created PayPal Here, with a stylish triangle-shaped card reader that the company says is more structurally sound than Square’s. PayPal president David Marcus thinks that all of PayPal’s 110 million users will eventually adopt it. VeriFone, the leader in credit card swiping machines, built a Square knockoff called Sail, which has a flap that extends down the back of the smartphone. (Intuit has offered its own mobile credit card system, called GoPayment, since 2009.)
The message from those giants seems to be, thanks, kid, we’ll take it from here. “There’s no question they’ve innovated,” PayPal’s Marcus says. “It’s been good for the ecosystem. And Jack is a good guy. But people need a multichannel solution.” Jennifer Miles, an executive vice president at VeriFone, adopts a similar tack: “Square took a sleepy industry that was doing things the same way for years and innovated. But that process is replicable.”
Dorsey is unimpressed. First of all, he thinks it’s wrongheaded to build those flaps on readers that plug into smartphones: “We don’t want to add things—we take things away to make them more simple,” he says. More broadly, Dorsey takes issue with the implication that Square is too naive to compete with the ultrasophisticated finance industry. “Yes, we’re naive,” Dorsey says. “But that’s a strength, not a weakness. We literally have fewer than five people in a company of 250 who have worked in the financial industry. So our approach is to engineer and create and build what we want to see.” (In any case, should Dorsey get stumped on some intricate issue of high finance, he can seek enlightenment from former Treasury secretary Larry Summers, who sits on Square’s board.)
Keith Rabois, a former PayPal exec and now COO for Square, has a harsher take on his old employer: “It’s sad that what qualifies as innovation there now is trying to replicate, piece by piece, something that someone else is doing.”
For VeriFone and PayPal there is a risk in mimicking another company’s products as the leader will always introduce new versions of its devices just as competitors catch up with its previous model. For example, Dorsey has already released the next iteration of Square—a swipe-free version. It began at an all-hands meeting in late 2010, when Dorsey issued a challenge to his staff: “I want to have a payment experience that’s so smooth that when I walk out I won’t be able to remember if I even paid.” Imagine if customers were checked in automatically via Wi-Fi any time they walked into a participating store. When they wanted to buy something, they could just give the merchant their name. They’d never even need to reach into their pocket!
The vision—swipeless pay, if you will—was a logical extension of Square’s mission of turning payment into an intimate experience. But instead of merchants doing all the work, this required customers to download an app too. They dubbed it Card Case. The first version—which featured the passionately designed digital wallet, including virtual credit cards for each participating merchant—launched in the spring of 2011. A few months later, while interviewing with Dorsey for a job at Square, an Apple iPhone product manager named Shuvo Chatterjee pointed out that, while he loved the service, the wallet metaphor didn’t really work. “I’m collecting those cards, but it’s not really scaling,” he said. “In my real wallet, I don’t have one card for every merchant I buy from.” Dorsey hired Chatterjee and made him the Card Case product lead. In March 2012, they released an update. The beloved Hermès wallet was gone, replaced by a cleaner interface that more effectively promotes discovery of new places. (Once you establish a relationship with a merchant, it’s like opening a bottomless ledger, one that can easily handle things like loyalty programs.) The app also acquired a new name, Pay With Square, an indication that it was no longer a side project but had become crucial to the company’s mission. No dongle required.
And the innovations don’t stop there as Square is continuing to expand the company’s offerings up the retail food chain. Earlier this year, Square saw the popularity of the iPad as an opportunity to expand its business beyond individuals to boutique-level merchants. It released Square Register, an app that makes it easy to use an iPad as a full-featured cash register. Vendors can set up buttons for each item they sell, much as McDonald’s lets cashiers simply press Shake instead of entering the price. It can also connect wirelessly to a cash drawer.
But Register’s real value is that it offers sophisticated analytics for free. Its users get data that allows them to identify which products are selling and when, and future versions will be even more powerful. “As a customer enters the vicinity of the establishment, a notification will spring open on the merchant’s screen,” says Megan Quinn, Square’s director of products (who has since left the company). “It will show the customer’s name and suggest their most likely order, based on an algorithm that knows past purchases and things that sell well at the store.”
Henderson, the engineering lead on Pay With Square, points out that the company collects all kinds of information about its users, data that might be invaluable to merchants and customers alike. “First of all, we know your location,” he says. “Second, we have a decent sense of your history. We know the kinds of places you’ve been and what you like. But we also know lots of other things—like if there’s a whole bunch of food trucks that pull up nearby, we’ll see the spike in activity and can point you to those trucks. I think you’ll see us get really good at this.”
