Best wishes !!

I wish the readers of this weblog all the best for a good 2004, with a lot of payment innovations!



The picture below is an old, nicely designed, booklet with credit-transfer forms, issued by the Municipal Giro of Amsterdam in the 1920s. This municipal giro was the first in many innovations ranging from early automation of the booking process in the 1920s, the design of a photo-machine (1930s), introduction of communications networks, atm's and (almost) a credit card.

LG Card: a nice moral hazard case....

The trouble with LG Card in Korea continues, according to the FD. An additional 2.7 billion dollars should make the company ready for sale, but observers have some doubts.



The case of LG Card (see also previous entries on this blog) is interesting now that speculations arise as to the intervention of Korean government (or the Korean central bank). It is a fine example of a possible moral hazard. Moral hazard occurs when organisations or individuals act upon the assumption that government or central banks may bail them out in case of trouble. It distorts the regular process of taking and assessing risks and may result in financial losses (to be borne by the tax-payer).



With the LG Card, the situation was that the government promoted and supported the use of the credit-card. So all issuing companies did not care for risk management and shifted the Korean society from cash to credit-card oriented. As a result, each Korean individual now has 4 credit-cards and the outstanding credit-card debt amounts to 14 % of Gross National Product.



So the big question is now how the credit-card industry in South-Korea will be restructured. If government is to bail the industry out, it creates a precedent in which other organisations or industries may also start taking risks with the idea that government will help them. So it appears unlikely that this will happen. But then again, it will be hard to find buyers for the South Korean credit-card issuers...



Or would the IMF be willing to intervene.... ? This article on their website suggest that IMF financing has not proved to induce moral hazard.

PayPerMobile: all you need is your Mobile..

Another new provider of mobile payments has hit my radar screen. This time the name of the product/company is PayPerMobile. Their pay-off: The most easy payment method ever!

E-commerce turnover in the Netherlands reaches 1,2 bilion euro...

according to this article in the Financieele Dagblad. Most products boughts are standardized items such as flights, books, cd's etc. The 1.2 billion however, is only a minor part of the 82 billion euro total sales in retail.

Interview with van Rossum (Tootz)

This article at E-biz Platform Amsterdam is based on an interview with Kees van Rossum of ING. He is responsible for the launch of Tootz and explains that this pilot-launch must be viewed as a test to determine the price-sensitivity of merchants and consumers.

Dutch Rail proceeds with chipcard

Todays Financieele Dagblad contains an article about the introduction of the chipcard for the Dutch Railways. Apparently the contract with TLS has been modified to get NS to participate in the chipcard deal. Most likely the price of rail tickets will vary more specifically, based upon the time-slot in which the train-trip occurs.

Wave the credit-card....

See this interesting article in Wired on the current contactless credit-card trials.

Interview with Stolwijk

Todays Financieele Dagblad contains a last interview with W. Stolwijk. It is very much a human interest article and portraits him as a passionate painter. An interesting remark (and shadow of things to come) is that he pities the fact that the fierce competition between banks will make cooperation (and achieving efficiency by working together) more difficult.

Government representatives also still converting euro to guilder

As the EU-surveys show, the Dutch people are still converting sums of money back to guilders. Even our prime minister Balkenende does so in reply to questions of parliament: "Mind you, this sum of 110 million euro still represents 240 million guilders!". Previously our former Member of euro-parliament (now Minister of Transport) Karla Peys repeatedly converted during a debate in parliament to convince the MPs.

LG Card crisis in Korea continues

Het Financieele Dagblad reports this morning that LG Card (see posting of November 25) is still in trouble. It has an additional emergency loan of $ 250 mln. The second biggest issuer in Korea, KEB Credit is also troubled and has stopped servicing cash withdrawals at ATM's.

Global Payments expands into EU-market

The US Company Global Payments has acquired a majority interest in Czech Republic Processing Company MUZO. This is all part of the changing processor market in Europe, where scale advantage will determine the ultimate landscape. See the details of the deal in this fact sheet or read the press release.

Stormy wheather for contactless card for public transport

Planet reports that the introduction of a contactless card for public transport is in danger. The NS (the Dutch Railways) is willing to invest but seeks a commitment from other players in the sector in order to be sure of sufficient transactions. Apparently it has not succeeded in finding this committment and as a result TLS (the company that arranges the introduction of the card) will soon meet its shareholders to discuss the situation that has arisen.



Other news on the new chipcard (Automatiseringsgids) is that this Saturday the Minister of Transport started the new payment system in Amersfoort, meanwhile opening the new offices of TLS. Also, one of the participating companies, Connexxion, issued a press release to inform the public that it will start its trials with the new system at the end of 2004.



Most interesting link that I can provide is the discussion on the new system at Tweakers net. This provides a nice insight into consumer perception themes.

Peak in pin-transactions

As always, the saturday before Christmas turned out to be the busiest moment for online debit-card transactions. Het Financieele Dagblad reported that Interpay processed 5,9 million authorizations. This is what I expected and means that we will see a total of 1,1 billion of these transactions in 2003.

