The Financial Services Club's Blog

Why payments innovations are rubbish!

Here's my latest retail payments focused presentation.  It's premise is that there's loads of innovation out there, with micropayments and iPhone apps being hotbeds of innovation for developed economies whilst microfinance and 2G GSM messaging being creative fields for developing economies. 

However, all of these innovations are just froth on the cake of the payments infrastructure and the core of that infrastructure - the clearing and settlement services that underpin these services - is still pretty rotten.  There's still lots of legacy infrastructure out there, which needs updating to operate in our 21st century world ... but sits languishing because banks are slow to act.

And the fact that banking protects banks through bank licensing, means that none of the innovative firms - including PayPal - can make much difference to this rotting core.

A little bit over-stated, but I think it makes the point.

Why all payments innovations are rubbish

View more presentations from Chris Skinner.

You'll notice some of my usual slides in here, but I've also added quite a few new ones, including several that list stunning numbers ... such as Facebook currently uses over 30,000 servers!!

Branches are dead, the future is social (Part Two)

After my post last week about my latest presentation with an audio file, my keynote in Bahrain this week was going to be a variation of the presentation.  Due to being unable to fly to Bahrain, I mentioned on Monday that most of the day had been spent editing a video file for the conference to be able to present my keynote. 

This 'aired' for the first time this morning and so here is the video version for the blog:

MEFTEC 2010 Presentation from Chris Skinner on Vimeo.

And the original slides, in case you missed them:

Branches are dead, the future is social

View more presentations from Chris Skinner.

And an audio file to go with it if required:

Download Chris Skinner, EBF2010 (45MB)

Bearing in mind that this was made with a cheap ($200) HD video camera, free video editing and slide management software and cheap ($59 per year) hosting services, it's an extraordinary way for anyone to create and become their own media channel in the 21st century.

Mind you, they could improve the looks of the anchor hosts a bit, couldn't they?

More on remittances

I mentioned a dinner which I chaired about remittances the other day, and the firm that organised the dinner sent me a white paper as a follow-up.

As a taster, read the previous blog entry or this paragraph gives a good indication of the content:

"Remittances are no longer solely about supporting people in the developing world. in many cases today, remittances are also made for charitable and trade reasons and can therefore have a very powerful impact, especially if directed for maximum benefit. findings of a recent World Bank report indicate that the rate of return to each dollar of aid directed toward promoting trade is nearly $700 in additional trade.

"This discussion covered pertinent industry issues including how the global uptake of mobile, internet and social network communications is dramatically changing the landscape.

"Interestingly, participants’ perspectives also suggested that, in spite of technology being more affordable and accessible, the old world of payments – face-to-face contact and cash-based transaction – continues to command a foothold, albeit a weaker one.

"The debate turned to the roles that financial institutions and regulatory bodies are currently playing, as well as their future potential impact. this led to dialogue about the ongoing problem of the unbanked and financial exclusion in the latter part of the discussion.

"Participants offered some sound suggestions of how this can be tackled, including how transferred monies can be used for trade reform."

There's quite a nice 12-page summary, a bit more comprehensive than my few paragraphs, and this can be downloaded here if you're interested: Download Remittances White Paper

 

Remittances and the need for financial inclusion

I chaired a dinner last night on remittances and it was pretty interesting.

The term ‘remittances’ is generally used to refer to foreign workers sending money home and represents major GDP for many countries. For example, Tonga’s remittances represent 40% of the country’s GDP, Samoa’s is 25%, Jamaica’s is over 20% and the Philippines 10%.

This is a big market and a mature one.

Equally, it is not just about migrant workers as the appetite for transferring money internationally has  extended far beyond itinerant workers to a vast and diverse cross-section of senders and receivers.

Some senders are using lo-tech systems like Hawala, whilst others are heavily linked via hi-tech mobiles ... meanwhile receivers are the same, with everyone assuming they receive through human interfaces and yet, if you study this area closely, more and more is being enabled via mobile.

For example, in the Philippines, SMART and Globe Telecom have been running riot in the remittances space for years:

• SMART is the leading mobile operator in the Philippines with over 25 million subscribers, and has been offering an SMS-based remittance service known as “SMART Padala” since 2004. This service allows expatriates to deposit money with partnering banks in areas where high concentrations of Filipinos live, such as Hong Kong, Yokohama, and Abu Dhabi, and to specify the SMART subscriber in the Philippines who is to receive the money. The service sends a text message to both the sender and the recipient, notifying them that the money has been transferred. The recipient can then use his/her mobile account to specify the desired withdrawal amount and pick it up at a partnering institution in the Philippines.

• The Philippines’ second mobile operator, Globe Telecom, offers a similar service known as G-Cash. At participating remittance companies in the US, the UK, Australia, and Taiwan, Filipino workers can send money via an SMS message to Globe subscribers in the Philippines. The recipient can pick up the cash from any Globe Telecom store by showing his mobile phone (with the SMS message) and a form of personal identification.

And if you wonder whether low-income folks want mobile money, then this is the place to look. For example, a study by the microfinance and remittance focused organisation CGAP found that targeting low income users could succeed.

“Philippines is known as the texting capital of the world but we were working in provinces that were poorer and where literacy levels were lower than the national norm. What we found is true in most markets globally: younger people whose social lives involve being connected via cell phones and people with exposure to using computers are more comfortable using cell phones to begin with.”

The result is that 80% of money movements in the Philippines is now made electronically. A decade ago, 80% would have been physical movements of cash. That’s transformational and is why one of the folks at the table said that: “if you don’t know what is happening with technology these days, then you’ve lost the plot”.

This increase in access to electronic and formal channels for money transfer, rather than physical and informal channels, is rapidly changing the dynamics of connectivity and funding.

For example, microfinance is now becoming a major focal point, as is financial inclusion, and it amazed me that everyone talked about mobile for money transfer during our discussion but no-one talked about social networks. And when I did raise the subject of Kiva as a social lending microfinance service, one of the bankers asked me: “what’s Kiva?”  Surely, being in this space, banks should know about these developments?

Another said the lack of commentary on social media and microfinance was more of a reflection of the fact that young people use social networks and the average age of a remittance sender and receiver is around 37.

I then added that the average age of a Facebook user is 42 and Twitter users are generally over 35s.

Silence.

“if you don’t know what is happening with technology these days, then you’ve lost the plot”

The nature of networks, mobile internet and social finance is changing all of our lives fundamentally and is as true in the remittances space as any other.

Ignoring such fundamental changes is likely to leave the existing money transfer firms dead in the wake of dynamic societal change.

