How to Monetize Ideas

Posted on July 10, 2011 by Alan Weiss

 

Very few good ideas are ever monetized. They either drown amongst a lot of other, mostly bad, ideas, or they emerge not fully metamorphosed - crystalline, fragile constructions that blow apart in a light breeze.

Here’s how to can turn a good idea into very good money (or at least know that it’s not such a good idea):

• Assess the size of the audience. Do you have sufficient mass so that even 1 percent of the total constitute significant business? The “World” is never your audience. Who really might have pragmatic applicability for your product?

• Assess the quality of your reach. Do you have a highly popular web site, lists of people who know you and trust you (or, better, who have purchased before), a blog, a newsletter, speaking appearance, alliance partners and so on so that your product can be projected?

• Assess the medium. Are you considering a form and format that is ideal for learning and use? Does the medium add or detract from your value? (Example: “Talking heads” on video rarely constitute popular products.)

• Assess your brand. Are you sufficiently well known that many people will purchase merely on the strength of your name and renown? (Too many unknown people think the easy way to money is with a product. Even good products languish when people don’t trust you and/or have never heard of you.)

• Assess your price point. People believe they get what the pay for. Are you maximizing your price based on perceived value? It’s as much work to make a £10,000 sale as a £1,000 sale, so why not make the former? The key is profit, not numbers of sales.

• Assess whether this is long-term business potential. I believe that any new venture should reach six figures in a maximum of two years. Selling £25,000 the first year probably means much less than that in profit in terms of amortizing development and other costs, and the second year will probably bring even less.

• Assess your ego and motives. Are you doing this because others have done it, or because you want a “book” or a “CD” or just passive income, or are you really providing value to others in varying ways that extends their effectiveness?

• Assess the market. Is this fresh and new, or derivative? Do you really have new intellectual property, or is this the “Seventeen Habits of Teams Pursing Black Swans that Moved Cheese for the Soul”?

© Alan Weiss 2011. All rights reserved.

Square Beware

Squaring Off With Square: Ingenico Takes Control of Rival ROAM

Square, beware. Ingenico SA, a maker of in-store payment terminals, just took a controlling stake in ROAM Data, a rival provider of portable payment systems used by small merchants.

Just like Square, ROAM’s technology lets smartphones and tablets based on iOS and Android to accept credit-card payments. It’s distributed to small businesses by the likes of Intuit Inc., Sage Payment Solutions and Total Merchant Services.

“We are arming them to compete with Square,” said Robert Stringer, vice president of products and marketing at ROAM. The companies did not disclose the value of the deal.

With Ingenico behind it, ROAM hopes to invest more in its technology, and to expand beyond the U.S., where the majority of its users are based, Stringer said. ROAM is profitable, and had seen sales grow 600 percent since 2009, when Ingenico first invested in the company.

The additional investment could signal that large payment-equipment companies are increasingly taking Square seriously, and redoubling efforts to push the start-up aside. Last year, rival VeriFone Systems Inc. began offering a special sleeve, which lets mobile devices accept card payments.
Ingenico sells a portable, cell-phone-sized device that takes card payments as well. ROAM brings Ingenico a step closer to having a comparable offering to Square’s.

The investment “is part of chess moves by the industry stakeholders to protect their turf,” said Richard Crone, who heads Crone Consulting LLC. “I consider it an early warning for Square.”

Ingenico’s president of North America, Thierry Denis, downplayed the rivalry with Square, saying “it’s not a step against any one of our competitors, it’s a response to the market.”
Square, created by Twitter co-founder Jack Dorsey, did not immediately respond to a request for comment.

The Changing World of Mobile Payments

Karen Webster Sizes Up the Rapidly Changing World of Mobile Payments

Let’s play a little game after you’ve read all of these recent announcements.

