January 12, 2010

Mobile Phones Will Open the Door to a Cashless Society; Smart Phone Presages the Mark of the Beast

Is a Cashless Society on the Cards?

January 11, 2010

Steve Perry, executive vice president of Visa Europe, has a different take on the folding stuff packed in our wallets that most of us take for granted.
"Cash is expensive," he says. "We need to be using it less."
Expensive? Vintage wines, maybe. Designer clothes, yes. Modern art, almost certainly. But cash?

"Why do you think supermarkets introduced cashback?" Perry asks rhetorically.
He has me stumped there. I tell him I always thought of it as a service for overdrawn students to drive a few more sales through the tills.
"No," he responds politely. "It's because they want cash out of the system so there is less to manage. Processing a transaction on a card can be cheaper than handling cash."
Perry is a leading cheerleader for the cashless society. It's hardly a surprising role, but its an argument he is finding increasingly easy to make. Last month, for example, the Payments Council announced to anguished outrage that in 2018 the cheque would be dead.
"There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement," Paul Smee, chief executive of the Payments Council, said.
Perry extends the same argument to cash. Notes and coins are never going to be fully replaced, he accepts. Currency has, after all, been around in some form or another since 3,000BC. But now that we're in the electronic age, payments could do with a little catching up, he reckons.

Visa has recently published an extensive report on the cost of cash to society. Citing numerous independent papers by consultants and national governments, the payments company constructs a compelling case.
"The European Commission has calculated that the total cost to society of all payment methods including cash, cheques and payment cards equates to 2pc-3pc of GDP," the report states. "To put this figure into context, it should be remembered that the entire EU agricultural sector equates to 2.1pc of GDP, which means we spend more on payment than we produce on food."
The EC estimates that cash accounts for more than two-thirds of the total cost. McKinsey, the consultants, have estimated that "society spends about €200 (£180) a year per person to cover the cost of cash" and the "real" cost of cash to a retailer is 1.3pc of the purchase price – no less than the transaction fee on a card. The Dutch central bank has published a similar study, estimating the annual cost of cash at €300 per family.

Because cards are less risky (the associated cost is estimated at 0.02pc-0.1pc per transaction on cards compared with 0.1pc-0.2pc with cash) and encourage spending, they are more efficient and better value, Visa argues. Furthermore, card transaction fees are expected to fall, with some countries in Europe such as Denmark already offering free debit card services to retailers.

In the UK, Perry estimates, £1 in every £2.50 is spent on cards. He hopes to see the ratio reversed, with £2 in every £3 on cards by 2015. Of course, that would mean more business for Visa but, he claims, it would also mean less waste through cash security and cash handling costs.

A few years ago, changing consumer behaviour to such a degree would have been unthinkable. Perry says the internet and "chip and pin" have changed all that. Online retailers have helped the public grow familiar with card purchases, while chip and pin has reduced the incidence of fraud from 0.07pc to 0.05pc.

In the EU, according to the European Central Bank, €1.68 trillion was spent on cards in 2008 and use has been growing at 12pc a year for the past five years. Debit card spending this year in the UK is expected to overtake cash spending by value for the first time.

Perry believes the UK consumer is ready, citing the massive increase in the use of debit cards. Visa, best known for credit cards, now generates 70pc of its European business through debit cards.

Other countries are not so enlightened, he notes. Germany is still so nervous about card payments that some online retailers offer a service where they collect the cash at the customer's door on delivery. Others are more technologically savvy. South Korea introduced a preferential VAT treatment for consumers paying with cards to encourage the move to cheaper, cashless payments. Subsequently, the share of cash payments fell from 40pc in 2002 to 25pc in 2006.

For Visa, the challenge now is the 80pc of all transactions that are still made in cash – largely small ticket items such as newspapers and snacks. Visa has been pioneering contactless payments, that allow swift purchases by waving the card over a reader and dispensing with a pin – making buying with a card even more effortless than with cash.

Perry believes 2010 will be the year contactless takes off, with the total number of cards in use rising from 5m to 15m. Barclaycard has already 1m customers on its "onepulse" card.