Analytics and data-mining might provide Square’s real business model. So far, the company has charged a very small fee for each transaction, and merchants aren’t likely to pay much more. And while Square has been giving participating merchants access to analytics about their businesses for free, it is also aggregating that data, real-time information about what people are buying in every region of the country, complete with detailed demographics. It’s reasonable to think that might be very valuable in the near future.
Square is still focused on smaller merchants, but its executives believe that even tier-one retailers will use Square before long. “The Neiman Marcuses and the Walmarts will want to have an emotional attachment with their buyers, where anybody can walk in and pay with their name and have an electronic receipt,” Rabois says. “That’s what we’re going to deliver.”
In other words, Square aims to provide shoppers with an emotionally satisfying experience—and it is using the Apple playbook as its guide. “My challenge to our product team is to build the app that they themselves really want,” Henderson says. “That’s something I learned at Apple. That’s the reason it’s able to consistently surprise consumers.” Communicating the Apple way really isn’t too hard for Henderson, because “almost every one of my team at Apple now works for Square.”
The Square Economy
Square Card Reader
Who uses it: More than a million massage therapists, accountants, taxi drivers … anyone who wants to sell something.
How it works: Vendors plug the free dongle into a smartphone’s headphone jack. Customers swipe their cards and sign the screen with their finger.
Who uses it: Shops and boutiques looking for an alternative to a cash register.
How it works: The iPad app, which connects to a cash drawer via Wi-Fi, lets vendors set up buttons for each item in their store. Square also provides merchants with free analytics.
Pay With Square
Who uses it: Customers and stores that like the idea of swipe-free payments.
How it works: When consumers download the app and walk into a participating business, their name and photo pop up on the store’s iPad. Customers pay by giving their name and can even add a tip later.
Whilst in Russia last week, I was lucky enough to be there when good friend Daniel Gusev launched a new bank initiative for OJSC Promsvyazbank (PSB).
PSB is a privately-owned universal commercial bank. Founded in 1995, PSB currently ranks 10th by assets among Russian banks and Daniel is innovation advisor to the Board.
The concept Daniel sold to the board was a simple one: to launch a tie-in to the Angry Birds app.
Angry Birds, as surely everyone knows by now, is the massively successful gaming app on smartphones. Just in case you don’t know how successful this game has been:
This popularity is something that a bank has just been waiting to leverage. The question is how:
The latter is the approach PSB took.
Nothing new in that but the reason for blogging about it is that I, and he, could not believe the global coverage the app tie-in gathered.
It not only got a bit of local press - a small mention in the Moscow Times - but got a lot more coverage globally from news services as diverse as CBS News, Newsday, the Denver Post and the Jakarta Post.
It even got a nod halfway through this news item from CNET news:
Obviously, it is the app that is getting the news focus but, through the brand tie-in, PSB has become a name the world has registered.
As Daniel said to me, “we have launched some of the most innovative products for investment and commercial markets that no-one mentions, not even our local media. One mention of Angry Birds and the world knows about us.”
So I asked him how they came up with the idea in the first place.
Here’s what he said:
We launched a new retail strategy in 2011 that demands a solid effort into what products are offered and how they are offered.
To a large degree, this all is dependent on how the products are explained and what qualities they possess and through what channels they are offered.
It requires a good effort of design thinking as well as understanding on what milestones the bank is ready to take itself through.
That's where the bank's Innovation Hub came in handy - a skunk-works fund created in the Bank a year ago, that was tasked to lead the charge to innovation in retail.
The prime objective was to change perceptions of the public for the bank and Angry Card is just but one in a selection of projects run by the Hub.
To raise awareness and create momentum (perceived public success is as important for customers, as it is for employees), we seek highly viral platforms and Angry Birds being popular in Russia made the match.
Getting Rovio’s attention was a challenge in itself – as their growing reliance on licensing deals made them selective about industries they work with [Ed: about 30% of Rovio's $106.3 million 2011 revenues came from merchandising and licensing deals] – but we succeeded and just love the cooperation that is to be developed further with a handful of additional initiatives.
The card we've designed reflect both the usual image of birds and pigs, and the Russian flavoured setup creates an instant collectible status.
For now cards are plain debit, with RUB 299 first-year fee (approx. $12) and RUB 499 ($19) after that, and it comes with perks such up to 15% discount on Angry Birds merchandise sold through Rovio's Russian based shops.