Central Bank president dislikes small eurocents..

Today our central bank president was on the radio, stating that he disliked (and never used) the one and two eurocent coins. He would not mind if these were not to be used further. Also he stated that falsifications of euro notes are a thing of all times and that the recent increase in falsifications should be viewed in that respect.

Webwereld reports launch of Tootz; mobile payment instrument by ING

This morning WebWereld reports the launch of Tootz, a mobile payment product by ING. Essentially this is a similar product as Rabo's Minitix: the user opens a separate account and puts some money on it (maximum of 100 euro) in order to pay for ringtones etc.



The payment protocol is interesting in the sense that within three minutes after a purchase, the user needs to phone the number 0800-8668968 (TOOTZNU) to confirm payment. The phone won't be answered by voice response mechanisms; just calling is enough to effect the actual payment.

Donate with Way2Pay

I've just finished the Way2Pay application and made a donate button for this post. It took me about 20 minutes to give you this:



Test Way2Pay en doneer hier 1 euro / Test Way2Pay and donate your euro here:

Credit-card procedure Postbank

For those interested in the renewal procedure of the Postbank credit card:

- a letter arrives with an activation code,

- the postman rings the door on Saturday and delivers the card (signature/driving license needed),

- the card is activated (but with a voice response dialogue which vaguely states that the activation order has been received.. one must assume that as of that moment it is possible to use the card but that is not really confirmed),

- the customer is instructed to not only cut the old card in two, but also to send it back to the Postbank.

KPN renews prepaid-platform: chooses Alcatel

Planet Multimedia reports that KPN Mobile has chosen Alacatels Intelligent Network (IN)-technology for its pre-paid customer base. The specifics are:

-8690 Open Service Platform (OSP)

-payment suite with Alcatel 8618 Rating Engine and 8698 Lite Service Creation Environment (SCE).

Essential is the open architecture of the system which allows easy addition of newer services to the network.

Dutch hold on to the guilder to determine price...

Todays Volkskrant reports that the Dutch can not let go of the guilder as the unit of account: 68 % of us are still recalculating the price in guilders as opposed to a European average of 54 %.

March 1, all contracts move to banks...

Trouw reports today about the fact that CCV van der Velden is ready to perform some of the switching for debit-card as of March 1, 2004. This is the date when banks will be responsible for the debit-card contracts with retailers. At the same time competition should take place with respect to the switching, allowing others than Interpay to also process transactions.

pre-Report of GTIAD meeting is out

Apparently some journalists have laid their hands on the draft minutes of the GTIAD meeting on e-money, in which the conclusion was that pre-paid premium sms can be considered electronic money. See the articles in:

-AVN Online,

-NewMediaAge.

Moxmo and Idols

Last week, the second run of Idols started in the Netherlands. In the promotion area, we can see the e-money provider Moxmo on a prominent place on the Idols- website. As one of the features to attract customers, it is possible to vote for Idols and not use the pre-paid money of the telco-operators, but the money that is in the Moxmo-wallet. As a result, the SMS will be 10 cents cheaper. Again, a feature that may attract quite some users.

Rabobank launches micropayment-wallet for future use over GPRS

Planet Multimedia reports that as of today Rabobank launches its Minitix product. This is an e-mail electronic money wallet just like Way2Pay from ING and like Paypal. So users load the wallet and use a pay-button on websites to pay merchants. The product aims at payments up to 10 euro (max value in the wallet is 100 euro) and is designed to solve future payment problems in the mobile telecom-domain (the 3G environments).



The product features are well designed; users may choose to define their own risk barriers. Standard setting is that all payments need to be validated by a password of the user (having pressed the Pay-button). But the user can also choose to set a limit of for example 5 euro. This means that all payment below 5 euro will be immediately paid without further authentication asked.



Given that the margins asked by Minitix from m-merchants will be considerably lower than those asked by telecom-operators, it appears there is a rather gloomy future for the current telecom issuers of e-money. Also, those regulators/scientists that are worried about insufficient innovation might want to reconsider their assessments.



Needless to say that I immediately signed up and was pleasantly surprised with the seamless opening procedure.

IM4U: integration of SMS and ICQ ; towards e-money

PlanetMultimedia reports that radiostation Radio 538, television-channel The Box, newspaper Spits (Telegraaf) and Rabobank will jointly supply software that combines the functions of SMS via the mobile (all 5 Dutch operatos) and the chatprograms MSN en Yahoo Messenger en ICQ. The software can be downloaded as of this friday.



Actually, the software has been developed by Trees.nl under the name IM4U and is distributed by the four partners under their own brand name. It will also be possible to use premium SMS or 0900-numbers to buy credits. These can be used to purchase ringtones etc. So, only if Trees.nl (re)sell all these goodies itself, will it not be an electronic money institution. Otherwise we can welcome another new player in the e-money market.



Interesting news is that, given the expected large volume of SMS, a price will be charged to the user of 14 eurocent (as opposed to the regular 22 eurocent now charged in the netherlands). So if only for this reason we may expect IM4U to be an immediate succes.