For example, the likelihood of a divide between informal networks using human carriers of money versus formal networks using mobile internet is the clear path of the future. This inevitably raises critical questions for existing providers of Money Transfer such as Western Union, Travelex and the banks.

And these are the themes we explored in depth last night.

It was interesting that one theme that kept cropping up regularly was ‘trust’.

I always hear trust in the context of banking and payments, so challenged what it is that is trusted.

For example, the Philippine GCASH Service is delivered in partnership with financial institutions and banks. Why? Because, according to the banks, customers trust the service if a bank is involved.

Sure. They trust the service, not because they trust the bank but because they trust the banking infrastructure to guarantee movement of funds.

So the trust is in the system, not the individual bank or financial partner involved.

That’s one critical point.

Another is that this market – especially if we talk more about financial inclusion – involves so many players. It cannot be led by a bank or mobile operator, but needs to be led by a collaborative effort of banks, mobile carriers, governments agencies, regulators and more.

It may even need involvement of security services and police, as half the dialogue about money transfer is focused upon terrorism.

“9/11 was funded by hundreds of sub-$1,000 transactions through the money transfer markets”, was one of the comments made last night.

Sure, but is the role of a money transfer service to allow simplicity of money transfer or to monitor the pulse of terrorism?

I would argue that it is both, which is why so many organisations need a hand in these markets: global regulatory authorities, national governments, police and security forces, banks and infrastructure providers, mobile and electronic service organisations, software and technology firms ... and money transfer agents of course.

This led to an interesting debate at the end of the evening about the role of banks in money transfer markets and their interest, or lack of interest, in remittances.

One banker said that: “any dramatic change in the past will not have been noticed by the bank and any dramatic change in the future will not be noticed because these changes happen locally, not globally”.

Another reckoned it was because banks are not able to make money out of money transfers, but can lose money: “on a $1,000 transaction, we make about $10 if we’re lucky but, if you mess up, the costs are anything up to $100 million in fines and over $1 billion in lost business due to reputational damage.”

I disagreed with that view as, if banks felt that way, you wouldn’t be performing any payments processing for anyone.

In fact, a point came up that surely this was a corporate and social responsibility and that if banks are not interested in remittances today, and the market continues to grow, then at what point will banks start to wonder why they are disintermediated from these markets and wish they had been involved?

We concluded that, in order for remittances to really rock and roll in the future, it needed three things:

1. A goal: there must be some collaborative objective and mission to be reached;
2. A reason: there needs to be some skin in the game and value returned for all players;  and
3. A cause: there needs to be a common enemy to cause the players to do this, such as the threat of regulatory change.

With the above, then a multi-industry group could potentially be created to burst the bubble of financial exclusion and move us to a completely connected global society of commerce.

Zombie money in a chainsaw hell

I recently discovered that friends were killing me.

Literally ripping me to shreds with a chainsaw.

And it hurt.

After all, I am meant to be the Zombie Priest in the Church of Goth, and no-one had beaten me before.

And where did that chainsaw come from?

I was mad.

In fact, I was steaming.

So I vowed to get a chainsaw myself.

Problem is that I would have to turn at least 40 friends into Zombies too (note: not Zombie Bankers), in order to earn enough points to buy a chainsaw.

And so far, I had invited over 200 mates to become Zombies and only 12 had bothered to do so.

How would I get 40 of them to turn?

It was a problem.

And I was still mad.

In fact, I was boiling.

Then I found Spare Change.

Spare Change sits on top of PayPal (which sits on top of the banking system) and, for a small fee for each transaction, allows me to make microtransactions and buy things to spice up my favourite Facebook apps.

Oh, thank heavens for Spare Change.

For just $5, I could buy a chainsaw. So I spent $50 and bought two chainsaws, plus a machete, shotgun, uzi, meat cleaver and bazooka for good measure.

Forget turning mates into Zombies ... just kill them.

Now, I am the Zombie Pope in the Cathedral of Death.

And Richard, the idiot who attacked me with a chainsaw, is dead meat.

Now you may wonder what the hell I am talking about, but the above is a real incident that occurred on Facebook last year, after I signed up for the game promotion of Resident Evil.

And Spare Change is a simple little Facebook app, that allows me to buy things in Facebook gameworlds. I blogged about this app, and others such as the QQ coin, a year ago if you want to know more.

And these gameworlds are growing into big business.

According to current estimates, the worldwide market for virtual goods is expected to approach $5 billion this year.

That’s $5 billion worth of exchanging stuff that doesn’t exist ... but it’s fun.

And it’s also incredibly quick to build a business.

For example, within a week of its launch, game company Zynga's new Café World game in Facebook had garnered ten million players.

Farmville, another game from Zynga that started this summer, already has over 60 million monthly users.

And analysts reckon that about a tenth of these players buy stuff so, if a tenth of Zynga’s 60 million farm players buy a cow or tractor for $5 this month, then Zynga are banking $3 million a month.

That is why another social game developer, Playfish, was acquired by the more traditional computer games developer, EA Games, for $275 million in cash last week.

This is big stuff.

Even bigger is the idea of using virtual worlds and social gaming to bling your profile.

That’s how China’s QQ coins started and soon became a phenomena. Today, QQ international boasts over a billion users and more than 500 million active monthly users. That’s four times the number of users of Facebook and six times more active users than PayPal!

Add on the microtransactions of iPhone apps, with over 1.5 billion iPhone downloads and over 100,000 apps now developed, and we start to see the world changing.

After all, if I charge $0.01 per download for an iPhone app, and get a 100 million downloads ... that makes me a millionaire. And with the SuBo effect, where a woman (Susan Boyle) appears in a UK talent show and is watched by over 300 million people globally via the internet in less than two months, 100 million downloads is not unreasonable for a good app.

These experiences, along with others such as Second Life’s Linden Dollar economy, indicate that the future of money is not money itself. We do not wake up and think about making payments and buying money, we think about waking up and thinking I’m going to use my money to buy something.

So money is purely there for the value exchange.

And if that value exchange can be achieved by using virtual coins, fantastic.

Conclusion: expect the world of the next decade to morph into a myriad of payment mechanisms that supplement, supplant and supply fun and games on top of the traditional banking network.

Oh yes, and expect billions of microtransactions to occur person-to-person globally.

 

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Microfinance in CEE is different ... or is it?

We had a good meeting of the Financial Services Club in Vienna on Wednesday night for our Central & Eastern European (CEE) Group.

The meeting was in a cool place called the K47 Club ...