Visa's new vision is to insert chips into mobile phones and do away with cards altogether. Antony Jenkins, chief executive of Barclays' global retail bank, already has a "onepulse" enabled phone and more prototypes are being trialled at Visa's innovations suite. The difficulty is persuading mobile phone manufacturers to build a handset that can store a chip and antennae.

Jenkins believes contactless mobile phones are the future and will open the door to fully mobile banking. Soon enough, people will be receiving, making and managing their payments on mobile phones, he reckons. In Africa, six million people are already paying for goods on their mobiles, proving that electronic payment systems can be more reliable and secure than cash.

Of course, cash will never be fully replaced. It's the currency of the black economy for a start, which is one reason why the authorities would like it used less and less. In Italy, for example, the black economy is estimated to be 40pc of GDP and 12pc in the UK. It's also proved remarkably adaptable over the past five millenia. For Visa, though, there is still ample room for cards.

Citibank's 'Tap and Pay Project' Allows Consumers to Use Their Mobile Phones to Pay for Purchases

Early results of the project, taking place in India, find that 3,000 participants utilize their RFID-enabled phones for payments more often than consumers with credit cards.

RFID Journal
December 30, 2009

Six months into a Near-Field Communication (NFC) payment trial being held in Bangalore, India, global finance company Citibank is finding that participating consumers use their mobile phones to pay for purchases at a higher rate than consumers using traditional credit cards.

The Citi Tap and Pay project, which launched in June 2009 and is slated for completion in early 2010, involves approximately 3,000 consumers and 250 merchants. This, says Mohammad Khan, the president of ViVOtech—which supplied contactless payment software and hardware—makes it one of the largest trials of NFC RFID technology ever launched.

The pilot employs NFC-enabled Nokia 6212 phones, mobile network operator Vodafone's wireless communications service, MasterCard's PayPass contactless credit card system and security infrastructure, and ViVOtech's NFC wallet software, mobile coupon software, smart poster software and NFC readers. After the pilot concludes, Citibank intends to analyze the findings and make the results available to members of the industry.

Pilot participants purchase an NFC-enabled Nokia phone, which uses ViVOtech software to link the unique ID number on the phone's NFC tag with data about the customer on a Citibank back-end server.

Those taking part in the pilot buy the phone for about 5,000 rupees ($105) at Nokia's stores, then follow prompts on the phone in order to install ViVOtech's e-wallet software (enabling them to create a credit card account linked to the phone), via a Vodaphone cellular connection. A user responds to questions asked by Citibank, including his or her name and address, and creates a password.

The individual can then take the phone to merchants, such as convenience stores and restaurants, and tap it against a ViVOtech NFC reader. The unique ID number on the phone's NFC chip is captured and transmitted back to Citibank's server, where the payment is credited to the user's account. He or she then receives a bill at the end of the month for a total of the charges made, as would be the case with a standard credit card.

ViVOtech is also providing smart posters containing passive 13.56 MHz NFC RFID tags, as well as the software the enables consumers to access Web-based information and services related to those posters. The tags are encoded with a unique ID number linked to data on the back-end server regarding the business or service advertised on that particular poster. Consumers can tap their phones against the smart posters to download such things as coupons entitling them to discounts toward purchases at specific stores. The posters can also be used to allow a phone user to access directions to a neighboring merchant.

The pilot is intended to help Citibank gain customer and merchant feedback about the system, including how well it works and how it can be improved.

"The pilot will also give us further concrete insight into the business model, which will govern any such large-scale NFC customer implementation," says Satish Menon, the executive VP of Citi Growth Ventures, a worldwide Citibank team organized to help launch new innovation.
This is Citibank's largest NFC pilot in the entire world to date, the company reports, and is intended to determine whether the technology works effectively in high volumes. The pilot is being undertaken in Bangalore because of its high density of tech- and mobile phone-savvy residents.
"The Citi Tap and Pay pilot is a demonstration of our belief that contactless mobile payment services will be a key lifestyle driver for our highly mobile, international and increasingly urban customer base," Menon states.
With the pilot, he notes, Citibank aims to build momentum for faster and wider adoption of contactless technology for mobile phones worldwide, by developing a business model for the system. Thus far, he says, the pilot's participants have made more than 40,000 Tap and Pay transactions, and every customer who has signed up for the program has used his or her phone to make a purchase at least once.
"We're also seeing that Tap and Pay customers are more active than their plastic-using counterparts."
Thus far, ViVOtech has tested its technology in 37 trials worldwide, including most recently in Dubai, using smart posters in malls. At the conclusion of the pilot, Khan says, Citibank intends to review the results with industry members.
"With their support, we would then explore opportunities to further develop the mobile payments platform," Menon adds. "We believe in the limitless opportunities that such an environment presents, but also recognize the immediate challenges in terms of commercialization, cost, scalability and system-readiness."
What's more, Khan says, there may still be several more Citibank and ViVOtech pilots in the works in the coming months—not only in India, but also in other parts of Asia and on other continents.