Dexia and Base realize mobile payments in Belgium

Belgium newspaper De morgen reports that Dexia en Base have launched mobile banking as of the begin of December. Customers must be a client of Dexia, must have I-mode at Base (currently 20.000 customers) and must use a special type of GSM (NEC341i). This mobile banking application with the name Dexia Direct Mobile costs 1 euro per month but will be free during the first six month of use.



Yesterdays De Morgen contained an interesting commentary (in Dutch, registration required) by Leo van Hove on the Belgium discussion on 'free' payment transfers. He argues that the call for free-basic banking services stands in the way of achieving more efficient payment systems. So he sees the urgent demand for legislation to make Fortis withdraw its new fee structure for demand deposit accounts, as counter-productive.

Fees for mobile phone calls and for payments....

Rather than ensuring the redeemability of pre-paid funds to mobile operators, the good old Sinterklaas has chosen to ensure lower fees for all those who call from a fixed line to a mobile phone. Het Financieele Dagblad reported Saturday that the competition regulators (NMa and OPTA) have agreed with the mobile operators that their fees will be periodically lowered. As of January 1, the fee per minute will be lowered to 0,189 euro, then on December 1, 2004 to 0,155 euro per minute and on december 1, 2005 to 0,11 euro.



What's interesting is that in this discussion no-one expects the fee to be 0 cents, while in similar discussions in the banking sector, that is sort of the baseline. Fortis Belgium recently introduced payment fees for getting cash at the Fortis ATM, for a small subset of its customers. While the fee is as low as 0,06 euro and while Fortis allows alternative pricing packages, this action caused considerable public debate. It's an interesting world.

Petty thieves on the lookout for your pincode !

Two weeks ago, an alert bank customer had trouble in using the ATM. Then, a stranger behind her suggested to re-enter the pincode. This made the woman suspicious and she looked a little better. Now, it turned out that there was plastic envelope, hidden in the machine, with her debit-card in it. She turned around to find the English speaking well-dressed man, but he was nowhere to be found. The news made it to newspaper De Limburger and police warned to be very careful.



In the same period, also somewhere in the South of the Netherlands, a shop owner tried to get his piece of the debit-card-fraud-cake. He copies his customers' debit-card and overlopoked them entering the pin. The net result was 10.000 euro and an arrrest (this weekend) by the policy.



The main lesson: be very careful with your pincode, especially in this shopping season. A union of German banks therefore warns customers (see this press release) to take care during their shopping spree.

Snail-mail from Sinterklaas

Today is the birthday of Sinterklaas. A typical Dutch tradition that combines presents, mockery and poems. Or as this writer puts it:

Sinterklaas for grown-ups means a party of giving and receiving gifts, much like on Christmas, but now the presents are called "surprises" (pronounce as "sir-preeze-us"). A surprise is a gift hidden within a product of tinkering, aimed at giving the gift the appearance of something completely different, accompanied by a poem. It serves to embarrass the addressee by reminding him/her of some embarrassing moments in the past year, or to point out a general failure of character in a mocking way.



Now, in the regular mail today, I've received a poem from Sinterklaas about the issue of redeemability of e-money for mobile phone operators. In it Sinterklaas succeeds in convincing the competent supervisory authority AFM (Autoriteit Financiële Markten) to ensure that as of today, if so desired, customers get their pre-paid money back from mobile operators.



Now that would really be a 'surprise' !

Strohalm : Blade of Straw

Via Ian Grigg I came across the site of Strohalm English Site:

Strohalm is a research and development institute that supports the creation of new monetary and economic systems to provide new opportunities and advantages to businesses and individuals to move towards a sustainable economy.

WebWereld poll on internet payments

Last week's poll at WebWereld was about Internet payments. There were about 2800 respondents. These use the following payment mechanisms:

- 36 %, acceptgiro (inpayment),

- 36 %, credit card

- 14 %, cash on delivery

- 8 %, I never buy on the web,

- 5 %, different mechanisms,

- 1 %, switchpoint.



2230 respondents also filled in additional questions, which show the following usage of alternative payment mechanisms:

- 21 %, paypal,

- 13 %, rabo direct

- 4 %, way2pay,

- 1 %, www-bon

- 1 %, wallie-card,

- 0 %, moxmo,

- 64 % none of the above.



What we learn is that the first movers Paypal and Rabo have apparently succeeded best in finding their niche as a payment mechanism. Way2Pay's 4 % and Wallie-cards 1 % are encouraging, given their recent start. But where these end up, no one knows.

Louis Lathouwers explains his Guilder-LETS to Radio Bergeijk

Radio Bergeijk is a Dutch situation comedy about a fictitious radio broadcast station of the local village Bergeijk. Yesterdays 15 minutes broadcast was hilarious in the sense that a regular studio guest, Louis Lathouwers, tried to explain his view on the payment situation after 2002 (Listen to the show- in Dutch - here).