“Starting This Summer, the Isis Mobile Wallet Will Be Available to More Than 100 Million U.S. Card Holders” (ISIS announcement with BarclayCard, JPMC, Capital One)
“[The Visa and Vodaphone mobile wallet] has the potential to transform the way that people pay and are paid the world over.” (Visa/Vodafone mobile wallet announcement at MWC 2012)
“Google Wallet has announced that 22 of the largest U.S. retail chains support its initiative, which enables consumers to make purchases by tapping their Android smartphone at 300,000-plus MasterCard PayPass-enabled merchant terminals.” (Google Wallet)
“We are exploring potential solutions that would help us to deliver the fastest, most secure mobile-payment experience possible for our customers." (New retailer-centric mobile payments scheme)
“Home Depot has decided to bring the revolutionary POS technology to nearly all of its 2,000 stores in the US. It’s the first time in recent memory that a major retail chain has allowed a way to pay at the register that doesn’t actually require customers to have a physical product (whether it’s a credit card, a mobile phone, or a dollar bill).” (PayPal mobile wallet debut at Home Depot).
“Apple is clearly running a semi-sandboxed experiment inside selected retail stores. The experiment? Allowing customers to buy physical goods using Apple's own virtual currency system (iTunes).” (Apple Easy Pay Trial)
“Serve, the digital payment and commerce platform from American Express, debuted a Facebook application that allows users to send, receive, and request money without leaving the social network” (Serve and mobile wallet via Facebook)
“Card Case is an example of the grace that Dorsey believes defines Square, a company he hopes will radically transform the generally unmagical burden of exchanging money for goods and services. The app, designed as a visual homage to the fashion house Hermès, can also show you your payment history, what’s for sale in-store, and nearby places that take Square.” (Fast Company writing about Square)
Here are the rules of the game:
• For one point, to what are all of these announcements (made since the start of the year) referring?
• For ten points, what major players are missing from these announcements?
• For one hundred points, what’s the same about most of these announcements?
• And, for 64 thousand points, who’s likely to gain the most traction and win?
Let’s see how you did.
If you answered the first question with “mobile wallets” then score a point! (And if you didn’t, don’t admit that to anyone…)
If you answered the second question with Amazon and Facebook, add 10 points to your score.
If you answered the third question with, “All but three don’t rely on NFC to enable payments (Apple, AmEx, and PayPal),” then add 100 more to your score.
Now, before we see whether you can add 64 thousand points to your score, we need to first discuss just how many winners there will be and why.
Everyone quoted above, plus probably at least a hundred more, all want to win and are working very hard to capture market share. Just about every day there is a new announcement about a mobile wallet something or other. The Mobile World Congress last week in Barcelona was mobile wallet announcement central where we had the long-awaited ISIS debut, along with announcements from just about every mobile operator, network and mobile wallet start up.
Then, on Friday — well timed, I’m sure to hit at the tail end of all of this mobile wallet euphoria — was the retailer coalition. Their announcement basically dissed everyone in favor of “something different.” The strategy, I suppose, was to appear stealth, but its complete absence of substance made it too cute by half. No, we don’t have a technology and we’ll work with anyone, but “it” has to be better and safer than what exists now. To that point, there’s not a whole lot of experience to draw from; mobile wallets are mere babies in the payments lifecycle. Sure sounds like a strategy to me – but maybe one that is less about mobile wallets and more about shaking down the fees from the card networks and future mobile wallet providers.
But I digress. Let’s get back to the discussion of the mobile wallet winners. It will come down to, I think, how many mobile wallets people will want to have which is a function of: how easy they are to use; how convenient they are to access; and how many merchants will accept them.
My hypothesis is that, in spite of the fact that people, today, technically, have multiple accounts registered for payment (e.g. iTunes, Amazon, PayPal), most people by and large think of themselves as having one wallet. Most of those wallets are leather and they hold a bunch of stuff, including cards, cash and ID. If you were to ask anyone today if they would like to carry around two or three or ten leather wallets, my guess is that most people would look at you as if you had lost your mind. They’d say they’d rather consolidate everything into a single wallet that could comfortably hold the cards they wanted, and those they liked to use at the places they liked to shop. I would say this would be true even for women who carry purses that could hold multiple wallets, and like buying a lot of fancy leather accessories.
So, will the mobile environment make the answer to the “how many wallets are you willing to carry” question be any different? That depends on how you define the wallet — or, more correctly, how consumers will define their mobile wallets.
One answer is that the mobile wallet is the mobile phone so the phone literally becomes the digital substitute for the leather wallet. The many individual payments apps that can be downloaded on that phone are the digital analogs to the plastic cards that are carried around today in the leather wallet, even if they have more functionality and give the consumer the choice of switching between payment types. This new mobile form factor makes it tons easier for people to have and use many different payment types at many different merchants. As I have written previously, Starbucks has shown us the power (and profitability) of having an easy-to-use, single-purpose payment app – a stored value app that can be used only at Starbucks. The mobile phone makes it easy to now carry around multiple store card apps just like that since the fat wallet syndrome is a non-issue in cyberspace.
But I don’t think that most people will think of those apps as wallets. They’ll think of them as payments apps to be used at a particular merchant, just like the store cards they carry around now.
My definition of a wallet is a container that holds a bunch of different payment options that can be used at many merchants – cash, checks, cards – and I think that most people would agree. If you also agree, it means that single use apps like Starbucks aren’t wallets, they are apps which people today refer to as wallets (thus contributing to the confusion over mobile wallets). One of my colleagues has the Starbucks and LevelUp apps (a new mobile payment method available in Boston) on his iPhone and the iPhone is for all intents and purposes his mobile wallet. Those individual apps aren’t wallets, they are apps inside of his new digtal wallet, the iPhone. My guess is that he’ll probably add more of those sorts of apps, but not a lot more.
The mobile wallet as I have just described it (the phone) will make it possible to have multiple — even, in theory, hundreds — of such apps. It would make merchants really happy since they like it a lot more when people use their store cards (hence their motivation behind their own mobile payment network). But that doesn’t necessarily mean that people will want and/or use all of them. Just as in the leather world, people have a lot of cards (on average 7) but use only a few (like 2). Mobile may make it easier for more payments apps to “fit” into the wallet, but it doesn’t mean people will use them or want to have them. And having another icon on your phone isn’t costless—it takes more time finding the apps you want. Over time, people will reduce icon clutter on their phones and just have the payment types that generally use.
Moving on. Another answer to the wallet question is that the mobile wallet is actually a container that lives in the cloud or on a phone, that is accessed via the mobile phone, and that aggregates and makes easily accessible several frequently used payment tender types. That’s the PayPal and Square models (cloud-based) and what Google, ISIS, AmEx/Serve, Visa, MasterCard and many more are all pursuing too. Of the group, PayPal is the farthest along – 100M+ consumers with accounts ready to transact at the point of sale and merchant traction is starting to happen. Its cloud-based approach has given it a running head start – like 12 years of a running head start – with fewer moving parts to manage. Cloud-based wallets, like PayPal’s and Square’s, will integrate lots of other things too, such as loyalty programs, financial management tools, shopping assistants and so forth. Square’s Card Case is designed to recreate the experience of putting your purchases on “account” never producing cards or even showing the phone. The identification of the Card Case customer and authentication is done in the cloud, and via a “geo-fencing” feature that recognizes customers with Card Case accounts as they enter the merchant’s store. In all of these cases mobile wallets function more or less as an acceptance mark which, to be useful to consumers and merchant, means that these wallets must be accepted beyond just a single merchant.
If mobile wallets, a.k.a. new acceptance devices, are defined as these cloud-or phone-based containers, lots of other questions naturally arise.
The first is, how many are merchants going to be willing to accept them? The answer to that question depends on how costly it is to add another mobile wallet to the POS system but my guess is that it is going to be costly enough that only a few wallets will get traction with merchants.
The second is, how many are consumers going to be willing to use? My guess is this isn’t going to be any different than the physical wallet in the end and that consumers will have a handful.
The third is, how many mobile wallets are going to get enough traction with consumers and merchants, and solve the chicken and egg problem quickly enough so that they can survive long term? If you agree with my answer to the first two questions the answer is NOT MANY.
The fourth question is whether the existing payment networks will be wallets, simply, as they are with PayPal, just a choice within a wallets, or simply payment apps on a mobile that only allow the consumer to use their network card. I’m less sure on my answer to this one but my guess is that the networks will either survive as payment apps on the mobile phone (like the Starbucks store card) or that consumers will decide what they really want is a multi-tender type wallet with lots of functionality in which case the payment networks will become a much less interesting business. Unless that is decided soon, and the business model questions related to this for the networks are thorny, PayPal will have had a long lead time in plowing the multiple tender type ground and consumers might not see enough value to move away from that wallet to something new. (Square is aiming for the same target but in a slightly different way.They’re hoping to build and ignite a merchant and consumer network around using IP-enabled devices to create a personal experience in store, an invisible payments experience and a prompt to try other merchants who can match that experience.)
Then, there’s Facebook. Facebook could redefine the mobile wallet even more differently since its core asset is Facebook Credits, which is more of a currency than a mobile payments application. To put this in perspective, the Facebook Credits experience is more like what you do when you travel to a different country and need to buy that country’s currency to transact there - you simply use your native currency to buy it and then use that currency to transact in that country. Facebook Credits is no different - you basically use existing currency (accessed via existing payment methods) to buy a new currency (Facebook Credits) that are accepted at a country you want to visit (the merchant). Today those merchants are digital goods/games, by and large, but tomorrow who knows. It is also easier for merchants to accept Facebook Credits than add a new acceptance mark to their POS. Sure, there is the “currency conversion” that happens on the back end to “convert” Credits to the dollars attached to a payment type, but it is likely a much easier lift than adding a new acceptance mark. The Facebook wallet would become the currency used at the point of sale, with the details of how those currencies are “exchanged” being handled in the background. Facebook in this scenario, could have the equivalent of a software-enabled smart euro. (Sound interesting? Read the full take on Facebook’s possible “smart currency” at PYMNTS.com).
So, back to the 64 thousand point question. Who will win and get traction? The game is very early. And as they say, never make predictions you don’t think you’ll outlive. But you need to look at consumer and merchant behavior together to predict the outcome. I’m not going to put money yet on the winners (some of whom may not even have been born yet). But I am going to lay down a wager that consumers will have only a handful of icons on their phones that connect to a single-tender type (payment app) or a wallet (multi tender types) and that merchants accept payment with mobile only for a few of these icons. The notion of a thousand wallets is unrealistic for the same reason that there aren’t thousands of payments networks: merchants and consumers don’t want them.
So, now it’s your turn. What’s your answer to win 64 thousand points?