The focus of the meeting was microfinance, and was interesting because talking of microfinance and microcredit in CEE is very different to microfinance in Africa or other emerging economies. This is because it is not so much community based, where a village or family borrow together to finance farming or basket weaving, but more based upon small loans to individuals and small to medium enterprises.

Hence, there is a concern amongst many of the financiers here that there is the lack of social community pressure to payback.

With the original Muhammad Yunus model of financing at Grameen Bank, the whole village would be liable for the loan you see. So if one person defaults, the whole village defaults. That puts an enormous pressure on everyone to play ball. With CEE microfinancing however, the money is based on one-to-one individual loans rather than community loans per the Grameen model

This does not preclude offering microfinance in CEE as it is a very successful model of business with many of the banks, such as Erste, moving into this area with Good Bee; but it does mean having strong management over risk and collections.

Ken Vander Weele, President of US firm Opportunity Transformation Investments (OTI), said that they had been operating microfinancial services across CEE for over two decades and gave several examples of how such services develop.

“In Montenegro we were making €1 million to €2 million loans to SME’s after several yearsk, as these businesses ramped up their lifecycles from micro finance to macro.”

That seems all well and good, but in the current crisis climate, will they payback?

“The real micro micros are running cash in the markets face to face, and their cashflows are still strong. It is the SME’s with €10,000 to €50,000 loans who are struggling.”

It was clear from the discussion that the more developed the economy and commerce is within a nation, the less likely you are to find a thriving microfinance community. This is why microfinance is not particularly burgeoning in economies such as Poland whilst in Southern Europe, especially in countries like Albania, it is an overwhelmingly strong trend.

This does not mean there is no interest in microfinance. In fact, many banks across CEE are showing Increasing interest in microfinance because of the success of the programs currently up and running, the profitability to be made from such offers and the higher interest rates on offer.

This is particularly the case in countries where loan sharks are raking the markets and a more trusted source of funding at lower cost is required.

That is why banks will ultimately own microfinance as a business because banks have the liquidity, the capital base, the reach and the marketing to make this a success.

For example Sava Dalbokov, CEO of Good Bee Holding which is a subsidiary of Erste Bank, said that banking penetration in Romania is covering just 40% of the population and that 99% of companies have less than ten employees, making it a good business for microfinance. This and similar examples in other CEE nations, demonstrate that Europe is behind here in banking the unbanked.

In the case of Good Bee, they teamed up with Wizzit the mobile finance operator from South Africa, to offer mobile payments and finance in Romania. But this leads to another dilemma as people now know that they can get money on their mobile phones, but they aren’t sure how to get money out of their phone. This means focusing on the next level of cash management with Good Bee teaming with Western Union and others to offer this capability across Romania.

And it is a good opportunity for the banks. As Pavol Kapsdorfer, Sub-Regional Manager at EDCS, made clear by underscoring that there are still “over a billion people living on this planet for less than a dollar a day.”

So who will win?

Probably large European banks over time. This is because the USA has been exiting the CEE region, because it becomes less relevant to the American firms interests as it develops, particularly as most of these countries see “the exit strategy is to join the EU. Once you’re in the EU, all the issues disappear and you become ‘normal,’ whatever normal is”, stated Ken Vander Weele of OTI.

This is why it was a good topic of conversation as the banks are keen on this space and will grow in their interests as regulators and policymakers push more and more for universal access.

If everyone must have access to a bank account by law, which some felt was likely in the future, then starting a microfinance, microsaving and microinsurance operation now will gain trust, growth, security and profitability when these services become mainstream.

That is certainly an area of interest of banks who are struggling today to find any source of new business.

But it is not just about offering a bank account. It’s about the training, delivery, structure and support of staff and the products that go with that.

This last point is a strong justification for banks to get into experiencing something related to microfinance right now if, for no other reason, than that experience can be gained anywhere from Bratislava to Glasgow to Alberquerque.

Meantime, we finished the evening with some lovely Weiner Schnitzel and wine ...

 

Nothing micro there then ...

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Numbers Part 17: Mobile Money

Just found a few numbers on mobile money users and thought it worth sharing:

• The market for mobile applications, or apps, will become "as big as the internet", peaking at 10 million apps in 2020 according to Symbian.

• CGAP produced a recent survey on Financial Access and found that there are 6.2 billion bank accounts worldwide - more than one for every person on the planet - except that 70% of adults in developing countries do not use formal financial services, or are unbanked, compared to 20% of those in developed countries.

• Of the 139 countries that CGAP surveyed, only 40 reported that they encourage or mandate government transfers through the banking system; 14 of these are high-income countries and 10 countries in Latin America. Few countries in other regions are promoting such transfers.

• The survey predicts that the mobile payments market could be worth as much as £365 billion by 2013, with 110 million users in Europe alone by 2014.

• By the year 2012 CGAP and GSMA estimate there will be 1.7 billion people with a mobile phone but not a bank account and as many as 364 million unbanked people could be reached by agent-networked banking through mobile phones.

• CGAP estimate that mobile financial services to poor people in emerging economies will increase from nothing to $5 billion in 2012.

• 40% of Kenyan households have used M-PESA as of late 2008, a figure announced by Caroline Pulver of FSD Kenya as she unveiled the findings of their survey (see pdf)

• 41% of Filipino mobile money users were able to set up a mobile money account in 5 minutes or less.

• Electronic payments deliver cost savings of at least 1% of a country’s GDP when compared to paper, according to Visa.

• Monitise, the mobile money network, has just signed up their millionth customer and are processing 25 million transactions per annum.

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The branch-based banking model is dead (UPDATE)

Here’s a summary of the presentation I gave at the conference this week.

The headline is that the traditional model of banking is dead, long live the new bank model.

The dead model is the one where 80% of costs of retailing are in stores (branches).

Branch based banking is dead.

Branches are not dead ... just the concept of branch-based banking per se.

UPDATE: the critical point here (which some are missing - see comments) is that branches are not dead.  You still need some for sales and relationships.  But about a tenth of the number that most banks have today as the majority are just administration or transaction outlets that can be automated.

For those who read the blog regularly , you’ll know what I mean but, just in case, the point is that 8 out of 10 branches were opened as administration centres to service the transaction needs of communities. Those needs are now being self-serviced so what are those transaction centres there for?

In particular, as 95% of customer contact is now being delivered remotely through technology channels, including corporate customers, this should mean that at least 80% of the cost goes into the staffing, processes and technology used in those channels.

In other words, 80% of the old bank operational costs for retailing were in branches. Today, it should be in technology channels.

But there’s more to it than that.

It’s about relationship and connections.