In his explanation he noted that with the introduction of the Euro, the people in Bergeijk became twice as poor. In order to resolve this he suggested the introduction of a new fictitious trading unit, with the name Guilder (our former money unit here in the Netherlands). Then, on-air, he tried to exchange his invented fictitious Guilder for a cup of coffee and a repair of the bike. The conversation really got out of hand when it came to fictitious banks, a fictitious Rabo-bank, with fictitious bank accounts, debit-cards and fictitious pin-code's, including fictitious robbery of fictitious money in the accounts. And also fictitiously rich people.



Essentially, the show was a satire on LETS, Local Exchange Trading Systems. These are a payment-unit to be used in communities that do not want to use money, but want to exchange services. See this site for more information on LETS and this site for the Dutch variation: Noppes.

Letter about payments issues to parliament

Today, the Ministry of Finance released its promised progress report on payments and sent it to Parliament. Some topics of interest:

- increased attention will be paid to the falsifications of the euro; the central bank will do a renewed campaign to make sure the public knows and uses the safetu features of bank notes,

- the change-over of contracts between retailers and Interpay to the retailers and their banks will take effect on March 1, 2004.

Mrs. A. Jorritsma to be the independent chairman of supervisory board of Interpay

Interpay today announced the former Minister of Transport (and Economic Affairs), A. Jorritsma will be the new independent chairman of its supervisory board. The announcement follows the advice of the central bank to improve the governance structure of Interpay. Mrs. Jorritsma is currently also Mayor of Almere.

Banks hold mini-conference / press meeting on account-transfer-service

These are busy days for payments experts; as soon as the one meeting is over, another one is held, consultation documents float around and all this has to do with retail payments.



This afternoon, the Dutch Bankers Association held a meeting on the "Overstapservice", which sort of translates as account-transfer service. The service helps consumer who want to move their bank account by providing them with all information on periodic payments, passing on direct debits etcetera (see my previous blog-entry).



Both the website and the meeting show a change in approach by the Dutch banks. The NVB-website is filled with all the information that one needs in order to understand the subject. It also has a form that consumers may use when they want to move their bank accounts. So it definitely looks as if the old days of a more introvert banking sector have made way for a new approach in which Dutch banks are more open and communicative.



Of course the proof of the pudding is in the eating, but as I'm really happy with my bank (which is the case for at least 80 % of the Dutch bank customers) I won't try the service. But anyone who does try it, is invited to send in his or her experience to: fijne-en-minderfijne-ervaringenmetoverstapservice@lelieveldt.com.

The Communication on the New Legal Framework

Finally the long awaited communication has been published here: the Commission Communication on the New Legal Framework. Reactions are possible until 31.1.2004, so that the Commission may finalize the work on this issue before their term ends.



Now let's read it and see what the differences are with the previous, undisclosed version.

ING Direct and Rabobank.be: successful Dutch internetbanks

FD reports that ING Direct has, in its first half year of activity, attracted 250.000 savings customers in the United Kingdom. ING was using 25 million pounds for the launch, of which 15 million to be used for marketing. ING offers 4,3 % on its Internet-savings accounts and requires 400.000 customers to reach break-even.



Meanwhile Rabo has succeeded to attract 275 million euro of savings from the Belgium market, where its Rabobank.be active for one year now. On average, the 13.500 customers save an amount of € 21.000. Rabobank wishes to reach a number of 32.000 customers at the end of 2004 and hopes to reach break even in 2005. Also, expansion to other Eu-countries is on the agenda. Technically, Rabobank uses the digipas-technology of Vasco for authentication.

Corporate segment not always profitable

Although it may be cool to contract large corporate customers and provide payment services to them, it may not always be profitable. A sharp focus may be what is required, according to this report by BCG: The Path to Value Creation: Global Corporate Banking 2003.

Europe is not acting European

Today, the Consumer Protection Directorate issued a press release which explains:

Cross-border business-to-consumer sales have stagnated in the EU despite large price divergences. A Eurobarometer poll published today shows that consumers are not confident enough to shop cross-border. Only 12% of EU citizens have actually bought any goods or services across borders over the last twelve months. "A competitive European economy needs consumers who are willing to shop across national borders. This poll confirms the need to continue to strengthen the EU's consumer policy." said Health and Consumer Protection Commissioner David Byrne.



Basically, this shows that people shop and buy in the country were they live, or where they travel through. And no European Commission policy may be able to change that. It's a similar misconception as the one about the single payment area. It's not the creation of a single payments area that makes a consumer pay internationally, it's the other way around. As soon as consumers are paying internationally, there is a single payments area. But it may take some 10 more years for policy makers to acknowledge that.

GTIAD-meeting on pre-paid telco-services

Last week I was present at the first part of a GTIAD-meeting on the applicability of the Electronic Money Directive (and the local legislation that implements the directive) for mobile telecom operators. At the meeting, the telecom operators acknowledged that what they were doing constituted electronic money (depending on the organisational setup of their business). In line with this reality other industry representatives stated that consequently, all e-money issuers should be subject to the same rules.