Card fraud falls to its lowest level for 11 years

When the penny drops

Card fraud losses have fallen by nearly half since their peak in 2008

The amount of money lost due to fraud on credit and debit cards fell last year by 7% to £341m - its lowest level for 11 years.

The drop from 2010 was mainly due to a 41% fall in fraudsters impersonating people to obtain or use credit cards.

There was also a 24% fall in the amount of fraud from cards being faked.

The UK Cards Association said it was the third year in a row that card fraud had fallen, with a drop of 44% since losses peaked in 2008.

It brings card fraud to its lowest level since 2000 when £317m was lost through fraud.

The association credited the improvement to the increased use of anti-fraud measures.

Among them were online card verification software, such as Verified by Visa and MasterCard SecureCode, and the increased use of chip-and-pin technology abroad.

Melanie Johnson, chair of the UK Cards Association, said: "This is... clear proof that our endeavours to fight fraud are packing a punch."

"Customers have also played their part in driving down losses by taking heed of advice about looking after their personal and financial details," she added.
Losses falling
Card fraud rose during the past decade to reach its peak, in 2008, of £610m.

Continue reading the main story

Card security tips

• Shield entry of a Pin number at a cash machine with a free hand
• Regularly update a computer's anti-virus software
• Be wary of unsolicited e-mails and telephone calls

• Trying to foil cash-machine cons
• Fraudsters turn to card snatching

Although the adoption of chip-and-pin technology, largely replacing signatures, had helped to rein in fraud in the UK, there was a revival in the fraudulent use of cards abroad.

However, this has now dropped as well, with fraud abroad falling by a further 15% last year to £80m.

That was its lowest level in 12 years, and nearly two-thirds down from the peak of foreign card fraud in 2008, when it stood at £230m.

Overall, the most common losses last year were due to cards being improperly used to order items over the phone, by post or over the internet - so-called "card not present" fraud.

This accounted for £221m - nearly two-thirds of all card fraud losses.

Meanwhile counterfeit card fraud, once the second-largest category of loss, has slumped in the past five years, down by three-quarters since 2007.

The biggest areas of card fraud loss in 2011 were:

• Cards not present: £221m
• Lost or stolen cards: £50m
• Counterfeit cards: £36m
• Card ID theft: £23m
• Cards stolen the post: £11m

DCI Paul Barnard, who leads the police cheque and plastic crime unit, said with more sophisticated anti-fraud technology now in use, criminals had returned to simpler forms of fraud.