People get technology today not because it’s gadgets but because it is connecting their lives to the lives of countless friends and strangers.

This is why Facebook can go from nothing to a place with the population of the United States in under four years, and why Twitter can go from off-the-radar to on-everyone’s-radar in just under a year.

Last year, no-one mentioned Twitter.

Today, it’s an integral part of the show.

But it’s only integral because it helps people manage, share and organise their lives and loves.

And that’s what banks have to do if they are to reconnect. They must connect people to their money and finances in a simple and easy way.

The presentation draws on all the materials you can find in our directory of social finance, and is themed around the human connections that make up our lives.

This is why each point ends with human faces, as that’s what it’s all about, and empty branches, as that’s what it’s all about.

The Bank Model Is Dead (download)

View more documents from Chris Skinner.

By way of a little more explanation of the flow.

To start with, today’s kids see the computer and its operating system as a history lesson.

They don’t care how technology works, just as I don’t care how electricity works.

I just like what it can do, and that’s how kids see technology.

They also see banks as a history lesson.

Their grandparents went into branches, their parents used ATMs and they just think of money and banking as being like Mint, an internet service that organises their finances for them.

What’s a bank branch for therefore?

Equally, everyone keeps referring to the Facebook and Twitter generation, or the twitfaced generation as some might call them.

Who are the twitfaced generation?

They’re not the under 25’s.

They’re not the under 35’s.

They are the over 35’s.

Most Facebook and Twitter users are average age of 40.

So when we talk about social networks, we are not talking about the next generation of customers. We are talking about the current generation.

If anything, the new generation of customers should be called “the Mob”, as they are all about being mobile connected youth (the Mobile Youth website is brilliant if you want more on that).

So what we’re really saying is that you need to completely rethink the bank around social technologies and rethink the branch network by closing most of it down and reinvesting that saving into social finance.

If you don’t, you’re dead.

Give it less than a decade, and you’re dead.

I’m serious.

Mainstream media fought this battle ... and lost.

That’s why television and newspapers are shutting down by the bucket load as today’s media is created by me on YouTube and Typepad.

So stop fighting the lost bank cause of the branch network.

Rethink it.

Keep the branches you need for sales, and shut the rest down.

Replace them with ATMs.

Equally, start thinking about new ideas such as microtransactions.

A billion iPhone app downloads in nine months.

Charge 50 cents a download and you’ve generated $500 million.

That’s the future.

It’s the grains of sand that will build the future.

And some banks get this stuff.

eBank and Jibun Bank in Japan; Wells Fargo and Bank of America in the USA; BBVA, Caja Navarro and a few others in Europe; but these are few and far between.

By way of example, I’m still waiting for my bank to start a blog or anything ... instead I just have a locked out website with activation codes that don’t work (long story).

In summary, the bank of the future will connect with me intimately via my mobile lifestyle 24*7. They will not only be proactive, but predictive of my needs and will provide me with a connection not just to a payment or to my money, but to my financial lifestyle.

That’s what MINT is doing today and BBVA has delivered too, but it requires bravery to go down this route.

Being brave by shutting down transaction centres, opening hi-touch 21st century sales centres and pushing the rest down a common technology platform that supports access via mobile, laptop, music player, television, car ... any internet-enable device basically.

And this changes your business model as the old model would involve massive investment in the business case to launch new technology platforms.

Today, technology is free and disposable.

So get on with it.

Retail bankers of the world, unite.

Shut down the branches and bite the bullet.

Stop fighting the old fight and start focusing on the future.

Otherwise you’re just dead meat, and who are we all going to sell to then?

The mobile phone companies?

p.s. as mentioned, all the case studies supporting this can be found at our directory of social finance

Forget money, let's use sand

For years, I’ve played poker with matches and chips rather than coins and notes.

We accept that a match can be ten cents or a chip is a dollar or more.

We don’t need real money to know our exchange rates.

Now, this basic idea is being replicated in social networks.

Facebook, as many of us know, has made a bet on this with Facebook credits.

Twollars can do the same for Twitter.

And now, according to this Wall Street Journal report, everyone is trying to build virtual credits in social worlds:

To be honest, this idea is not new, as it is just an extension of complementary currencies as pioneered by Bernard Lietaer and Margrit Kennedy.

This has gained traction recently as communities try to encourage more local trade through currencies such as the Totnes and Lewes pound.

But the big deal is that social networks, with billions of users, can now take these concepts to new heights as money migrates to credits across social networks.

So the future looks like one where, as the WSJ video calls it, the world is built on sand.

Sand?

Sure, the world is full of rocks, pebbles and sand:

• rocks are the core currencies of nation states – the dollar, euro and renminbi;
• pebbles are corporate currencies, such as store credit cards; and
• sand are the little grains of value exchange made person-to-person, peer-to-peer, P2P.

The future built on sand?

Sure.

Sand makes glass and the gazillions of grains make up the coasts of all nations.

So why not build a world on sand ...

... oh yes, the house falls down on sand.  We need rocks for foundations as well.

*

Postnote: this is actually Innovations in Retail Payments, Part 2

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More about mobile money

I'm on holiday and ignoring nearly everything ... almost everything ... but not quite.

Just found a couple more links about mobile money that are really interesting so couldn't help but post them.

First, Fast Company has just produced a really good review of all things to do with mobile money:

"Mobile payments system Boku just announced that it will work with a bevy of social networks and gaming sites. But competitor Zong, was recently chosen to pilot Facebook's virtual currency, called Credits. Both sites will face considerable opposition from Obopay, a seasoned startup that recently earned the backing of mobile phone giant Nokia for its Nokia Money payment system. Mobile payments are convenient, fast and easy--but which service should you use?"

They go on to look at PayPal and Amazon's TextPayMe, and their answer is that each has its own virtues dependent upon what you are trying to do, e.g. gaming, downloads, sending money, etc.

Well worth a view.

The other that caught my eye was the launch of Virgin Mobile's Zoompass in Canada:

Virgin Mobile Canada and EnStream LP announced that Virgin Mobile customers can now Zoom each other cash with Zoompass(TM), a groundbreaking new mobile money transfer and payment service.  Zoompass is a fast and easy way to send and receive money securely with a mobile phone.

Being on hols in a remote place with only a mobile and blackberry to keep in touch means that these things are proving to be of great value.

After all, how else am I going to pay that utility bill I left on the doormat that day I left?

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In love with Kiva

For those of you who haven't heard of Kiva, it's a P2P lending community with a difference.  It's the Grameen Bank of the Zopa world.  In other words, it facilitates microfinance, using the web as an enabler.  And it's wonderful.