National Irish Bank Moves to Cashless Banking

The Irish Times
December 22, 2009

National Irish Bank has written to thousands of its customers this month informing them of a “new style of banking” in which branches will not handle over-the-counter cash transactions.

The letter says branches will no longer handle cash withdrawals and lodgements, night safe lodgements and foreign currency cash. Branches will continue to lodge cheques, drafts and postal orders and issue drafts.

Customers are advised to obtain cash from “ATMs nationwide” or to seek “cash-back” on their debit cards.

A spokesman confirmed that cashless banking was being introduced across the entire NIB branch network over the next 18 months, and had already been introduced successfully in a number of branches. He said the feedback from customers was positive with few complaints.
“These branches provide better security for staff and allow us to spend more time, in a better setting, with our customers . . . Customers like them, as our staff have more time to discuss customers’ overall needs.”
However, NIB customer Frank Barry from Malahide described the change as hilarious and ridiculous:
“A bank refusing to accept cash . . . I thought that’s what they are for?”
Mr Barry contacted The Irish Times after his wife Catherine Gralton received two letters informing her that the local branch would stop handling cash from next February.
“If I did have a cash lodgement, I would have to go to another bank, buy a bank draft and then go to NIB to lodge it,” he said.
An NIB spokesman said the changes followed the model used by NIB’s parent, Danish-owned Danske Bank. Cashless banking is far more common in Scandinavia while Irish dependence on cash is among the highest in Europe.

The spokesman said it recognised that some business customers may need to lodge and withdraw cash and it would offer these a number of options. However, he declined to say what these options were, citing security reasons.

NIB announced earlier this month it was cutting 150 jobs and closing 25 of the bank’s 58 branches because of the recession and changes in the banking sector.

ACC Bank, which specialises in business lending, has also moved to cashless operations.

The Irish Banking Federation said it was not aware of any other main banks introducing cashless banking at this stage, though a spokesman added that “they would all love to.”

Handling cash is more expensive than the non-cash alternatives such as internet banking or debit and credit cards.

Cash also poses greater security threats for the banks, whereas consumers bear many of the risks associated with non-cash transactions.

NIB in particular has suffered a number of high-profile robberies and one of the branches it has already converted to cashless banking, on Dublin’s Howth Road, was the scene of a so-called tiger robbery in 2006.

After all, we want to keep you safe.

2010: The Year of Mobile Banking & Payment

January 30, 2010

Want to transfer money on the move? There’s an app for that. As the popular Apple ad goes, more Americans are discovering the benefits of mobile banking and the applications that facilitate it.

The rising popularity of applications, the proliferation of smartphones, and greater familiarity with text messaging are driving the use of banking services on mobile phones.

As smaller banks follow large banks in offering mobile banking services, this year will see a further acceleration of growth.
“Applications are seeing tremendous adoption,” said Kay Nichols, executive vice president of FIS Channel Solutions, a unit of electronic payment processor Fidelity National Information Services Inc. “Part of the adoption growth is tied to a combination of heavily subsidized handsets and lower ‘all you can eat’ data plans from mobile network operators.”