Within the two days after announcing the card we have received more than 10,000 retweets on Twitter all over the world and several thousand shares on Facebook, all pointing to a clever strategy we have taken with social.
1) look for platform products that easily carry the virus of positive emotion to all groups; and
2) experiment with having a fan club ready through your social media, so that they can carry and amplify the virus
Oh, and just in case you did not see it, here is the press release in its full glory:
A credit card issued by Russia's Promsvyazbank shows Angry Birds characters, in Moscow
MOSCOW - (AP) -- Tuesday, May 29, 2012. Russia’s Promsvyazbank has become the first lender to offer their clients credit cards branded with Angry Birds characters. The sign in the top says Promsvyazbank.
Russian fans of the videogame Angry Birds will soon be able to get special debit cards — or "Angry Cards" — giving them discounts on the game's products.
Moscow-based Promsvyazbank said Tuesday it will start issuing the new MasterCards on June 4. They will be printed with images of the various characters and will give users a 10 percent discount on all Angry Birds-branded products.
Besides debit cards, the bank will also issue Angry Bird cash cards, which users top up with money. The bank will pay a 4 percent annual interest rate on the card's balance.
The maker of Angry Birds, Rovio Entertainment, has already launched toys and baby clothes lines featuring Angry Birds characters. But the Russian debit card is going to be the first Angry Birds branded financial product. The videogame has been downloaded more than 10 million times in Russia.
Ivan Pyatkov, director for retail sales and technology at Promsvyazbank, told the Associated Press that the bank is planning an initial printing of 50,000 cards but hopes to issue twice as much by the end of the year.
The bank expects the card to help attract urbanites between 25 and 35 years of age with a monthly income of at least $1,000.
Pyatkov said the bank is receiving a large number of requests for Angry Birds cards following early reports in the Russian press.
"Some clients are demanding their Angry Birds cards right now — before the official launch," Pyatkov said.
Promsvyazbank will be launching the card in partnership with Internet Retail Solutions, Rovio's agent in Russia.
Promsvyazbank, ranked as Russia's 11th largest by the Interfax research center, is 74 percent-owned by two Russian tycoons, the Ananyev brothers. Commerzbank holds 14 percent in the lender via a subsidiary while the European Bank for Reconstruction and Development has a 12 percent stake.
The first cards are distributed this week.
I feel like I spend a lot of time these days dissing contactless payments, or at least those that rely on NFC and RFID chip technologies.
The reason being that I cannot see why I would want to get something out of my pocket to touch on a terminal – these are actually contact payments, not contactless – when I could walk into a store and just say put it on my tab using Square Card Case, or as it’s now called Pay by Square.
Pay by Square is just an app on the phone that, once set up, allows the user to walk into any accepting merchant and just say “it’s on Chris’s Square account”.
No touch and go, just say and go.
I like it.
There are other proximity payments around, such as QR codes as I’ve blogged before, so contactless using NFC and RFID may be a short-lived solution.
That doesn’t mean that heavyweight backing in the UK from Barclaycard and Visa is going to dampen the process, as both are promoting contactless big time.
I’ve already mentioned Visa’s work around the Olympics and what they believe are impressive stats.
As of March 2012, Visa claim that the UK has 20 million contactless cards issued by seven providers, with over 100,000 terminals deployed.
That makes the UK a high proportion of the 31 million cards so far issued across 15 European Union countries – forecast to rise to 80 million by 2015 – and is really down to Barclaycard’s early commitment to getting contactless on the road.
As mentioned the other day, Barclays Bank are trailblazing a first mover lead trail in many areas, and particularly in mobile and mobile contactless, so when they invited me to an ‘exciting announcement about mobile technologies’ I could not resist to find out what it was.
The event opened with David Chan who runs Barclaycard’s consumer services for Europe talking about the four evolutions of cards from the old zip-zap machines which carbon copied the embossed raised numbers from the card in the 1970s (and still used by some today!), through mag stripe, EMV chip and now contactless.
He referenced the fact that big stores like Tesco, Asda, Boots and WHSmith were now joining the contactless revolution along with early movers like Starbucks and MacDonalds.
Interestingly, London’s tube and buses will take contactless payments, not just Oyster payments, via their contactless terminals by the end of next year, and this year will see a 50% increase in the number of pay points accepting contactless.
This is why Barclaycard predict the UK will move from £20 million of contactless payments in 2011 to £6 billion by 2016!
The constraint however is that it is card-based and not as easy to use as a mobile.
With most folks more likely to have their mobile than their wallet, the big announcement was therefore the launch of the Barclaycard PayTag.