Why is it wonderful?

OK.  It starts with that fact that it connects people with money to those without. 

I joined Kiva a while ago and put $100 in, just to see what happened.  The investment was split into $25 chunks across four borrowers in four countries.  Since then, I've been recycling the $100 amongst different communities and here's some of my recent investments:

These are shown on my profile picture and comprise a range of countries and projects, from buying livestock to running a store.  .

As you can see, three haven't repaid yet, but then I only invested in them this week.   Meanwhile, Jubail Sempa is typical of my $25 per project investment - repaid in full in.

On a regular basis, Kiva updates me with the progress of the loans made.  For example, I made the first three loans yesterday and got this email today:

Thank you for your loan. It has been disbursed to Tidjani Shaibu Adamu by Christian Rural Aid Network (CRAN) in Ghana. We are excited to watch this business grow. Over the 7 months of this loan, Christian Rural Aid Network (CRAN) will be collecting repayments from this entrepreneur and posting progress updates on the Kiva website. 

This update was posted by CRAN, who are Kiva's partner in Ghana.

Meanwhile, where a loan has been repaid, such as Jubail Sempa's Group above, then you get a full profile and update of the project.

So here's Jubail's project:

The loans have "helped him out of poverty".  There's the point.  Using the concepts of microfinance created by  Muhammad Yunus, who received the nobel peace prize for creating Grameen Bank, Kiva has taken this concept into the 21st century.

The organisation runs a network based in the USA, with local agents managing the distribution and collection of money.  As a result, there's a human connectivity here which is why most loans are repaid fast.

 
 As you can see, Jubail's group wanted $4,325 in February to buy more cows, and paid back early.

This is usual.

The nice thing about Kiva is that it's social too.  You not only feel connected to your remote investment, but also with the other investors.

All in all, it's a brilliant concept run by fantastic people and improves the world.  And there's not many financial services companies you can say that about these days is there?

This is why people like Bill Clinton give them praise:

And there's another reason Kiva is important for you to be aware of.  They're now moving into the mainstream.

Early in June for example, they started microfinance for ... Americans.  Their blog gives a review of what's happened, and the slides are interesting:

Kiva U.S. Loans Impact Analysis

View more presentations from kivamicrofunds.

I took particular note of the outcome of their move into microlending in the USA:

The Kiva Board had a lot of questions given the significant amount of both criticism and support of the U.S. pilot from the Kiva lender community. After a lengthy discussion, we’ve decided 3 things:

1. Based on overwhelming feedback that Kiva is about giving people choice, Kiva should continue to give our members the choice to make loans to U.S. entrepreneurs.

2. We've received tons of feedback regarding the perceived poverty level of certain borrowers who were part of the U.S. launch. Kiva intends to sit down with our U.S. based Field Partners and share this feedback so that they can post loans that align more closely with Kiva's poverty alleviating mission.

3. As we consider future opportunities to expand within the U.S., we will exercise caution and keep the ongoing feedback of the Kiva lender community in mind.

Funnily enough, this reflects the fact that the Kiva community like the idea of helping Cambodia, Uganda, Nigeria and other under developed economies, but many don't like the idea of people with money giving to economies where people have money ... the USA in other words.

The trouble is, these days, many in developed economies also need money and so Kiva has said that if Americans want to give to Americans, so be it.  I wonder if they'll give to Glaswegians, as Muhammad Yunus thinks that's a good target?

Meanwhile, if you have ten minutes, it's well worth spending the time watching this movie: the story of a Kiva loan.

A Fistful Of Dollars: The Story of a Kiva.org Loan from Kieran Ball on Vimeo.

  

The Finanser is sponsored by Vocalink and Cisco:
  
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PSD and SEPA research

It’s July 1st and we are pleased to announce that, during the summer, the Financial Services Club is running an in-depth analysis and research project about the country-level plans for the transposition of the Payment Services Directive (PSD) on 1st November 2009 and the implementation of SEPA Direct Debits (SDD) on 2nd November.

The research will be released the week before SIBOS in Hong Kong in September and, as part of this, we have an online 25 question survey which all readers of the Finanser are invited to complete.

If you participate in the survey you will automatically receive a copy of the final research report in September and, for those who enter their email address, three winners will get a copy of the book: “the Future of Finance after SEPA” and one lucky person will be given an honorarium to the Financial Services Club to be able to attend any of our meetings in the future for free!

Now there’s an offer you can’t refuse.

If you would like to participate, then just complete our survey, which should take you less than ten minutes, by clicking here.

  

The Finanser is sponsored by Vocalink and Cisco:

For details of sponsorship email us.

Zopa - love it or loathe it?

I’m often asked about Zopa’s business model and website Lovemoney have kindly made a video explaining what they’re all about and how they work.

At the end, they ask whether you should love or loathe Zopa … you’ll have to watch the video to find out the answer to that one.

Although the video is a bit naff, the comments area is interesting with MissingOz saying that: “Zopa is great, I've been using it for 2 years now ... Ironically, now I know how banks feel when faced with lending.”

Oh to be a banker, and take real risks with your money.

And Max878 (what happened to the other 877 Max’s?) says: “I'm a Zopa lender. Yes, it's a strong product. However, please bear in mind that the historical returns of over 8% are simply not realistically achievable. At the moment, you are not likely to be lending to A* borrowers at much over 7.5% if that. Zopa will take 1% of that in fees (not unreasonable bearing in mind that they carry out stringent checks on potential borrowers). Many lenders, myself included, believe that default rates are edging close to 1.5% - 2% at the moment, and it's not likely to improve in the near future. And you will of course be taxed on the interest that your investment earns.”

It’s not all fun and games in the world of borrowing and investing, is it?

Mind you, my favourite comment would have to be Olipro’s, who reckons the presenter “talks in a tone that reminds me of the informational videos they show to children in school.”

So, if Jack lends Jill one dollar and wants Jill to pay it back very quickly, Jack charges Jill more to borrow that dollar than he charges Mary ... but Mary is better looking so that’s why.

Sorry, having a non-PC moment ... but then I am in Italy this week, home of Silvio Berlusconi, so I can be forgiven can’t I?

More about Rome later in the week as it’s mixing business and pleasure.

Meanwhile, if you want to know more about Zopa and other social financial services, I’m running a one-hour webinar detailing all about this, Twitter, Facebook finance and more on Monday 6th July from 17:00 GMT (12:00 EDT, 18:00 CET) for an hour.

This follows on from our other successful webinars of recent times, and you can register to attend by clicking here.