“It’s clear the American mobile phone subscriber is beginning to expect more from their phones,” Nichols added.
People use applications to look up bank balances, view transaction history and locate a branch or ATM. Apple’s iPhone, Research In Motion’s BlackBerry and Google’s Android-based phones have been the top destinations for applications.
“The most popular bank applications for the iPhone are from Bank of America, JPMorgan Chase & Co, Wells Fargo,” said Red Gillen, a senior analyst at research and consulting firm Celent.
Smartphone market leader Nokia has struggled to meet with similar success so far.
“Should Nokia get its act together on apps, I expect their phones to drive app growth as well,” Gillen said.
Mobile banking services, which have started to take off in the United States over the past two years, allow users to make payments, check balances, transfer money between accounts, and generate statements of recent transactions on their handsets.

About 1,000 banks currently offer mobile banking, out of some 30,000 financial institutions in the United States alone, said Charles Landry, executive vice president at Syniverse Technologies Inc.
“The U.S. mobile banking market is moving beyond its infancy toward core adoption,” Landry said. “So as you can see, there is still a lot of room to grow.”
Syniverse manages the delivery of mobile messages for financial institutions through relationships with wireless carriers.

The United States has more than 10 million mobile banking users, Nichols of FIS Channel Solutions said, citing market researchers.


An emerging trend is payments, with customers showing an increasing willingness to use their phones as mobile wallets.
“In 2010, we will see a huge change in the market moving toward payments by the end of the year,” said Matthew Talbot, vice president of mCommerce at Sybase 365, another provider of mobile banking services.
Players like Paypal, Visa and MasterCard are looking to control the payments market, as are banks and mobile carriers, Talbot said.

A majority of respondents to a recent survey said they were interested in using their phones to purchase items at a cash register the same way they would do with a credit or debit card.

Customers use their mobile phones as a shopping assistant to compare prices, access credit card details and to organize and track their gift card, loyalty and reward accounts, according to the survey commissioned by Firethorn, a Qualcomm company that offers mobile banking services.
“Mobile payments are still in the early phase in the United States as compared to Asia and India, where these types of services are more prevalent,” Landry said.

“In the United States, the majority of mobile payment services offered today consists of a payment alert that triggers an action to make a payment.”

Don't Pay by Cash or Check: Use Your Cell Phone Instead

The newly formed Cassis Americas is headed by Allen Merrill, previously an executive at MasterCard Worldwide and a former partner at McKinsey & Company. Cassis has been keeping a close eye on the American market for several years, Merrill told NFC World. "We decided in previous years not to enter the Americas market," he explained, but the situation is now beginning to change. Our conclusion this year, says Merrill, was that "if we wait 12 to 18 months, it will be too late. When it starts, it will accelerate fast." - Singapore-based Cassis Opens Up for Business in the Americas, Sees NFC-enabled Mobile Banking Opportunities in Canada and the U.S., NearFieldCommunicationsWorld.com, April 13, 2010

May 7, 2010

Are you ready to give up cash and checks and start using your credit card exclusively? You might just be able to do that -- if you own a smartphone.

Seems that now that almost everyone with a cell phone is quickly exchanging it for a smartphone, several companies are betting good money that these phones will be used for almost everything -- including paying for your morning cup of joe or the drinks at that cash-only bar after work.

According to The New York Times, cash as payment has declined as debit and credit card use has risen. And now, mobile-payment technologies from PayPal, Intuit, VeriFone and Square are making it even easier and more affordable for anyone from your housecleaner to the farmer you buy heirloom tomatoes from to start taking credit card payments.

Love it or hate it, it seems that most companies are betting it will become part of the new financial landscape. Google recently acquired Corduro, a company that offers online and mobile payment technology, and Visa recently purchased CyberSource, to also expand its mobile technology endeavors. Mobile commerce is definitely expanding, with much of the enthusiasm coming from teens and young adults who've already adopted the technology on Facebook or other social media.

So far, the U.S is lagging behind in mobile payments (developing countries like Kenya and the Ivory Coast have already embraced it), but companies are betting on young people expanding its use. The new technology is also looking to make taking credit card payments cheaper for retailers and drive people away from the more traditional credit card companies.

A while back, I wrote about PayPal's new partnership with the iPhone, that allows iPhone users to pay one another by using their cell number or by bumping phones together. At this point, that form of payment is still limited to iPhone users only and isn't recommended for retailers.