Effectively, it’s just a contactless sticker to put on the back of your mobile but, with great fanfare, Barclaycard launched some videos and other stuff for its launch …
They then had the various hacks and journo’s try out the stickers on fake mobile phones to show how easy it was to buy their free lunch using the contactless tags.
I was amused when one of the journo's turned to me and said: "what? I came all the way here just for the launch of a sticker?"
There’s a whole load of other stuff about the launch I could add here (press release etc copied at the end of this blog), but I still have reservations about contactless, mostly because it is five years since the UK started this process and we’re still a long way from critical mass and partly because other technologies are taking over already.
First, the UK’s slow progress is due to a lack of cohesive rollout as demonstrated by the counterpoint example of Poland.
Poland is Europe’s leading market for contactless payments, with over 54,000 terminals and 5.7 million Visa contactless cards deployed as of March 2012.
All of the acquirers and key merchants were on board from the start and, between December 2010 and December 2011:
All in all, by entering into contactless later rather than sooner, the Polish deployment has seen far more success than the UK.
Obviously the UK can catch up and the release of the PayTag sticker will definitely help but, even if there were a cohesive execution of contactless in the UK today with Visa and Barclaycard leading, I would still have reservations.
Sure, Barclaycard need to make it work as they have invested heavily, as has Visa, so both firms tell me that they wholeheartedly expect contactless to work alongside cards, mobile, proximity and other payment methods for the foreseeable future.
As soon as I can say and go, then I’ll give up with touch and go.
The only thing is that the say and go might take another few months or years to rollout.
Meantime, the touch and go folks will have their day.
Anyways, here’s the edited press release from the Barclaycard gig for those who like such things:
19th April 2012, London: Barclaycard today announced the launch of Barclaycard PayTag, a new way to pay with your mobile phone. Millions of Barclaycard customers will be offered the chance to make payments with any mobile phone by simply sticking a Barclaycard PayTag to the back of their handset.
Available at no cost, and exclusively to Barclaycard Visa cardholders, Barclaycard PayTag is an extension of a customer’s credit card account. At a third of the size of a normal card, it can be discreetly and simply stuck to the back of any mobile phone. Once attached, it can be used to make payments of £15 and under, rising to £20 in June, by simply being held over a contactless payment terminal.
56% of UK consumers said that the item they are most lost without is their mobile, according to a YouGov poll of 2,085 UK consumers between 5 -10 April 2012, and so Barclaycard are giving people the option of using the phone to make easy, convenient, everyday payments without the need to upgrade their current handset.
The announcement comes as Visa predicts that the number of contactless point-of-sale terminals in the UK will rise by 50% to 150,000 this year. Major retailers that offer, or are introducing, contactless include Waitrose, McDonalds, Boots, WH Smith and Tesco. By the end of 2012, London buses will also accept contactless payments, followed by the Tube and the rest of the transport network in the Capital in 2013.
Barclaycard PayTag is safe and secure, and comes with the same 100% fraud protection as any Barclaycard. An exclusive group of customers will be invited to receive their Barclaycard PayTag in the coming weeks, before they are offered to millions of Barclaycard customers later in the year.
Research carried out on Barclaycard’s behalf predicts that £3 billion worth of purchases will be made with mobile phones in the UK in 2016 ( 2012 Ernst and Young research). Barclaycard PayTag provides customers with the choice of simple mobile phone payments now, without having to wait to upgrade, and at no additional cost.
Visa note that there 31 million contactless cards in use with 227,000 terminals from 51 acquirers and 60 issuers in 15 European Union countries today, representing a six fold increase in transaction volumes during 2011
The wireless world of connectivity we live in has risks, and the greatest risk has to be infection of technology.
Technology viruses like trojans and man-in-the-middle look mild today, when you see the tsunami of malware that’s out there.
Just a year ago, I was saying that banks should offer advice to consumer about security and privacy policies related to the use of social media and mobile media.
Now it’s ten times worse, with the names of the day being the honey for the pot.
In fact, facebook is the most scammy site in the world, with all of the ideas from fictional news stories - “OMG! Mother went to jail!” scam; to fictional information you would be desperate to know if you’re a fan – “Justin Bieber’s cell phone number” scam; to the “guess who’s been viewing your facebook profile” scam.
Scam upon scam upon scam.
And it’s far easier to trick someone in this socially connected world into a viral malware than ever before.
Think about it.
Some things you get used to.
You are locked out of your PayPal account. It is urgent that you re-enter your details or your account will be deleted by close of business Friday.