The Finanser is sponsored by Vocalink and Cisco:
 
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iPhone's BIG NEWS: micro-payments

A nice news report on Pocket Gamer's website, that says iPhone's developers are getting all excited about micro-payments, a new feature in the new iPhone 3.0 software:

"Right now, the only way to charge someone for your iPhone game is through a standard App Store purchase. You get your money up front, but you can't then charge players anything else.

"That's changing with iPhone 3.0. And while you might wonder if this is just an excuse to get iPhone gamers to dip into their wallets even more often, it's actually a hugely positive thing for several reasons.

"Downloadable content, virtual items, subscription billing and fast-track social advancement are some of them."

It is all about gaming, but I love the idea of playing Epic Pet Wars and being able to suddenly bring out a mega-baton-beating weapon for my dawg, such as a cut-throat razor-blade chainsaw dog collar that I happened to just buy for $0.002 which could then blow the whole motherfunking place apart ...

... sorry, got a bit carried away there.

Africa's mobile financial revolution

I know that the theme of mobile banking is appearing a lot at the moment, but it is hot, hot, hot!

A bit like Africa, and this is the story of a great success in Africa.

And no, it’s not M-PESA, although that one’s a goodie too.

This one’s ABSA Bank in South Africa.

ABSA launched mobile payment services back in 2000 and saw a gradual growth in usage, with a near enough doubling of users year-on-year to reach over one million customers today.

Over half of these customers use mobile banking for balance checking, but buying prepaid airtime and looking at mini-statements are also very popular.  The service not only offers simple SMS payment services, but goes a step further by tapping into the functionality of USSD.

USSD allows more functionally rich processes and services to a standard GSM telephone and therefore balance checks and beyond, and is the method by which ABSA Bank has built an affinity for the mobile handset as a financial tool.

Not only is it used for customers to make simple transactions therefore, but the service also offers alerts as an early warning system for fraud. This means that for every payment on debit or credit card, customers can set alerts to their telephone to reduce fraudulent activity. You can also parameterise those alerts, based upon size of transaction or location.

Here’s Christo Vrey, Managing Executive, Digital Channels for ABSA Bank discussing the service:

Christo was speaking at the Financial Services Club’s European Banking Forum ** and makes it clear that

(a) moving the channel from a simple transaction to a useful service for anti-fraud management, customers will pay for the additional services; and

(b) moving the channel from a simple transactional system to a mobile financial channel increases the opportunity to grow market.

This is made clear in the chart below:

What this shows is that they had forecast the market size to be about 5 million people based upon simple SMS payments but, by adding SMS alerts and USSD the market size triples.

The reason for this is the bank extends the range and breadth of mobile services, to leverage this as a channel rather than as an ancillary. For example, the bank makes it mandatory to use the mobile as a kind of Xiring terminal, where every online payment is authorised through a one time password (OTP) via an SMS text message.

All sorts of other information is provided through the mobile including notice of payment to beneficiaries, account activity notifications relating to ATM withdrawals and debit order payments, and more. In other words, the bank has tried to create an affinity for customers with their mobile bank as their primary transaction and verification tool.

One of the biggest pieces of their service is a demonstration however.

A demonstration?

Sure.

How many people use an ATM if no-one shows them how?

How many people use self-service internet, if no-one shows them how?

And how many people use mobile channels, if no-one shows them how?

Now you may think this is not important, but the most important aspect of ABSA’s experience is that customers swarmed to the service after they rolled out a sales force (double click picture to see larger image):

This sales force demonstrated the service to customers as they went to ATMs across South Africa, and were easily identifiable as they were wearing the bank’s bright red livery.

The fact that people took the time to explain the service explains the blip you see in ABSA’s customers between 2007 and 2009. It also shows the reason for the interest in this service, in that you are looking at a country where geography is a barrier to payments. Getting money from A to B has been traditionally tough, with bus drivers and taxi’s being the only way to normally move money around in an insecure and unreliable way.

In fact, you can combine the story of ABSA, which is really getting into the banked population, with the story of M-PESA which is driving into the unbanked population, and the stories provide a common theme.

First, geography is a key factor. The fact that Africa lacked the infrastructure for some of the payments and other processes we are used to, means that the wireless banking capabilities of mobile make it a key.

And the second factor speaks for itself: mobility. The fact that mobile communications are now in play, overcomes the need for physical movements of the days of old. And the days of old to which I refer are less than five years ago.

For example, I was lucky enough to hear Olga Morawczynksi of CGAP talk about M-PESA last week, at the excellent Digital Money Forum.

Olga made her doctorate study around how M-PESA worked and why, and I don’t have time to report everything she said, so would refer you to previous blogs about M-PESA for background:

Workers' Remittances - a huge opportunity
Is your bank ready to be an MVBO?
Mobile payment provider 'infuriates' banks

Olga made it clear that the reason for the rapid take-up of M-PESA is twofold.

First, men naturally migrate to Nairobi for work, leaving wives and family in rural villages who need money to buy essentials such as wheat, maize and more.

Many of those in the rural communities depend upon these remittances for anything from half to all of their income.

The fact the migrant worker can now instantaneously get the money home without having to leave the City for days, or pay someone a large commission to move funds, is the reason why it works with the typical user making six M-PESA transactions per month in a mixture of remittances and savings.

The second reason was the political unrest in Kenya during the recent elections, which meant saving with a 'trusted' provider such as M-PESA, who are run by a South African, became more trusted than saving with a Kenyan Bank, especially as some of those banks went bust (sounds familiar?).

By January 2009, M-PESA had 5.5 million users out of Safaricom’s 13 million subscribers representing a third of Kenya’s 36 million population.

Those M-PESA users are making 160,000 person-to-person payments every day through a network of M-PESA agents, each of whom process around 90 transactions a day earning US$5 in commissions. US$5 a day in Kenya is a good rate of earnings when the average casual labourer only makes $1 a day.

All in all, the rapid take-up of a new technology, accessible to all through mobile GSM communications in a mixture of SMS and USSD is proving to be a massive success in several African communities.

It will be nice when we can get it here!

p.s. thanks to Aden Davies for pointing out a great article in ReadWriteWeb related to the themes above.  Johnny Walker also noted that I missed Wizzit.  I've been aware of this one and so this article was not meant to be exhaustive, but Wizzit is important as it is an example of another great banking mobile service in South Africa.

* all videos and presentations are available to FSClub online members
** the European Banking Forum is a conference run jointly between the Financial Services Club and VIB Events

Facebook Testing Virtual Currency

Interesting note sent to me from Nelson Eduardo Pereira today, who spotted that Facebook are offering a currency.  It's not a real one, just swapping credits, but it's a start.