For those who want to use a credit card, the new cell-phone-as-credit-card-processor can be created by inserting a small piece of hardware into a smartphone; anyone from a street performer to a shoeshine vendor can then swipe your credit card. This new kind of payment system is likely to become even more popular with smaller retailers because of the danger of bounced checks or fraud, the bane of small merchants everywhere.

With mobile payment technology still in its infant stage, consumers haven't yet committed to any one kind of technology. According to the San Jose Mercury News, other methods for consumers include an RFID sticker that sends a signal, a method currently being promoted by Bling Nation, a startup that has partnered with regional banks; MobiBucks, which uses a phone number and PIN to access one's account; and Obopay, where users can text message a payment or go online to transfer money. While dozens of startups are flooding the market, trying to hit on that perfect system to attract millions of users, so far, there are no frontrunners.

The Cashless Society

The Economic Voice
January 12, 2010

According to the Telegraph, there is the distinct possibility that the ‘cashless society’ may be just around the corner. In the report, Steve Perry of Visa Europe argues that card payments are cheaper than cash. What our Steve hasn’t hoisted in is that cards ARE cash. Or maybe he has but does not want us to realise the concept. The main reason for a noteless and coinless society, he says, is that electronic is cheaper.

In the same way that coloured beads, split sticks and ‘ Wampum’ were used as immediate vehicles for transferring value, printed notes and coins do the same but so do credit and debit cards.

But here’s the crux of the matter. Beads, sticks, Wampum, notes and coins were physically held by the owner. The contents of a debit or credit card account are held and controlled by a third party on the ‘owners’ behalf. And that third party will have to account for the movement of that value to a government for tax (and other) purposes.

Getting rid of notes and coins is not getting rid of ‘cash’. It is getting rid of one type of cash, the type of cash that ensures anonymity. Because all transactions by debit and credit card will be monitored and analysed by computers linked to whoever.

Great, you say. No more unaccountable payments to dodgy plumbers. No more prostitution that relies so much on notes and coins. No more drug pushers on street corners. No more tax evasion. ‘If you’ve nothing to hide you’ve nothing to fear’ from the computer snoopers.
“Ah! But Mrs Smith, we notice you’ve purchased more that the health recommendations allow for chocolate ├ęclairs. You’ve also smoked over 20 cigarettes a day and had three MacDonalds fatty burgers this week. I also see that your husband has a penchant for the local newsagent ‘top-shelf’ products and that your son has bought a book that is on our ‘suspect list’. Also, looking at your overall spend, we see a discrepancy with your tax return. So you can understand why we are doubling your personal taxes, freezing your assets and raiding your house. After all if you’ve nothing to hide.”
Sound a bit over the top? Alarmist? Of course that wouldn’t happen here? Well, government and local authorities have a history of misusing laws and information to their own ends. All that data exists for card payments already. Supermarkets and card issuers (banks) use it for marketing purposes.

With all payments electronically based do you really think we can keep the government’s grubby paws off of the data?

There is also already talk of imposing a ‘Tobin tax’ on financial services transactions. A society where only electronic transactions took place would be a temptation no government could resist. And the new tax would only take the cost of transactions back to about the level of when we used notes and coins, so what’s the problem?

Every aspect of our lives bar-coded and reduced to digits that any busy-body can scrutinize. A nation (if not a world) of digitized consumers and taxpayers.

1984 is breathing fire down our necks, cash in the form of notes and coins may actually be the last refuge of our real individual freedom. But only for the poor of course.

There will be many people who will want to evade this system. Those who are wealthy and don’t want their children’s inheritance taxed out of existence for example. The rich will accumulate other means of transfer such as rare metals. They after all won’t be allowed to get caught in the tax trap. A whole parallel system, a new form of ‘cash’ could evolve for them. For the rest of us, I see a lot more bartering and direct swapping of goods and services returning to society as we try to eke out our living.

Starbucks Payment App Goes Viral, But One-Size-Fits-One Is Doomed
Paying by Phone Slowly Coming to the U.S.
Square Mobile Credit Card System (Beta)
The Future of Money: It’s Flexible, Frictionless and (Almost) Free
Mobile Advertising Needs Transaction Spur
PayPal Fist Bumps Square
Twitter Creator Launches ‘Square’ — Like Smartphone Paypal for Credit Cards

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