I am Unga Bunga, the grandson of Great Unga Bunga, who died leaving $5,236,456,123.05 in his estate. Please help me get it out ..
OMG, have you seen what they have been saying about you over here?
I get used to all of these as a heavy social mobile net user.
But some are more tricky.
For example, Lauren Vis is the Managing Director of KAS Bank and will be speaking at the Financial Services Club in June.
When looking for his profile details, I found this scam email:
Re: From L. Vis
KAS BANK. Suite 560 Salisbury House
London Wall Broadgate London
EC2M 5NU,United Kingdom
I am Mr. Lauren Vis I work with KAS Bank here in London. In my department, being the Private Banking Manager (Greater London Regional Office), I discovered an abandoned sum of £19,500,000 GBP (Nineteen million five hundred thousand pounds) in an account that belongs to one of our foreign customers …
Nothing too clever about the Nigerian 419 scam here, except that the name and address details for the bank are all correct and bona fide. Slightly more intelligent.
Or take the one that had me click the other day.
Doing the usual stuff on the iPhone a note came through that a FEDEX parcel could not be delivered and to click on the order details.
Now I was expecting a FEDEX order and so I clicked … and immediately had a computer infection.
These days, regular airline bookings and related orders come through and I just ignore them, but many wouldn’t.
Or not for the first time.
For these reasons, consumers may rightly fear being compromised in their online dealings.
For example, 63% of webmasters whose websites get hacked don't know how the compromise occurred, and only six percent detect the compromise themselves.
Twenty percent of all households have at least one bot-infected computer, and 5% of all enterprise 'assets' are infected.
And typically, every other computer has some sort of infection.
Yes every other computer.
1 in 2.
And don’t think that by being a smug MAC user, you escape notice.
And mobile is making this worse.
A recent study conducted by Websense, and the Ponemon Institute found that 53 percent of organizations experience data breaches due to insecure mobile devices.
No wonder another study by the US Federal Reserve found that, among users of mobile phones who haven’t yet adopted mobile banking, about half said they were “concerned” about security.
And rightly so, you may feel, as 70% of mobile banking apps are not secure according to a study by myprivatebanking.
Add on to this that cybercrooks have worked out how to get around OTP and other mobile bank security systems and, in a more luddite Skinner moment, I’m thinking about going back to using cheques, branches and cash only in the future.
We seemingly spend all of our time bashing banks these days, me included.
They’re either slow, unresponsive and ignorant of change, or they’re greedy, arrogant and screwing the economy.
You can’t win.
That’s why my new book was going to be called: “don’t tell my mum I work for a bank … she thinks I’m a piano player in a whorehouse”, but that title’s already taken.
Now however, there is some good news.
There is one UK mainstream bank that is leading the pack.
They’re innovating on the high street, in their card operations and in their mainstream banking services.
It’s hard to praise Barclays when they are 1000% tax-evasive, but when you see innovative bank services you have to fez up and applaud.
Why am I so effusive about Barclays?
Because they actually get it.
Barclaycard caught my attention some time ago.
First, there was the major campaign for contactless payments from waterslides to rollercoasters which was an integrated campaign with social media games via facebook and iPhone competitions.
They were the first bank to introduce mobile contactless in the UK, and they’re also running innovative programs around crowdsourcing customer views in the USA with Barclaycard Ring.
But it’s not just the card operations as there was also the Barclays branch of the future in Leicester Square, and more.
Now, there’s Pingit.
I saw the new ad for the first time yesterday:
It immediately made me download the app, and it’s pretty simple although they ask for a lot of upfront security processes which will put off a number of users.
The real power of Pingit is that it is a really simple idea – use Barclays to send mobile payments – and, more than this, that it’s a method of capturing the consumers’ and corporates’ attention.
The reason being that the app sits on your phone with Barclays branding all over it, whether you are a Barclays customer or not.
Simple but brilliant.
And if you don’t believe Barclays innovation strategy is working, here’s an email trail I received recently from an innovative friend:
From: Go Getter, innovator
To: Mrs. Y, Commercial Banking, ABC Bank
I was wondering why your bank reporting on the client account never shows transactions falling on a weekend? I believe under Faster Payments banks can clear payments during weekends. It looks like all the weekend transactions show up on the following Monday.
Is this a limitation within your bank or the type of account – and can it be changed?