"Many scams involve customers being conned into handing over their cards and Pins, or their telephone banking security details by someone calling, pretending to be their bank or police," he pointed out.

"Be wary of any unsolicited phone calls or emails - never hand over your card and Pin or bank security details in full as neither your bank or the police will ever ask you for these."

Meanwhile, fraud losses against online banking accounts fell by 24% last year to £35m, while fraud losses involving telephone banking rose by 32% to £17m.

Is Apple Missing The Boat On NFC?

One of the big trends at the Mobile World Congress in Barcelona has been announcements regarding NFC. While NFC has been supported in a handful of Android phones and BlackBerry models, till now there haven’t been many real-world applications for it. With several announcements around NFC, the technology’s time may be finally be coming.

Despite rumors, Apple has never shown an interest in adopting NFC in the iPhone or iPad. Could Apple’s lack of NFC support could stick out like a sore thumb despite the fact that it managed to upstage every company at MWC with yesterday’s iPad 3 event announcement.

The idea of NFC as the basis for a smartphone-based digital wallet has been floating around the tech world for a while now but has never materialized as a mainstream product. One reason for that is that NFC as a piece of hardware and short range communications protocol is only part of the e-wallet equation.

Creating an e-wallet and mobile payment solution requires a lot more than NFC chips being included in mobile devices along with NFC support in mobile OSes. It also requires buy-in from and integration with banking and credit card companies, reader devices from merchant processing firms, and it requires that retailers upgrade their various electronic payment readers to support NFC.
That’s a lot of stars that need to align for NFC to have a chance of widespread implementation. Till now there have been a number of small, typically local, test initiatives by finance companies, but no wide scale or global initiatives. That may be one reason Apple has been pretty quiet on the NFC front. The company might be waiting for there to be signs that the technology had matured into a viable product.

With several NFC announcements at MWC, that time may be coming with more trials in the U.S. and some global partnerships forming to support and promote the technology around the world. Here’s a sample of the announcements that came flooding out of Barcelona earlier this week:

• Three Big Plastic Issuers Take Step Toward Mobile Wallets
• VeriFone announces NFC POS solution for mobile network operators
• Visa Announces Mobile Payments Provisioning Service
• Santander unveils first NFC wallet to offer both Visa and MasterCard payments
• Intel and Visa Join Forces to Boost Mobile Payments
• LG unveils two more NFC phones

It’s also worth noting that NFC isn’t limited to mobile payments. The short range technology has other applications including digital flyers, the ability to exchange information between devices, and even the ability to serve as a digital key to a device (something Apple was once rumored to be exploring for future Macs and iOS devices).

Some of these features extend the functionality of NFC beyond smartphones to other devices like tablets, computers, and home and office electronics. While the e-wallet scenario might not seem like a huge miss on Apple’s part given the timing of the iPhone 4S launch, but not including some NFC support in the iPad 3 or in iOS 5 (or 5.1) might be a different story. On the other hand, this does offer third-party vendors a chance to innovate around both the iPhone like DeviceFidelity is doing with its In2Pay iCaisse4, which has been certified for mobile payments by MasterCard.

Machine to Machine Technology Adoption Set to Explode by 2015, but Are We Ready?

AdaptiveMobile Research Shows High Expectations for M2M Technology but Highlights Worrying Vulnerabilities That Can Already Be Exploited Today

WOBURN, Mass. & BARCELONA, Spain -- AdaptiveMobile, the world leader in mobile security today reveals that machine to machine (M2M) technology is on the verge of widespread adoption, with 10% of UK residents already using it regularly and 54% expecting their phone to talk to, unlock and start their car by 2015. While awareness is high, however, so too is concern over security, with 86% of respondents stating that they see risks associated with M2M technology. AdaptiveMobile will be demonstrating the reality of these threats at Mobile World Congress, with the remote hacking and unlocking of a front door via a mobile phone.

According to AdaptiveMobile’s fourth Global Security Insights in Mobile (GSIM) report¹ -- up to 5 billion M2M devices that communicate over mobile networks could be in operation by 2020, and this growth combined with advances in cloud computing and wireless technology creates a huge opportunity for operators. A primary concern for users, however, is privacy and crime so this must be addressed before the full benefits of M2M can be realised, especially as the technology is being rolled out now.

Cathal McDaid, Security Consultant at AdaptiveMobile, said, “M2M technology is already a reality in lots of industries, including healthcare, utilities and advertising. Heart rate monitors are connected to alarm systems to monitor patient vital signs, for example, so the potential for this technology is huge.

“With this opportunity comes risk, however, and having devices connected across mobile networks creates several issues, for example, machines communicating without human supervision could mean vulnerabilities and exploits go unnoticed.”

According to the GSIM report, 49% of consumers believe M2M technology could make it easier for thieves to hack into their homes or cars and almost two thirds (60%) expect a high risk of having their personal information exposed via M2M systems. When it comes to whose responsibility security is, one third (33%) of respondents believe the manufacturer, device retailer and wireless provider should be responsible for managing these risks together, with one fifth (20%) believing that the operator alone should shoulder the responsibility.

McDaid said, “Clearly the onus is on the providers of M2M technology to protect users from security threats and we can help operators protect trust in their network by preventing mobile attacks across all traffic sources, whilst still capitalising on the M2M opportunity to grow revenues and retain customers.”

“Moving forward, it is critical that dedicated, tailored security is created for M2M and delivered at a network level to allow operators, device manufacturers and end-users to rely on these devices without needing to worry about security. As we move closer to a market where M2M becomes more dominant, ensuring the security of these devices will be of paramount importance.”