The service builds on the gift services in Facebook.

These gift services have been tracked by Lightspeed Ventures for a while now and estimated to be worth around $15 million a year back in January 2008, increasing to $35 million by September 2008 and probably upwards of $60 million today.

The credit-based system is described in more depth in Venture Beat:

and what it implies is that Facebook has launched a first phase, virtual currency for swapping appreciation in virtual units amongst their now almost 200 million users.

Tomorrow?

Cashing in those credits for trading in real money?

Can't be far away ... oh yea, that's Spare Change isn't it?

View more presentations from sparechangeinc.

Why banks should focus upon Twitter

Blogging about Twitter in January and February identified it as a new, social networking focal point, due to the rapidly growing numbers of fans of their service.

Now there are many folks asking questions about Twitter, as it gains momentum.

For example, in the last few days, Paul Penrose at Finextra asks: "What’s the point Twitter?" whilst, in an article for Marketing Week, Andrew Harrison claims that Twitter is the emperor’s new clothes.

The thing is that, as demonstrated by the latter view, it is easy to pour scorn on things we don’t understand or know how to use effectively but Twitter is rapidly emerging as a major source of financial innovation and should not be ignored.

For example, were any of you the ones who thought that a mobile phone was for yuppies, a blackberry was a waste of time or wonder why anyone would want to text message?

How wrong you can be and, if you have those attitudes, you can easily miss the biggest wave of change we have ever seen in our times.

That wave of change is illustrated by every other person on the planet now having access to a mobile phone and millions of text messages being used for payments.

The thing is that many of us try to shun things we don't understand, don't like or are scared of.

But that's wrong. 

If people are embracing a new technology - and millions have chirped over to tweet lately - then it warrants understanding.

In my case, I didn't get Twitter as I'm not a mobile junkie and that's who I thought it was designed for, but I've now discovered lots of net-based tools for Twitter - such as Tweetdeck and Monitter - and it's become my essential text message service for the internet.

And sure, you get the odd person (did I say, ‘odd’?) who posts stuff like “just eaten a sandwich”, or “been to the toilet” ... and they’re the ones who probably rang folks with their mobile in the 1990’s saying “I’m on the train” or “I can’t hear you, you’re breaking up”.

You see there are things that Twitter’s fantastic for and, for those who are interested in trying to keep up-to-speed with information overload, having your mates say “another bank bankruptcy” or “look at this article on social media” is really useful.

Equally, for catching customer dialogue and responding it can be terrific too, as Commonwealth Bank of Australia (CBA) found out this week when a customer posted an angry Twitter.

The client was going through a lengthy mortgage process with CBA and was fed up with the wait for final approval which might mean they’d lose their house purchase. So they twittered their frustrations and, within an hour, had a CBA customer service rep Twitter back, sort out their issue and deliver great customer satisfaction.

Now there’s service for you.

So I can’t handle these folks who rain on someone’s parade just because they don’t understand it.

Mr. Harrision's article, for example, claims Twitter has 1.2 million users worldwide and this was published in the week of 26th March 2009.  The actual number is seven million and rising.  He does qualify this to be 'active' users and, whether it's 1 or 7 million, it's enough to get attention.

After all, we probably dismissed PayPal when they had 1 million active users and today they have over 70 million.  It doesn't take long.

Bottom-line: to diss this stuff sounds like someone saying television will wipe out cinema or the internet is just for pornography and gambling.

From a financial market viewpoint, the question is whether there is opportunity to monetize and grow business through such services.

Most social media is targeted at a conversation, which creates an advisory and support service.  Talking with customers through social media makes sense, but where’s the PayPal for Facebook or Twitter?

Surprisingly, there is very little monetary activity in Facebook for example.

Maybe that’s because of excellent stand-alone social finance services, such as Mint, Wesabe, Social Picks and more, who have all made some inroads to integrating their capabilities with Facebook ... or maybe Facebook's insecurities scare away any financial activities.

Regardless, the only service to gain any traction so far appears to be Spare Change.

Spare Change has 134,000 active monthly users.

Compare that with Pay Me, which has only 77 active monthly users, and you can see that capitalising on this social stuff may be hard after all.

There a couple of other interesting financial applications on Facebook, such as:

Money, a new application from Michael Moriarty that allows friends to send each cash;
Chipin, which is useful for rasiing cash for parties; and
MyMoney from Fiserv, which is designed for credit unions to play in this space;

but, overall, the majority of financial applications on Facebook are games.

This is why we could generally claim that Facebook is for socialising and not for secure payment processing. That does not preclude advice, which is what I keep pushing financial providers to consider through such sites, but monetary transactions? Maybe not.

This may not be true for Twitter.

Although Twitter is new, there are already many financial oriented sites that are growing around it, such as TwitPay, Twollars, Twipper, Harvest, Xpenser, Tweetwhatyouspend, StockTwits and FXTwits.  

These are all sites offering some form of payment or social finance service through Twitter, and I have to thank JJ Hornblass at Bank Innovation for these tips, as he has been keeping a pulse on this activity. 

Wesabe and other social finance websites are also integrating with Twitter, so they think it’s important, as do some innovative banks:

Wachovia: first Twitter post, August 18th 2008; 2,484 followers; 274 updates
Bank of America: first Twitter post, January 7th 2009; 1,598 followers; 647 updates
ING Direct: first Twitter post, February 6th 2009; 748 followers; 84 updates
ANZ: first Twittter post, March 18th 2009; 147 followers; 29 updates
Wells Fargo: first Twitter post, March 26th 2009; 346 followers; 81 updates

So the real reason Twitter is important is ...

• It’s an SMS across all platforms, mobile and internet
• It fits with the Attention Deficit Disorder, or ADD Generation (which includes me)
• It’s got lots of add-ons for great functionality and usuability
• It works
• It’s useful
• It’s quick and easy
• It’s good

What more could you want?

Oh, and if still not convinced, here's 10 reasons to Twitter from Dave Lee, a technology journalist for the BBC and co-editor of the BBC Internet Blog:

1. You’ll know about stuff before everyone else does. 
2. You can use it to find out what people think… about anything. 
3. You can find people who like what you do. 
4. You can use it to get help. 
5. It can transform your career. 
6. You can campaign for good.
7. You can talk directly to people in power. 
8. You can read stuff you’d never normally have found. 
9. You can use it to save heaps of time. 
10. MC Hammer is on there. 

Social lending: from baby to child

Zopa announced results this week that showed lending had risen 140 percent year on year.

