Mobile payments could hold the key to Apple's next $100 billion

 

Apple has been a near permanent fixture in the headlines since the launch of the original iPhone in 2007, but this month the company received special attention when its market cap topped the $600 billion mark and it was made known it had more than $100 billion in cash reserves.

Predictably, a plethora of comparisons began to be drawn around Apple's worth and you can find an eye-watering listhere. Some choice examples include the estimates that put Apple's value above that of the global coffee industry and the international illegal drugs trade.

The position that Apple has now, not just financially but also within the hearts and minds of the modern consumer, gives it the perhaps unique ability to enter new sectors and make them "Apple" in a way that feels completely natural to us -- and by making them "Apple", I mean of course beautiful, desirable, easy-to-use and hugely profitable. Alternatively they also have the option to dip their toes into new markets without the need for much innovation on their part. When businesses are dependent on your ecosystem for continued growth, new ways can always be found of ensuring that their growth results are inexorably tied to yours and this generates fresh revenue streams in the process.

During the recent era of Apple's ubiquitous media presence, the concept of digital payment for goods and services has been threatening to bubble to the surface and is quickly gaining pace.

Since Square's launch in late 2010, the number of middleware services entering the transaction market has been picking up steam and I'm a big fan of anything that resembles innovation in this sector. It's dumbfounding that the security around US card transactions in 2012 is still so lax that merchants hand you back your card before you've even signed the receipt. When my brother first moved to New York, he found this so ridiculous he started to leave a different signature on every receipt, from describing his role in the transaction e.g. "customer" to simply a word for the thing being paid for e.g. "brunch". Have a look at his collection of non-legally binding signatures to get a sense of how "hard" it is to commit credit card fraud in the US.

In my role as a Digital Strategist at TH_NK, I've been watching with interest the progress of businesses like Square, iZettle, PayPal and MPowa in recent months and I can't help but notice the emphasis they put on Apple products both in terms of device support but also in terms of the imagery and language they use in their communications. Looking through their websites, you could be forgiven for assuming they were in the business of selling Apple hardware, and actually they are. As a small business owner, you're going to be conscious of the fact that you're asking people to swipe their credit cards through a tablet which in itself might be a turn off. But to what extent would that feeling be exacerbated by presenting your customers with an Android tablet which they don't immediately recognise?

So where does Apple fit in?
Skimming off the top: Apple has a reputation for collecting their dues from businesses that make money from their platforms. 30 percent from iTunes and App store purchases, 30 percent from in-app subscriptions, 30 percent, 30 percent, 30 percent. How long will it be before Apple start looking for their cut of the 2.5-2.75 percent transaction fees that the likes of Square charge for their services? I think they will wait at least until these middleware products start to turn a profit. Latest estimates suggest that Square is still making an operating loss of $100,000 per day despite processing $11 million in the same time frame. Apple has nothing to gain in the short term by killing off these businesses which are still finding their feet and could prove to be fruitful partners if nurtured in the short term.

Bringing a gun to a knife fight
The interest in products like the iCache Geode suggest that there is a real consumer appetite for converting a wallet full of debit cards, credit cards, loyalty cards, identity cards and so on into a single, easy to use, digital solution. No matter how much I love the Geode, I can't help thinking it's nothing more than a sticking plaster on a problem that someone will solve very soon. Now if only there was a business that held a high level of consumer trust, wasn't tied down to a single financial institution and had access to our pockets 24 hours a day. They could really shake things up if they had the stomach for it...

Transforming The Way We Pay

The iPad's Next Trick:

Revel Systems has realized the iPad, already changing various industries, has the power to take cash registers into the 21st century.

It's not just Square that is playing with iPad-based tech to change shopping.
Revel Systems just scored an interesting coup that'll help it transform how American consumers actually shop in stores: Its new iPad cash register system will from now on be installed by Best Buy's Geek Squad--meaning small to medium stores all the way up to big chain stores will get much faster access to a next-generation cash register, installed by technical whizzes for a more painless experience.

The company has only been out of beta test since August, but the firm's press release notes it's grown "exponentially" and is "processing millions of dollars with major brands such as Camille's Sidewalk Café, Popeye's Louisiana Kitchen, and Twistee Treat." Those aren't exactly massive megastores, but they are household names for millions of people, and Revel is in at the ground floor of these companies with its iPad-based system.
The idea is simple: Cash registers, even the newer touchscreen computer-based ones, are bulky, old-fashioned, expensive, and not particularly reconfigurable on the fly. They typically involve a large number of expensive pieces of hardware, with cash drawers, the registers, credit card machines, and a central management computer all connected up in a complex way.