The next steps in the process will be that the GTIAD will make up its mind on this subject and send an advice to the Banking Advisory Council. Then, a consultation may take place on how to further proceed and make sure that the legislation will be applied in a proportional and adequate way to the telecom organisations.



See also the article in todays Volkskrant (registration required).

Banksys lowers its fees

Leo van Hove sent me this link (in Dutch) which explains that Banksys is taking steps to improve its relations with merchants by:

- replacing individual contracts by standard contracts with better general conditions,

- lowering the monthly fee with 15 %,

- lowering the Proton commission from 0,7 to 0,55 %,

- waiving terminal installation fees in the first half year of 2004.

The cost of these measures is estimated to be 13,4 million euro.



The changes are the result of a satisfaction enquiry as well as an agreement with the Independent Union of Entrepreneurs. And Dirk Syx, delegated official of Banksys, formally commits himself to the implementation results.

5.685.517 pin-transactions for Sinterklaas: 1,13 billion over 2003

.. debit-card transactions occured on saturday, due to the Sinterklaas-shopping spree. This is more than last year (5.325.917 transaction) and very close to the 5,75 million transactions that occured last year on the saturday before Christmas.



If we use the number to estimate the total number of this years transactions we may expect 1131 million (1,131 billion) debit-card transactions in 2003, which is still a 6,75 % rise over last year. As for the number of transactions on the Saturday before Christmas, this will probably be 5,98 million (give or take a few).

Tank cards under fire

One gas station owner in Daarle has been subject of a tank card fraud. Attentive people observed criminals filling gallons of Diesel. They notified the gas station owner who subsequently found out that at least 670 liters of Diesel was being tanked with falsified tank cards. So we see the crime moving from the well-protected debit-card to the private tank cards.

Chip under the skin: prediction becomes reality

In 1988 Wim de Brie wrote a famous sketch in one of his books. It was about the future of debit-cards and pincode. He assumed a chip would be implanted under the skin on the forehead and the pincode would be replaced by biometrics (using a finger print). Todays Volkskrant explains that a part of this may become reality. The company Applied Digital Solutions last week demonstrated RFID-technology that could be attached under the skin of customers. The device is called a Verichip and the Electronic Privacy Information Center has already protested against its application.

Chipcard for public transport

Yesterdays and todays newspaper reported on the cost-benefit picture of the proximity IC-card to be introduced in 2004 for use in public transport in the Netherlands. Karla Peys, the Minister of Transport informed parliament by means of:

- this letter,

- this research report on cost/benefits.



What is quite noteworthy is that Minister Karla Peys used to be the member of Euro-parlement claiming free cross-border credit-transfers from banks. Now she writes, in a letter to the Consumer Union, that is undoable to provide the public transport chipcard for free. She also explained this position by referring to the bank practice (charging for cards) as a benchmark.



Interestingly, the state will sponsor the new payment instrument with an amount of 160 million euro. There has been no discussion in parliament on the question if this support is in line with the EU-guidelines for state-support to private enterprises. Also, the actual calculations on costs and benefits (which took a while to be finalised) weren't part of a major discussion.



Despite these discussions, it appears that the position of the public transport sector in the social debate on payments is still underestimated. With 1,5 to 2 billion transactions per year, the public transport e-money system will be a major payment issuer in the Netherlands; yet, no mention is made of participation of representatives of Trans Link Systems in the Social Platform on Payment Systems. So I would suggest they'd be invited (either as themselves or as a delegate of the representative organisations for e-money issuers).

NMa introduces financial monitor and finds not enough competition in banking

On Tuesday 26 november the Dutch competition authority, NMa, held a conference to explain that a separate group of 8 employees will be monitoring the competition in the financial markets. The conference enjoyed a quite considerable press coverage given that Minister of Finance Zalm recieved the first financial monitor report from President of the NMa, Mr Kalbfleisch. The first monitor financial markets can be downloaded (here (in Dutch)).



The monitor itself unfortunately draws heavy on research that is not sufficiently specific to support its conclusions. Also once again, there is a call for number portability in banking. Which should remind me to write an article on estethic policy thinking and policy making (where esthetic and impossible practicle solutions keep on entering the mind of regulators, meanwhile blurring the analytical difference between policy goals, policy alternatives and policy implementation).

Korea's LG Card: case of the monetary relevance of the creditcard

These days, most newspapers report about the Korean company LG Card, with 14 million customers one of the biggest issuers of credit cards in Korea, that is in severe trouble. This is an interesting demonstration of the monetary relevance of payment instruments. Let's see what has happened...:



The Korean government wanted to eliminate the grey market in the retail sector and wanted to give a boost to consumer spending as well. So it decided to stimulate te use of the credit-card by fiscal measures. This worked fine: the economy grew 6,3 % in 2002.



The downside however, was that Korean customer did not really have the money. So as the customers faced problems in paying back the credit-card company, LG Card started getting into trouble with an outstanding sum of more than one billion millions dollars. In order to save its daughter company, the Korean Exchange Bank last week notified the public that it would take over LG Card. And it went on to restructure the debt.