In short, Zopa offers a lean and mean, razor thin margin system for loans.  As an lender, I enter Zopa and place an amount – let’s say $10,000 – in the system. Zopa then spreads that loan across a range of borrowers who I select as being appropriate for my money.

The beauty of the system is two-fold.

First, it offers great investment returns and borrowing rates, because it works on razor thin margins. The Zopa rates today offer up to 12% on investments per annum if you are willing to take on board higher risk borrowers.

Equally, it offers loans as low as 8% for lower risk borrowers. Compare that to the less than 4% on savings and typical start rates of 12% on laons and you can see why Zopa becomes attractive.

As mentioned, it also manages the risk of lending on your behalf.

This means that it spreads the risks of your loan across many borrowers, and uses credit rating agencies like Experian and Equifax to work out who is a higher risk or lower risk borrower.

The second part is the beauty of the system though. If I am a borrower, I can see who I’m borrowing from. Similarly, if I am a lender, I can see who I’m lending to. That’s why it’s called social lending.

The fact that I’m in hock to someone I now know and can see makes the system a dependable ecosystem, with less than 2% of loans in default, which is far better than traditional systems.

So, you have something that works, which is why Zopa has been copied worldwide with Smava, Boober and others in Europe; Prosper, Kiva and the Lending Club in the USA; ppdai in China; and many more.

Are they making money?

Not really.

Most of these fledglings are just learning to fly, but Zopa did announce yesterday that business was up 140% year-on-year. In practice, that still means only £35 million of lending however which, for a business that’s as many months old working hand-to-mouth is not a lot.

In fact it barely covers expenses.

But hand to mouth can soon change into a feast.

A decade ago we all thought that PayPal was irrelevant, and yet today PayPal has over 70 million active users in over 200 countries processing billions of dollars of transactions.

Is that irrelevant?

No.

Equally, Facebook went from no users to 150 million in the same time as Zopa has been around.

Twitter has gone from no users to 10 million in as many months.

This again illustrates the new economics of the world and of finance.

A few bright minds with a server can launch a brilliant business overnight for virtually no cost.

So don’t dismiss Zopa too easily as today’s minnow may be tomorrow’s gorilla.

This is particularly true when the banking system is broken, turning away prime and subprime and offering pensioners and savers zero returns on their investments.

In fact, if you consider Zopa's growth of 140 percent in the last year, is this because their model finally works or something else?

I think it's the something else.

It’s that their model has finally been awoken thanks to the banking system being broken and loans being harder to get than Viagra in a monastery.

In other words, the fact that banks are not lending loosely, as they were, or offering decent savings rates, as they did, is pushing customers straight into the hands of the social lending platforms.

As a result, watch out for social lending ... and also watch out for social saving, social insurance, social mortgages and more too.

After all, social lending is just the start.

Mobile payments in China

Researchers estimate that there were only 83.5 million online payment users in China in 2006, due to the lack of access to payment cards. Admittedly, Tencent with the QQ coin has enabled more payments outside the banking system, but the lack of access to e-payments has been an inhibitor to the democratisation of commerce in China.

However, this is changing and changing fast with UMPay, a Joint Venture between Unionpay and China Mobile, targeting this space through mobile services.

According to UMPay, e- and m- payment users will exceed 500 million people next year and there are already 100 million m-payment users under the UMPay scheme. That’s more than the total number of online payment users only two years ago.

UMPay launched in 2003 and provides China Mobile users with a comprehensive mobile payment platform and mobile payment system provide mobile wallets, financial message services, top-ups and mobile ticketing.

Double-click the image below to see the range and targeted groups for these applications:

Where they are going to gain the greatest growth is from rural farmers though.  This is the strategy of UMPay today - to saturate the rural locations with UMPay access - and will take the 100 million users through the half a billion number in the very near future according to UMPay CEO Bin Zhang.

I was lucky enough to catch up with Mr. Zhang in Hong Kong and asked him to briefly explain their strategy.  Here's a short version of our discussion** and apologies for the sound, but we were in the middle of a conference:

I particularly liked the chap at the back opening the conference doors and then slinking off again! 

Mobile finance is fast demonstrating its power in countries that are using such technologies to leapfrog established financial infrastructures. 

In China's case, this is a sophisticated mobile financial service from billing and payments to utilities and transportation.  In other words, a comprehensive use of mobile for banking and financial services.

We could learn a thing or two.

** longer versions of our video clips are available for FSClub members

Should we challenge our trust in money?

Payments is an area that has a positive vibe in banking as 'Transaction Services' - the payments processing part of a bank - is one of the more profitable and reliable businesses right now. 

I don't think this will happen, but could even this be threatened by the loss of confidence people feel with banks especially after quantitative easing, which the media translates into 'printing money'.

Nick Newman, the Times

Could people even question the meaning of money itself?

Some people might, but what's the alternative?

Probably the same one that came up during the Great Depression of 1929.

Back then many people felt lost and money became meaningless. The runaway inflation in Germany led to the rise of Hitler, and millions of people were unemployed, homeless and hungry.  The result was the rise of complementary currencies, also known as community currencies.

Most of these currencies are used as an alternative to national legal tender, and are transacted and traded locally to encourage local transactions using stable local trusted mechanisms and administered by the local community.

Community currencies can be 'earned' by doing work for the community and in the locality.  Fixing gates, ploughing fields, painting fences ... you name it.  If it's good for the community, you get some community currency.

All shops, merchants, farms and dealers will accept this currency, often in preference to real money, especially if 'real' money becomes uselss due to hyperinflation (take note Zimbabwe).

These currencies arose en masse in the 1930's, to get around the issues of the Depression, the loss of faith in the banking and political system, and the challenge of work.

Sounds familiar?

Funnily enough, one of those currencies is still around: the Wir, meaning 'we' in German - we are the community - the Wir Bank still operates in Switzerland. Rising from just 16 constituents in 1934, the Wir now supports over 62,000 small to medium businesses transacting around CHF 1.65 billion (US$1.4 billion) a year.

Anyways, I've mentioned such currencies several times before, but now note that these are rising worldwide and fast, from the Liberty Dollar (USA) to the Lewes Pound (UK) to the Boon Kud Chum (Thailand) to the Tianguis Tlaloc (Mexico) ... in fact, you can pretty much find a LETS (Local Exchange Trading System), Regio (Regional currency) or Time-based currency system anywhere today.

I'm sure it's a subject I'll come back to and just lay this down again as a marker note right now.  It would also be interesting to hear from anyone who has experience of such currencies in action.