 


But the iPad is small, powerful, cheap, comes with a built-in touchscreen and intuitive UI, and is naturally good at networking. And that's what Revel's system makes the most of: iPads can be used as the employee-facing part of a point-of-sale-system, with a touch interface that each store can configure to meet its needs with a simple drag-and-drop management software. The iPads interface with credit card readers and standard cash drawers, but are small, cheap, and reliable--and they deliver data to a central database so management can view transaction information, and peruse a suite of analytics about their business. Because the app is user-configurable, it's also possible to use it to help with payroll management, inventory tracking, employee time-system management, and even esoteric things like a daily menu change in a restaurant.

But there's another mode Revel's iPad system works in: Customer-facing "kiosk mode." That means the same intuitive, customizable UI can actually let consumers choose their own order (right down to picking ingredients in some food stores) and pay for it at the iPad interface. That offers all sorts of potential savings for small business, who may need fewer employees actually in the customer-facing part of their store, and it could mean faster ordering for customers too.

The company's cofounder and CEO Lisa Falzone spoke with Fast Company about the idea, which sprang originally from an iPad app designed for restaurants where the customer would view the menu, order, and pay on an iPad, which is an idea other firms have tried. Falzone said: "Through doing that and talking to the different restaurant owners and actually trying to integrate into the current point of sale systems we just realized that it was really hard to integrate, and they didn't have an open API. And for the restaurant owners they were hugely expensive, and they still had these back-office servers at $3,000 up-front cost and the touchscreen systems that were out there were slow because they had to talk to the server every time you touched their screens. We figured that the iPad was the perfect touchscreen for the next-generation touchscreen point-of-sale system."

In particular Revels' solution offers the "speed of a local system but the benefits of a web-based system." And to back it up Revel has an open API, so they've gone into partnership with existing payment firms, and it means the system is highly flexible. It's also got integrated networking, which means chain stores' systems all communicate so central management can see how sales are doing on a store-by-store basis. As Falzone notes, this means they're "not going after Square's market, which may be street vendors and so on," instead targeting bigger firms with more revenue.

That's all well and good, and Revel is likely to achieve much success and its customer list is growing as stores see the benefits of a cheap and flexible system that transforms their point-of-sale tech, but what this actually is is a sniff of the future of shopping. Twistee Treats, one of Revels' customers, has for example noted that people are using the iPad system preferentially "because they'd rather type their order in to a kiosk than speak to a cashier," as Falzone explains. And in terms of mobile payments, the idea is to adapt Revels' core code to allow mobile pay solutions and even mobile ordering before you arrive at the physical store, perhaps a little like Apple's EasyPay iOS solution.




The firm is already partnered with a firm called LevelUp, which lets you quickly pay at next-gen cash registers by simply having the register's camera scan a unique QR code on your smartphone's screen--for Revels' iPad solution, with its built-in webcam, that means the entire cash register could be just the iPad, with no extra peripherals to take a payment. That sounds subtle, but think about the complexity of a standard cash desk nowadays, with custom boxed hardware to print receipts, process your card and so on--if all you need is a wired-up iPad instead, you can completely streamline your cash desk. And even take it mobile, with emailed receipts and other solutions that depart from the way we pay for things right now.

This sort of system is also prefectly married up to the idea of mobile payments using NFC wireless tech, which Revels' app is already compatible with. And, interestingly, Falzone pointed out that so far her system is selling pretty much on its own merits, with customers actively seeking it out...which means that though other aspects of payment tech are maybe lagging, stores themselves are desperately keen to get this technology into your pocket sooner rather than later.

Bump Bump!

Bump Pay Will Let Users Exchange Money by Bumping Smartphones

The startup Bump Labs threw its hat into the crowded mobile payments ring on Thursday, launching an app that allows people to exchange money by tapping their phones together.

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  Bump

The app, called Bump Pay, builds on the company's core technology, which enables two smartphones using Bump apps to transfer data by being tapped together. Unlike NFC (near-field communication), which Google and others are promoting for mobile payments, Bump requires physical contact between devices. The company's current app, called Bump, allows users to transfer contact information and photos.


To use Bump Pay, a user types in how much money he or she wants to send and then bumps phones with the intended recipient. Bump's software determines which two phones collided. The app then transfers funds from one user's PayPal account to the other's. Both users must have previously downloaded the app and linked it to their PayPal accounts.

"Bump Pay is interesting because of its novelty, which may spur trial, but being within arm's reach of the person you're paying back is not always convenient and will limit its usefulness," said Denee Carrington, an analyst with Forrester Research.