The restructuring of the debt took a while, so last friday, credit-card users could not get any money from the ATM. The operators had shut down the usage due the debt position of LG Card.



Yesterday it was announced that -again under strong pressure of Korean government- Woori Finance en seven other banks provide a loan to LG Card of 2000 billion won (which is 1,4 billion euro), to be paid back within the year.



Given that the loan is not backed by securities or assets (so actually it was really forced upon the banks), the stock market reacted. The Korean banks saw their share prices falling with 2,5 to 5 % taking along the South Korean Stock Market Index. And with it the the currency exchange rate for the Won.



One of the primary lessons we can draw from this case, is that money is not only a means of exchange, but also a store of value. What we see in this example is that the government uses the monetary functions of payment instruments as means of monetary policy. Formally, monetary policy is of course the remit of central banks, but the Korean government has indeed found an interesting way of bypassing central bankers.



We can rest assured that this case will be studied in more detail by central bankers all over the world. Their conclusion will be: leave monetary policy to the central bank and be careful not to jeopardize the financial sector of a country for the cause of short term-politics.

Whereto with the E-money directive?

This week the GTIAD, the working group for interpretation and application of banking directives, will further discuss the application of the E-money Directive with respect to new payment services such as the pre-paid funds of telecom operators. As the 1.1a2 contribution to the discussion I've just drafted the document:

The Electronic Money Directive: Recapitulation and outlook, a working paper made for the GTIAD-meeting of November 27, 2003.



The main thesis in the paper is:

The European E-money Directive is the codification of a number of expectations with respect to the future role of both market players and regulators. These essential expectations are:

1- electronic money" is monetary value as represented by a claim on the issuer which is: (i) stored on an electronic device; (ii) issued on receipt of funds of an amount not less in value than the monetary value issued; (iii) accepted as means of payment by undertakings other than the issuer.

2- e-money is subject to regulation with a regulatory regime similar to that of banks, but specifically designed for e-money institutions,

3- all e-money issuers will be treated equal, the goal of the directive is to ensure a level playing field

4- the rules of the directive apply, regardless of the specific technology used.



One may assume that all European citizens, civil servants, institutions and enterprises adhere to the European principles and the democratic and institutional arrangement that they are subject to. Therefore, it is justified to expect that all market players and regulators will live up to the essential expectations mentioned above.



If however, it turns out that these expectations will not be met, due to decisions or actions by market players or regulatory bodies, this not only damages the level playing field for e-money products but also damages all the European Union stands for.



See for more info: www.11a2.nl

New legal payment framework for Europe

Financieel Dagblad is now also one of the newspapers that quotes an upcoming consultation communication of the Commission about the legal framework for a single payment area. In the article some of the suggestions of the EU Commission are:

- shortening the time periode for cross border payments to 3 days,

- realising quick dispute resolution.

The document should be sent out today.

Network365 and iPIN merge to become a global player in payments technology

Net4Nowt reported last week:

Network365 and iPIN announced that they have agreed to combine their businesses in a merger to create the global leader in payments technology. The merger, approved by the boards of both companies, is expected to be completed by January 2004. The name of the new company will be Valista.



Network365 develops software that enables wireless operators, banks and enterprises to deploy mobile data solutions with mzone(R), a comprehensive payments, multi-channel top-up and service delivery suite. Its award-winning mzone technology has been deployed in 18 countries and in multiple languages by key customers including NTT DoCoMo, 3, Hong Kong CSL, O2 ,Taito Corporation and TODO1 in the Americas. Network365 has offices in Ireland, Asia, Europe and the Americas.



iPINs Enterprise Payment Platform (EPP) is a single, multi-operator, interoperable, end-to-end platform that powers a variety of payment applications deployed by both operators and enterprise clients in the US and Europe. iPINs customers and partners include Vodafone UK, France Telecoms w-HA, Orange and Wanadoo, T-Online and Tiscali in France, General Motors, Accenture, Cap Gemini Ernst and Young, Convergys and Gemplus.

Account number portability does not make sense.. European Commission agrees

The Belgian Association of Banks has released this press statement, which explains why it makes more sense to facilitate moving from one bank to another by means of a account-transfer service rather than by introducting account number portability. As an aside in the press-statement, it becomes clear that the European Commission actually agrees on that.

Thus, the chances that any legally prescribed account number 'portability' will ever be introduced have reduced considerably.

Telco's are e-money institutions... but when will they really be?

It's actually a no-brainer. If e-funds are given to the consumer in exchange for pre-payment and those e-funds can be used to pay for third party services, this is what we call e-money. So already in 2000 it could be envisaged that telco's and regulators needed to be aware of the e-money directive (see this article of July 2000: Where EMI-directive and mobile phone payment systems will meet).



In practice, the consequences need some time to sink in. So at the end of the month another GTIAD meeting will take place in Brussel to further discuss implementation issues of the e-money directive. This article in Mobile Today hints at this meeting (although in the legal sense of the word it should be noted that the directive is already implemented and the issue is more about compliance than anything else) and suggest that compliance activities for mobile operators will be further postponed.