Read more here: http://www.sunherald.com/2012/02/27/3779440/machine-to-machine-technology.html#storylink=cpy

Mobile Banking versus the Mobile Wallet

With recent news that Barclays Pin-git (or is it Ping-it) has had 120,000 downloads in 5 days, that Square has 1m merchants on their payments platform (1/8th of all US card merchants/retailers) and Starbucks is doing 25% of it's North American payments via a cardless App - it seems like Mobile Payments are taking off like the H1N1 virus. The interesting thing is that many bankers are looking at all of this activity as if it has little meaning or impact on their business at this point in time. I think part of that may be that there is a fundamental misunderstanding of how the mobile can be utilized in the banking and payments space.

When showing glimpses of Movenbank's Mobile App I often get asked by bankers whether it is a mobile wallet or a mobile banking app? It's as if the two worlds of cards/payments and banking are destined never to meet when it comes to a conventional view of the banking world. In banks today, we even institutionalize this by having cards as a separate division or business unit, separate from the retail banking function. The only time they ever seem to meet is in the form of a debit card or within internet banking. But the cards business, while being a strong revenue earner generally for banks because of credit card fees and interest margin, philosophically is not really considered banking per se by most die-hard bankers.

In fact, I've known banks where if you walk into a branch, the teller needs to call the call centre to find out any information about your credit card, even your balance. With many of the banks I work with, in-branch or in the contact centre, CSRs/Tellers need to navigate between separate screens to see your credit card details and activity versus transactions in your checking account.
For a long time these two worlds have remained largely operationally separate. The popularization of the smartphone is destined to destroy that division of labor.

The world of Two Channels
Today retail banking is emerging out of the hyperconnected, digital transformation age as not much more than a collection of channels and utility. In the past, you had branches which were THE distribution channel, but that has rapidly fragmented. You also had cheques and cards which provided you a mechanism, or utility, for moving your money around. Historically banking was really about two primary things - storing or protecting assets, and helping in the conduct of trade and commerce. Rudimentary cheques (or bills of exchange) were around almost 800 years before physical currency, and prior to bank branches 'assets' were often stored in temples and palaces. At the core of banking was assets that you either kept safe, or moved around to effect trade. In many ways, that's still at the core of the bank value proposition.

As some of you may have noted in BANK 2.0 I call out bankers for calling digital channels 'alternative' or e-channels because of the psychology internally within banks that tends to put these channels in a subordinate role to the branch. Recently I was approached by a recruiter looking at placing a global head of 'E-Channels' into one of the big global brands and asking me for my input into how could take on the role. I told the recruiter that any digital guy worth his salt would immediately stay away from this major banking brand, largely because the decision to classify the role as a head of 'E-Channels' already told me everything I needed to know about the brand - that they still thought of digital as 'E' rather than mainstream, everyday banking. That told me that anyone taking on this role would still be faced with massive inertia around branch networks and would be fighting everyday to justify budget, investment and mindshare in the total channel experience - and that is why I said this brand was not ready.

With Internet Banking being the primary day-to-day channel for banking in the developed world, and branch frequency/visitation off 90% from it's peak in the mid-90s, the branch is really 'alternative' banking today, rather than pride of place at the core of banking behavior. So the pendulum has shifted.

So what are the two emerging channels?
If you characterize banking today from a day-to-day perspective, you've really got two core classes of activity. Payments AND day-to-day banking based on your assets, including applying for new products, wealth management engagement, etc. If you look at either customer engagement, transactional activity or the role of an advisor in respect to your assets, you'd be hard pressed to identify activities that aren't done through either Payments Channels or Delivery Channels (credit to Terence Roche @Gonzobanker for this insight).

Given the way retail banking is structured today, this means that many banks look at a mobile wallet as an instantiation of payments - the ultimate, downloadable payment channel 'function' or utility. However, they look at Mobile Banking as a mobile-enabled version of the Internet banking platform, which is ultimately just channel migration of transaction activity from branch to digital - hence, a delivery utility. Some progressive banks are even looking at onboarding customers entirely electronically through the web, mobile, ATM or call centre - without a signature. More delivery channels. The branch is the premier delivery channel still, and more so as transactions shift out of the branch, and it becomes about high touch sales and service (delivery of revenue and service).

When two worlds collide
The problem philosophically for retail banks is that the mobile device is collapsing this view of the world. Payments and traditional day-to-day banking utility will be packaged into one portable, handheld 'channel'. It doesn't make sense to have one app for 'banking' and one app for 'payments' or the wallet, you must have the utility of both the bank and payments capability in one.
That presents an organizational shift because it merges the two disparate parts of retail banking, but it also presents massive opportunities.

What is possible is that my day-to-day connection with my money is far tighter than it is in a traditional banking relationship. Whether it is simply the fact that I can see my balance before and after I make a payment (not possible with plastic, cheques or cash) or whether you can start to advise me day-to-day on how to utilize my money better - the opportunity for mobile is not the wallet, and not mobile banking. It is re-imagining the utility of banking from a mobile perspective.

Visa shows off Olympics NFC m-payments app

Visa and Samsung will next week unveil their Olympic and Paralympic Games contactless mobile payments app.

 

The two companies, both official London 2012 sponsors, first outlined plans for a special Games NFC payments handset last March and have since brought Lloyds TSB on board.

With the Olympics opening ceremony now just five months away, the pair will show off the technology at Mobile World Congress in Barcelona next week.

The app, based on Visa's payWave technology, enables users to make payments of up to £15 by holding their phone in front of a contactless reader at the point of purchase. Customers can also check their transaction history and view their up to date account balance.