But Chris Silva, an Altimeter Group analyst, sees proximity as the right approach in the U.S., "where people are just so paranoid about using any type of technology where there's a transaction taking place and you're not actually exchanging funds or a card."

"I think it makes sense for what people are going to feel comfortable using," Silva said.
As for the security of the app, Silva noted that some Bump Pay users could claim that they had accidentally tapped another person's phone, and thus attempt to recoup their funds. "There's a risk, but it's almost completely borne by the credit card issuers and the banks who are going to be stuck arbitrating those disputes."

Bump Pay will compete with Venmo, Square and PayPal Here, among other companies.

Bump Pay is initially available only for the iPhone

EMV in Limbo

The journey to align U.S. payments processing security standards with those in most of the rest of the world has all the appearances of progress: "inevitable" is the word most often heard in connection to EMV, and MasterCard and Visa have set what seem to be migration deadlines. Yet for card-issuing banks, there's still a frustrating lack of clarity that's requiring a U.S. migration strategy reliant on contingencies and agility. The banks know the standards are coming, but still don't know exactly what they'll look like.

What is clear is that the magnetic stripe-dominated payment system is on its way to the museum and will be replaced by a standard to be named later that links mobile, Web, point of sale and contactless payments requiring vast IT adjustments that impact both processing and security.

"Mag stripe is 50-year-old technology," says David Porter, a general manager for JPMorgan Chase. "We look at the swirl of things going in payments, such as RFID, ISIS, Google Wallet, Visa Wallet, etc. ... However long it takes, it will settle on the next universally updated payment methodology in the U.S., which we still don't know at this time."

Successfully navigating the new processing maze depends on harnessing the growth of two payments components that feed off one another - near field communication-enabled contactless payments; and pressure from retailers and card networks to apply EMV payment card security in the U.S.

EMV refers to Europay, MasterCard and Visa - a global standard for security chips in payment cards that is widespread in other countries, but just beginning to make inroads into the U.S. after years of reluctance due to the cost of changing payment terminals to accept chip payments. EMV is not regarded as foolproof - studies have shown EMV cards to be susceptible to man-in-the-middle attacks - but is considered safer than mag stripe cards because the cards are harder to counterfeit.

While EMV migration creeps into the U.S., NFC-enabled payments are also starting to take shape as card networks, telecoms and handset manufacturers target the market with mobile wallet solutions. The conversions of payment terminals to accept contactless payments in the U.S. are expected to include EMV migrations.

The problem is that no ubiquitous NFC model and EMV model for all merchants and issuers to use for processing payments has emerged, impacting interoperability, slowing conversion and requiring IT execs like Porter to engage in multiple strategies - continuing old payment methods while preparing for contactless and EMV in some future form. "It's not clear how it will evolve," Porter says. "We have to be sure to be prepared in the back office and make sure our systems can process mag stripe, EMV or contactless payments."

UNDER PRESSURE
While the scant U.S. EMV adoption so far has been for travel cards, substantial migration will eventually come from card network and retail pressure.

Wal-Mart has been pushing for EMV adoption for years, and Visa and MasterCard are also pushing EMV in the U.S. By October 2012, Visa says any merchant that accepts 75% of its yearly Visa transactions via contactless and contact chip transactions will not have to validate compliance with Payment Card Industry Data Standards.

By April 2013, acquirer-processors and subprocessors must support chip transactions, and by October 2015, liability for fraudulent transactions on chip cards will mostly fall on merchant acquirers instead of issuers, if the merchants don't have chip-accepting terminals. For MasterCard, ATMs in the U.S. will have to accept EMV cards as of April 19, 2013.

Discover is also pushing EMV migration - though there are differences. MasterCard and Discover are pushing Chip and PIN, citing security, while Visa's Chip approach says online processing removes the need for the offline authentication of Chip and PIN.

"The changes in liability will push the risk back out to retailers and will force them to react by accelerating the swap-out in the terminals," says Ron Shevlin, a senior analyst at Aite Group.
While uncertainty surrounding consumer demand and prevailing tech models for NFC mobile payments and mobile wallets remains, the argument is that merchants that upgrade payment terminals to accept mobile payments will add EMV acceptance capabilities at the same time.

"The contactless part is very important," says Zilvinas Bareisis, a senior analyst at Celent. "The link between contactless terminals and EMV payments ensures that not only are these terminals accepting chip payments, but it's a way to ensure they are paving the way for mobile payments as well."
But both contactless and EMV standards are being hamstrung by the fact that in the U.S they really aren't standards in the way that word is usually used.