Microsoft is moving in on banks..

Finextra reports that Microsoft is pretty active in getting closer to banks.



Last month Microsoft has launched a new software solution that runs on its BizTalk 2004 integration server, supports all Swift messages and also includes a toolkit to help banks provide payment services that are closely aligned with corporate supply chains.



Microsoft has also announced it is participating in the RosettaNet Payment Milestone Programme, an initiative designed to drive the automation of payments from RosettaNet business processes. To back up its participation in the programme it has launched RosettaNet Payments Toolkit. The toolkit aims to provide a cost-effective way for firms to integrate the payment process quickly and easily into existing IT systems.



Furthermore, E-payment news reports that Bank One and Microsoft are to offer a cash management service, which will allow business owners to integrate their existing processes for managing payables and receivables with their banking services. The new service, known as Instant Cash Management Solutions, utilises the Great Plains software from Microsoft to connect Bank One customers internally and standardises the transmission of accounting information. The service also includes a positive-pay service to detect check fraud, as well as automated lockbox reporting for payments.



Finally, something that occured a little earlier: Microsoft has appointed Koen Van den Brande to the newly created role of retail banking strategist at its EMEA financial services division.

Way2Pay update

FEM de Dag informs us that Way2Pay now has 20.000 customers and that 40 % of its customers shop during the day (from their work-place).

Consumer Union sees card trouble

The Dutch consumer Union reports that quite some service glitches occur for customers that want a new card. It placed an announcement asking its members for experiences and received 150 comments, ranging from non-functioning cards to price issues.



The Consumer Union wants bank cards to be replaced without charges in those cases where the customer sends in a nice and clean card. More news is to be found in the december 2003 issue of their Money-Magazine.

InterFaktuur : another EBPP

Bill payment is a costly thing. And getting your customers to sign up to EBPP and authorise payments on your website may earn you money. Thus InterFaktuur Nederland is offering an EBPP solution, that uses direct debits in the back-end. Basicly the same payment concept offer as Privver, but it's not part of a consolidated solution.



Meanwhile Postal Services in the US drops its 4-year-old electronic bill-payment service operated through CheckFree Corp (see this article).

Minister of Finance visits Wallie-card

I think our Minister of Finance Zalm, is about the only other professional involved in the Dutch financial industry, who maintains a weblog. I remember mailing him my link when I started this weblog and a couple of months later, he started his own.



In this weeks weblog he notes that he visited the Distri-Group on monday, November 10, to become familiar with their role as a distributor of pre-paid phone cards and as the issuer of pre-paid payment product: the Wallie-card.



Both products by the way need to comply with identification and suspicious reporting requirements, but I'm pretty sure that that has not been a part of the discussion during the visit.

ABN AMRO helps retailers with eurochecker

ABN AMROissued a press release to inform the public that it will send an eurochecker to 60.000 retailers. This is a brief illustrated leaflet explaining how to check the security features of bank notes. ABN AMRO hopes to contribute to solving the retailers problems with false bank notes.

Paying digital content by billing the subscriber: Planet Internet / OD2

Planet Internet announces that as of today it will offer its subscribers to the Planet Music Club the option to get digital music from the British OD2. Subscribers pay 7,49 euro per month and get 1000 credits. These credit can be used to:

- play a track on the site (1 credit).

- download a track to the harddisk (10 credits),

- burn the track on a CD (99-189 credits).



Now does this make Planet an e-money issuer...? That wholly depends on the question if the credits are merely credits at OD2 (in which case we have a prepayment for services, with Planet acting as the payment agent) or if the credits are those of Planet. In that case it all depends on how to interpret 'receipt of funds' in terms of the E-money directive. But pending my entrance in the PlanetMusic club I cannot give further specifics.

European Card Review interviews Stolwijk

European Card Review has interviewed Stolwijk, now that he is leaving his post as chairman of the Board of Interpay, but will continue as chairman of SiNSYS, the joint venture between Interpay, Banksys and SSB, for two or three years.



Mr Stolwijk explains that the next ten years will see a slow move towards more unified infrastructure. Still even aligning Belgium and the Netherlands is already a difficult job, he says. Also he suggests that the current PIN-brand might not survive in this future:

In the Netherlands, the PIN brand might not survive – it might become Maestro or whatever.

FINREAD Seminars In the U.S.

This press release invites US market players to learn more about FINREAD; the specification for smart card readers and e-commerce terminals.

Possible boycot of 100-euro note by retailers

Het Financieele Dagblad (paid access) reports that Dutch retailers are considering to refuse the 100 euro for payment in shops. Earlier retailers made clear that an increase in falsifications occured. Their suggestion that retailers be reimbursed by the government for the loss they make when accepting a very good falsification of the euro, has been discussed with the central bank and Ministry of Justice. This has not resulted in any agreement, which means that retailers may be advised to refuse 100-euro notes in their shops.