Sandra Alzetta, head, innovation, Visa Europe, says: "London 2012 is a unique opportunity to show the future of payments coming to life and leave a lasting legacy post-2012. The new mobile payment application is central to this showcase. We are also working with a number of partners to put live mobile payment technology into consumer hands."

There has been unconfirmed speculation that Google will also use the Olympics as a springboard to launch its contactless mobile payments system in the UK.

The rise of the machine

Mobile web devices will outnumber puny humans this year!

February 14, 2012 9:44 AM

The rise of the machines is upon us. A new report from Cisco predicts that mobile Internet devices will outnumber people on Earth for the first time by the end of 2012 - a sign of ever growing love and dependence on technology that always keeps us connected.

“By the end of 2012, the number of mobile-connected devices will exceed the number of people on earth, and by 2016 there will be 1.4 mobile devices per capita,” Cisco stated in its latest Global Mobile Data Traffic Forecast Update. “There will be over 10 billion mobile-connected devices in 2016, including machine-to-machine (M2M) modules-exceeding the world’s population at that time (7.3 billion).”

Cisco’s new study also indicates that mobile data traffic grew more than two-fold in 2011, which is the fourth year in a row such traffic has doubled. 2011′s mobile data traffic was actually eight times the size of the entire global Internet in 2000, which shows just how rapidly the mobile web has been utilized across the world.

The study also presented some interesting tidbits about the state of 4G networks like Verizon’s LTE and Sprint’s WiMax offerings. Users with a 4G connection generated a staggering 28 times more traffic than a non-4G connection. At this point, 4G connections only represent 0.2 percent of mobile connections, but are already accounting for 6 percent of all mobile data traffic.

While it might be a little premature to say the machines are taking over a la Terminator (see the pretty guy above), having more connected web devices than humans as well as more ubiquitous web connections is a step in that direction.

In the Terminator films, the machines are able to rise up against humans because they are diverse in capabilities and connected through the Skynet artificial intelligence system. Maybe we’re heading toward our own Skynet with our connected phones, tablets, and TVs that know an awful lot about us?

Terminator image: Terminator 3: Rise of the Machines/Warner Brothers

European Parliament: 2014 voted legally-binding deadline for SEPA migration

The European Parliament has passed legislation that establishes 1 February 2014 as the legally-binding deadline for banks to migrate to the new SEPA system.

The single European payments area (SEPA) regulation was passed by the European Parliament on 14th February 2012 and lays down EU-wide rules aiming to ensure that banks compete fairly, eliminate hidden national charges and accelerate transfers, potentially saving up to EUR 123 billion within six year, according to official estimates.

To this end, the rules will ensure that euro credit transfers or direct debits that are possible within SEPA countries are also possible across frontiers between them.

By eliminating multilateral interchange fees on cross-border direct debits as of 2012, the regulation enables businesses to establish their payment centres in any EU Member State.

Businesses could also organise all cross-border euro payments from a single euro account in a country of their choice in order to improve money management and speed up cash flows at lower cost.

The new legislation was adopted in the first reading with 635 votes in favour, 17 against and 31 abstentions.

Barclays unveils cash-free payment app in bid to poach bank customers

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BARCLAYS has launched a mobile app that could see the bank poach thousands of customers from rivals by giving them the ability to pay without cash.

The app, called Pingit, is aimed at boosting Barclays’ brand by linking the lender to a convenient service. It lets users link their mobile number to their bank account – with Barclays or a rival – and then send cash to any other registered user using a five-digit PIN code.

Barclays head of retail Antony Jenkins told City A.M.: “It lets us build relationships with new customers as well as strengthen relationship with our own customers.”

That gives the bank a chance to peel off customers from its rivals one service at a time – effectively un-packaging bank products so that account-holders more commonly use different banks for different financial services.

Jenkins said: “We will hope this forms a favourable impression in the minds of non-customers so when they’re thinking about a savings or mortgage product, they will come to us... We expect the benefit from that to be powerful.”

He would not detail how much Barclays has invested in the app beyond saying it is “significant”.
Jenkins is not sure what uptake is expected or where the returns will come from, but said: “Once you have engaged customers using the product you then have the opportunity to talk to them about other things.”

He added that the aim is not to use the app to flood users with marketing material, however.
The app is aimed at a mass market for those who need to quickly send small amounts to one another, for example when splitting a bill in a restaurant or, in the case of small business owners like plumbers, collecting a fee after a job.

It will be rolled out first in the UK and Italy.

HOW TO PAY WITHOUT CASH

• The ubiquitous Oyster card is a cashless payment method for London’s transport system and many National Rail services.

• McDonalds, Pret and Boots are among the UK shops where you don’t have to fumble for spare change. You can pay by tapping your Visa or Barclaycard on a reader.

• Orange Quick Tap lets you spend up to £15 by holding your phone over a contactless reader. This function, which links to your Barclays account, is currently available on Samsung’s Tocco and Wave 578 phones.

• O2 is working on similar technology after running a trial in Sitges, Spain. O2’s Mobile Wallet will double as an Oyster card, host several bank and loyalty cards and allow you to text cash to other phones.

• The Google Wallet mobile app also works by letting you tap your phone on a reader. It is currently only available in the US, but rumour suggests Google Wallet could land in London before the Olympics.

• Dwolla is another app, on iOS and Android, which facilitates money exchange in store and with other users, much like Square. Both apps are only available in the US.

Will Apple take a bite out of mobile payments?

Year after year, Apple fans have expected the company to make a splash with an iPhone-based mobile payment system. And year after year, Apple has let them down — but a lot has been going on under the surface.

Many mobile payment systems, including Google's, use near-field communication technology as the starting point. To use Google Wallet at the point of sale, a consumer must have one of the few NFC-equipped smartphones running its Android software. Similarly, a merchant must have a terminal with the proper hardware to read the chip.