From: Mr. X, Commercial Banking, ABC Bank
To: Go Getter, innovator
I work alongside Mrs. Y who passed on your query to me. I have spoken with our super helpful support desk people this morning who confirmed that even with Faster Payments they only clear the next business working day. They also advised that its not even anything to do with the type of account or their software and therefore cannot be amended. If you have any further questions or require technical assistance in the future then its best to call our super helpful support desk people on 0870 321 5432 (calls cost £85 per minute).
Regards, Mr. X
From: Go Getter, innovator
To: Entrepreneur, CEO
I’ve been thinking about our banking relationship with ABC Bank, and would like to seriously consider changing banking partner.
ABC do not strike me as interested in innovations for consumers or businesses. They’re also somewhat insipid. As an example: what Mr. X is telling me below is unhelpful, because Faster Payments is a 24/7 service and as a consumer I can both send and receive on a weekend – and whilst I followed up immediately, I suspect I won’t hear back from him any time soon.
I get the impression that of all the banks, Barclays are the ones with the most ‘innovation’ in terms of services and applications – they launched the PingIt app very recently, for example, and I also know from dealing with our BACS software suppliers that Barclays tend to do more for small-medium sized businesses. Both of our competitors are with Barclays, which in itself is interesting – perhaps they have a desire to take on innovative businesses as part of a drive to be the most forward-thinking.
For more on Barclays innovation strategy, read the interview with their COO Shaygan Kheradpir.
Jon Durant notes on his blog that Barclays has been an innovative bank for many years:
Barclays has a strong tradition of firsts and innovation: it launched the first credit card in the UK back in 1966, the first loyalty scheme in 1986, the first to accept bill payments via the internet in 1997 and the first to support contactless payments in Europe in 2011.
This reminded me of the innovative loyalty scheme they launched in 1995 called BarclaySquare.
I wrote a detailed research paper about industry alliances way back then, when the internet was still in its fledgling days. Here's a little more about this innovation for those who enjoy memory lane:
Another perspective of cross-industry operation is the virtual alliance, e.g. a joint venture within an electronic channel.
Banks are no longer islands of delivery - they are combining resources and efforts to leverage their position, specifically on the Internet.
This means that the more a bank can deliver in the consumer value chain - either through in-house delivery capability (e.g. managing consumer’s tax returns) or through joint venture alliances where the bank manages the partnership and extended value chain - the more they will do so.
Barclays Bank in the UK is an example of an early such alliance.
In the UK it is estimated that four million people have access to the Internet, but of those, only 1.5 million are using the Web on a regular basis. This seems a fairly limited audience, but that underestimates the value of this market. According to Money World, this audience is almost 100% ABC1, 80% male and 66% between ages 25-44, all segments financial services want to reach.
Barclays decided to differentiate their site by adding non-financial services to its Internet site.
Through BarclaySquare, the UK Internet Site for the Bank, the bank has teamed with retailers to leverage the bank’s card base. As well as getting information on Barclays products and giving feedback, customers can go to the shops or buy airline or train tickets.
Barclays aim is through a virtual alliance to be the Internet Brand.
As Consumers remember that the site they shop at is called Barclaysquare from Barclays Bank, the shopping mall, brought together by the Bank, becomes the brand.
It is only once you go through the bank’s gateway that you find a florist - Interflora; a clothes shop, Debenhams; a catalogue merchant of durable goods, Argos; a Toy company, Toys ‘r’ Us; an insurance company, Sun Alliance; and a telecoms company, BT.
Launched in June 1995, BarclaySquare allows consumers to pay for a range of goods on the Web using Barclay’s own Visa or MasterCard.
The early results have been pretty good.
From June-November 1995, Barclaysquare had 100,000 visitors; 600,000 page requests; 400+ retailer enquiries; and 3,000 e-mail messages.
In December 1995, over 15,000 visitors used the system.
In 1996, it had 1.5 million page requests and the first quarter of 1997 created 500,000 hits, a 10% increase.
More than 20 retailers work with BarclaySquare including Sainsbury's, Victoria Wine, Interflora, Argos, Eurostar, British Telecom (BT), Toys 'R Us, Victoria Wines and the Airline Network.
"The Barclays (Bank) Web page is contained within BarclaySquare and some people browse at that as well on visits," said a Barclays spokeswoman. "It has proved very popular and is an innovative and pioneering way of Web site marketing."
Barclays is planning to boost the profile of the scheme by mailing its 3 million credit cardholders with a magazine promoting the scheme's advantages. "We are also encouraging more retailers to join," he said.
If you're wondering what happened to BarclaySquare (a pun on Berkeley Square), it didn't get the takeup as Barclays is not Amazon ... so it's up for sale.