The lack of collaboration among stakeholders in the NFC payments market is well documented, as telecoms and handset manufacturers both have their own preferred method of delivering mobile payments. But Porter says there are lingering differences on the EMV front. Issuers, merchants, card firms and regulators in the U.S. still aren't on the same page - mostly over liability, the burden of terminal conversion and simple politics.

What made EMV work when it was rolled out in the U.K., for example, was the joint effort of a government mandate, bank users and the associations, which collaborated on an aligned system," Porter says, adding that these groups worked with merchant associations and hardware manufacturers to put EMV in place. "Those are four or five different disconnected bodies, but there was momentum to push it. The alignment of interests right now in the U.S. is not apparent, for whatever reason. For the final standard to emerge there will have to be alignment."

The expense of conversion is also a hindrance. Firms such as Javelin Research have estimated the cost of terminal and card migration as high as $12 billion, enough to cause haggling among stakeholders about who will shoulder the brunt of that cost, while attracting attention from overseas tech firms.

For now, travel-related EMV cards, which are not expected to spark broad U.S. migration, are still where most of the U.S. innovation is.

Chase is offering EMV in the U.S. in a manner similar to institutions such as Wells Fargo, the United Nations Federal Credit Union, and card technology firms like Gemalto: as a perk for international travelers. Frequent travelers are being offered cards that work in the U.S. as mag stripe cards and overseas as EMV cards.

In March Chase upped the ante to include a partnership with Hyatt Hotels. The Hyatt Credit Card will have EMV chip and signature technology, an industry first for a U.S. hotel credit card. The card will have a microchip and a mag stripe to accommodate merchants in the U.S

Global Payments Systems Breach

02 April, 2012 - 09:52

Global Payments breach affects up to 1.5m cardholders

US transaction processor Global Payments says that "less than 1,500,000 card numbers may have been exported" as a result of a systems breach.

Following media reports, the company was forced to confirm on Friday that it had identified and reported unauthorised access to its processing system in early March.

It is thought that only North America cardholders are affected, with 'Track 2' data - including account numbers - compromised but not names, addresses and social security numbers.

News of the breach saw trading in Global Payments shares halted after their price plunged by as much as 13.7% on Friday.

Visa has also removed the company from its list of approved service providers, telling it to revalidate as PCI DSS compliant.

PayPal goes toe-to-toe with Square as it launches mobile card reader

The mobile card payment race

PayPal is launching a mobile card reader, dubbed PayPal Here, as it attempts to attract small- and medium-sized businesses to its payment service in a move that could pose a significant threat to Square. PayPal’s triangular plug-in reader is accompanied by the firm’s software app, compatible with Apple’s iOS and Google’s Android OS, which enables merchants to process transactions, track them, and also accept cheques by taking a picture using a smartphone.



Merchants that join the initiative will receive a PayPal debit card, with funds from transactions available almost immediately, although cheques will take up to six days to process. Both the card reader and app are free to merchants, like Square’s, but PayPal’s 2.7% transaction fee undercuts the 2.75% that Square takes, as PayPal attempts to muscle in on its success.

"Consumers are changing how they shop and pay. Retailers are looking for a technology company they can trust and eBay is that company," says eBay CEO Kevin Donahoe.

PayPal has made significant strides in recent months to bridge the gap between online and offline payments, with moves to integrate its software at major retailers’ point-of-sale terminals. This is evidenced by its trial with Home Depot, as well as initiatives such as NFC-based cards and confirming purchases with a pin or phone number on their mobile device. PayPal labelled the trial as “the beginning of a fundamental change in the company”, and a card reader would allow consumers that don’t own a smartphone or haven’t downloaded PayPal’s app to purchase goods, with PayPal snaring a share of the revenue.

The company’s move to target smaller retailers appears more aggressive, with the firm rolling out its plug-in readers and software this month, though this may have something to do with Square’s progress during the past year. Square is already establishing a strong base and recently announced that it is processing USD4bn in tractions annually. However, PayPal’s 106m global users make it an automatic threat to Square’s continuing success.

Jacob de Geer, CEO of payments firm iZettle, told StrategyEye earlier this month that PayPal's mobile reader, would be good for the mobile payments market. "Competition is healthy and helps to increase consumer understanding about mobile payments and pushes the industry to progress quicker,” he says. Though PayPal Here will be available in Canada, Hong Kong and Australia, de Geer says a move into Europe could prove more difficult. “The chip-card market is a different kettle of fish with different security standards and regulation to comply with."

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.