For Apple, however, NFC is not the key ingredient. If it comes, NFC will simply be the icing on a cake that Apple has been baking — and will still be baking — for a very long time.
"Right now, Apple devices are not NFC-equipped, but they are a more flexible environment from a software perspective than traditional" point of sale terminals, says Rick Oglesby, a senior analyst at Aite Group LLC.
Google's Android is the leader in smartphones, according to Gartner Inc., but the Android product line is too fragmented to sustain the sort of payment ecosystem Apple is building. Android devices come in hundreds of different shapes and sizes along with operating systems that are often tweaked according to carriers' whims.

Apple's i-devices, by contrast, are not customized for different carriers and have fewer hardware variations (Apple typically removes older iterations of its hardware from stores whenever a new version is launched). This allows for a uniform experience across the entire product line — and a more practical foundation for a payment system, experts say. (Representatives from Apple did not respond to inquiries made by phone and email.)

Apple retail stores in Paris and London are currently using a device from Ingenico SA that slips over iPhone and iPod Touch devices, for chip-and-PIN transactions as well as for full access to the iTunes app store, says Svy Nekrasas, vice president of marketing for the French terminal maker.

"Apple is definitely a market leader, and we have nothing in the pipeline in terms of integrating other devices to this form of payment," Nekrasas says. Ingenico is also the hardware provider for a test of PayPal's wallet in Home Depot stores using traditional point of sale devices.

Most payment systems built around Apple's devices still rely on plastic cards. Square Inc. set the tone for mobile payment acceptance with a freely distributed reader that lets small merchants accept transactions through the iPad and iPhone.

Square's reader was designed for small merchants such as flea market vendors, but other hardware makers are bringing Apple's devices into established retailers.

For example, when customers go to the women's clothier C. Wonder in New York's SoHo district, salespeople greet them with Apple's iPod Touch devices equipped with a card reader from VeriFone Inc.

The reader turns Apple devices into mobile point of sale machines that tap into the store's enterprise resource planning system.

"The Apple devices provide a more dependable platform," Paul Hoffman, vice president of business development and strategy for J. Christopher Capital, the management firm for C. Wonder, wrote in an email. Vendors offer more products that work with Apple devices than with other mobile hardware, he said.

And "there is the inherent coolness factor with Apple products," he wrote.
Perhaps even cooler: the platform cost less than $500,000 and took about four months to implement.
Hoffman claims it would have taken more time and cost millions of dollars to do a terminal and system upgrade and to manage Payment Card Industry data security standard compliance for all of its stores. (VeriFone's sleeve, like Ingenico's, encrypts transaction information.)

VeriFone recently announced a bluetooth version of its hardware to work with other mobile devices, but its current version works only with the iPad.

If Apple chooses to turn its iPhone into a payment device, it will not have to deal with the hassle of enrolling consumers into a new payment system.

Apple already has the payment details of countless consumers enrolled in its iTunes digital media store. As some of Apple's patents have shown, the company has explored adapting this system for other payment settings.

And the iPhone's status as a consumer-friendly handset that can handle business functions positions the device well to serve small-business clients — a group that banks and payment companies are largely ignoring in their mobile payment deployments with big-name retailers like Duane Reade and Home Depot.

"There is a big set of merchants that traditional bank merchant acquirers have ignored" and that Apple and its partners "could bring into the electronic payment ecosystem by making the process simple and not requiring the purchase of point of sale" equipment, says Gil Luria, senior vice president of Wedbush Securities.

Another advantage to Apple's approach is that people typically update their phones a lot more frequently than merchants update traditional point of sale systems, says Larry Berlin, a vice president and research analyst for First Analysis.

"The market is ripe for some fierce competition," says Sandeep Bhanote, vice president and general manager of mobile retail for VeriFone.

But, Bhanote adds, "The only way to compete on par with Apple is for someone to come up with some standardization across the [Android] OS and form factors."

I have glimpsed the future - and it looks a lot like free hot chocolate.

James Temple

Square Card Case can broadcast a user's mug shot to the merchant.

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Late last month, I ordered the beverage at Sightglass Coffee in SoMa, grabbed it from the counter and walked out without cracking my wallet.

Nobody chased me down because, when I first approached the cafe, the Card Case app on my iPhone detected the store's perimeter and automatically switched on. It broadcast my picture to the barista, who could then tap my pre-entered credit card number to cover the bill. The phone never had to leave my pocket.

It felt a lot like buying in the one-click environments of iTunes or Amazon, which is to say it didn't feel like buying at all. Square, the San Francisco startup behind the app, has come close to replicating the frictionless online buying experience in the brick-and-mortar world.

"What we wanted to focus on was removing the mechanics of the transaction and building the relationship between the merchant and customer," said Megan Quinn, director of products at Square, which occupies space at the Chronicle building at Fifth and Mission streets.

But, of course, Square isn't the only company working hard to crack the nut of mobile payments - and they all face considerable challenges.

Google, Visa, MasterCard, VeriFone, eBay's PayPal division and a joint venture among AT&T, Verizon and T-Mobile are attacking the problem in various ways. In most cases, those businesses are going a different direction than Square, employing near field communications (NFC) technology that allows people to tap their phone near a terminal to make a payment.

Done right, mobile payments can accelerate the monetary exchange, while streamlining the issuance, acceptance and storage of receipts, coupons and loyalty cards. Down the road - once consumer and retail use reaches critical mass - the hope is that people will be able to leave their wallets at home altogether.

But there's a chicken and egg paradox: Customers won't start using mobile payments in great numbers until they're accepted in great numbers, and retailers don't have a huge incentive to roll these systems out until customers are clamoring to pay this way.

There are only about 150,000 retailers nationwide that accept payments over MasterCard's NFC-based Paypass readers. Google's Wallet payment app works with this system, and industry rumors suggest the next iPhone might as well.

Square, which has so far focused on small merchants has about 20,000 that accept Card Case.
Another big challenge is human inertia. To get people to download apps, key in credit card numbers and transform a habit they're very comfortable with, mobile payments will have to represent more than a little improvement over what they do today.

"You have to offer them a compelling reason to do it," said David Mangini, an IBM executive focused on mobile payments. "At a very, very minimum ... it has to be just as convenient, just as broadly accepted and just as safe."

One of the big knocks on basic NFC payments is that tapping a phone near a reader doesn't represent a whopping improvement over swiping a card. In addition, merchants have little to gain by replacing one expensive payment infrastructure with another, some observers say.

"It doesn't upset the status quo," said Nick Holland, senior analyst at Yankee Group. "It doesn't really change the original business model and it all goes through the same rails."

Receipts, deals

Google argues that its NFC-based Wallet app is a big step forward for a few reasons. A single tap replaces not just the payment, but also the exchange of receipts, coupons and loyalty points.
On top of that, Google believes it's tying together the on- and off-line retail worlds, by allowing consumers to move the deals they spot on the Web into the Wallet app, where they can redeem them in the real world. Google Wallet also advertises nearby deals when users open up the app.

"For the consumer, it's really about tap, pay and save," said Osama Bedier, vice president of payments at Google. "On the merchant side, it's about closing the loop on that advertising."
This is a critical goal for Google, too, as it experiences slowing growth in online advertising - 93 percent of commerce still occurs offline, according to Forrester Research.

Swedish startups leaders in m-payments race

With increasing amounts of people choosing to make payments via their smartphones, a number of Stockholm based tech startups are aiming to take the lead in the global race to head the booming m-payment market.

In June, iZettle launched a card reader that allows users to take credit card payments from chip-enabled credit and debit cards. The free device simply plugs into the port of an iPhone.

The Stockholm-based company and its device have been praised by the international media. Forbes wrote: "iZettle offers huge advantages over other systems that let businesses accept chip-card payments". Wired, Cnet, Financial Times and others have given the Swedish startup extensive coverage.

Jacob de Geer, CEO and co-founder of iZettle, believes that the considerable attention is explained by the fact that the service fills a burning need among both consumers and entrepreneurs.

"Businesses and individuals shy away from dealing with cash and the card is the natural alternative, given the spread," he told The Swedish Wire.

It's an innovation that ticks a lot of boxes. For example, tradesmen can save time, money and paper by taking an instant payment, instead of mailing invoices and waiting for payment as in the past.

A few months ago, the company raised 11.2 million dollars of funding, led by Index Ventures, Creandum and Charles Dunstone, co-founder of The Carphone Warehouse. The service has already been launched in Sweden and the company plans to take iZettle to other European countries, including the UK, Spain, Italy, France and Germany.

The concept of iZettle is similar to that of US mobile payment service Square, which was created by Twitter's founder Jack Dorsey. But while Square works when bank cards are swiped, iZettle works with chip-enabled cards, which are popular in Europe.

The competition for m-payment solutions raises an important question: which technology is the most likely to be world de facto standard? A Huffington Post article predicted that "there's a brutal, bloodbath-type clash looming" over mobile payment standards.

"I think I like the odds of a 30-employee Swedish startup with $11 million more than I like a great, big, over-hyped U.S. tech company with $100 million and an absurdly otherworldly valuation," wrote the Huff Post's Bill Robinson.

IZettle owner de Geer said he believes that Swedish tech-companies have the possibility to be frontrunners in developing m-payment services.

"Sweden is a natural test market for Swedish startups. Fortunately, the Swedes are very technology savvy and interested in new technology. We also have a very good internet and mobile penetration, which is helpful," he said.
"Given this, we have much better chances to come out with innovative mobile technologies before others."

In Sweden alone there are approximately 17 million debit cards. In combination with about 1.5 million iPhones, iZettle has a critical mass of potential users from day one, de Geer added.

But it is far from the only mobile payment firm in Stockholm. Growing demand for mobile services has led to a number of ICT companies chasing customers, with many taking advantage of the surging quick response (QR) code technology.

Some of the companies include:
• Payair, which uses the QR code: Mobile phone cameras are pointed at a bar code for automated product identification and approve the purchase with a personal code. The company recently launched its service in the US

• Seamless is a software innovation company which specialises in solutions for money transfers between mobile phones. In its mobile payment platform consumers scan a fixed QR code.

• Payex Mobile, created by debt collector PayEx, is a mobile payment service allowing users to make transfers between mobile phones and to make online payments.

• PayGround is a company independent of card companies, mobile operators and banks. Instead, it has developed partnerships with credit market companies. After registering a mobile phone number to PayGround's service, a person's credit card number is never revealed online.

• Accumulate ME enables a mobile to be used in all payment situations. It allows fast and easy deployment of new and future mobile payment methods using one platform.

According to Cap Gemini's World Payment report 2011, mobile payments are expected to grow from 5 billion euro in 2010 to 15 billion euro in 2013. InStat said some 400 million people will use mobile devices to make payments by 2015, up from 100 million today.

Mobile operator Telia predicts that at least half of all Swedes will use mobile phones to make payments within two years. The report Telia Trends also predicted that 30 percent of those polled would make mobile payments today if possible.

And Telia has now formed an alliance with its fellow mobile operators, Tele2, Telenoe and 3. 4TSverige, to offer cross network mobile payment services. It will be launched this summer.