Süddeutsche looks at draft paper on legal framework for single payment area

The German newspaper Süddeutsche Zeiting has published this brief article on the draft Communication of EU-Commissioner Bolkestein with respect to the future legal framework for payments. The newspaper notices that the 82-page document aims at protecting the consumer.



The consumer protection goes to the extend that payment institutions may even become liable in those cases where the seller of goods and services does not deliver properly or delivers faulty goods/services (something currently the case the UK, Sweden and Finland). Also, the paper praises the Dutch situation in which a central clearing house is helping consumers with the changeover to another bank (a service not yet operational by the way).



The newspaper describes that the wording of the Commission Consultation document is still quite open, allowing for comments by banks and users after the official publication next week. But the article in the newspaper suggest that the EU-employees already have a more detailed vision on the actual texts of a draft directive.

Reinventing Money ?

The purpose of this site is to demystify money by presenting the best leading-edge ideas on monetary and non-monetary exchange. It is a resource devoted to the advancement of economic democracy, self-determination, and global harmony.

Payment Systems Oversight / Supervision

The Dutch Ministry of Finance has today explained the tasks of De Nederlandsche Bank with respect to overseeing payment systems and maintaining financial stability. It described four options in case of financial stability problems in the market:

1-solution by market players themselves

2-liquidity support by central bank (only possible with on basis of securities),

3-government guarantee or recapitalisation by Ministry of Finance

4-liquidation.

ABN AMRO sets up Group Shared Services

ABN AMRO announces a number of reallocations in top management tasks. Among the changes is the establishment of new division af of January 1, 2004: Group Shared Services:

Group Shared Services will be established to create cost savings through consolidation and standardisation. Furthermore, GSS will focus on further exploiting new market solutions for support services with the aim to achieve better products and services for our clients at lower costs.



After having co-led the successful restructuring of Wholesale Clients, which is now largely complete, Hugh Scott-Barrett will be appointed Chief Operating Officer (COO) in the Managing Board, responsible for GSS.

Worldpay battling online attack

Erwin Boogert pointed me to this BBC NEWS item on an attack of Worldpays systems. Worldpay is a payment systems provider servicing credit-card payments for 27.000 retailers. It is receiving numerous autorisation requests since Tuesday; something known as a Denial of Service attack (DoS).



Worldpays website is too slow to open at this moment. Yet at another website we learn that WorldPay says it hopes to restore services to near-normality by the close of business today. Also, Worldpay, part of Royal Bank of Scotland group, stresses that no consumer information has leaked.

First excercise on cross border credit transfers

The European Consumers Organisation, BEUC, issued a press release yesterday as well as the results on a study-excercise about cross border credit-transfers. The good thing is that the organisation acknowledges that their excercise was by no means a full-scale professional test. They've merely asked their member organisations to send payments back and forth.



One of the conclusions is that the Regulation should have been fully implemented in the Netherlands, but that its not. I'm quite curious about that. Having sent and received a number of cross-border payments I noticed that the Regulation is implemented quite well. The BEUC-observation though that Postbank has not adapted its online banking for IBAN (awarding them a prize for the worst technical problem) is hard to deny of course.



The one payment that backfired (with a charge of 25 euro) did so because the IBAN that I entered was incorrrect. And for another payment, filling in the IBAN in the Internet-banking environment of RABO, immediately led to automatic fill in of the address details of the bank of the beneficiary.



So much for my excercise. Needless to say that it would be a good thing to actually do a full scale professional test. All research so far has been anecdotal, while it would be a very good thing to use representative data. We would be happy to execute such a test.

Just a quote....

.. about the difficult situation of being a CEO of a clearing house (in this case Interpay), cited in the Financieele Dagblad (paid):

"My shareholders are my commissioners and they are my customers. I wish that for nobody. And I dare say this because I'm leaving at the end of this year."



Mr Stolwijk, CEO of Interpay made the statement during a conference on iT&Banking in Amsterdam.

Government to finance e-purse for public transport

Karla Peijs, the Dutch Minister of Transport, has written this letter to parliament, explaining that the government will allocate 100 million euro to introduce the so-called 'OV Chipkaart'. An additional funding of € 74 million may also be expected.



A research study shows that the overall-benefits to society may be in between € 400 - € 1500 million and that without government funding the project will most likely not be realised (as some individual players are to lose money due to the migration to the new system). Other highlights:

- the new system will cost € 160-170 million compared to current cost of € 120 million,

- the largest net benefits will be € 570-710 million, due to better product conditions, shorter queues and increased social security,

- 13 million travelers will pay € 1,5 to € 2,5 for the contactless OV-chipcard.



It's interesting to note that there is a very brief reference to the need to discuss with the central bank the payment elements of the chipcard. There is also a generic reference to rules and regulations that need to be complied with, yet a reference to e-money regulation is not being made. Which, given the pre-paid nature of the product, is quite interesting an omission.



The full study about costs and benefits is not being published as there is still some discussion about who pays for placing the toll gates at the train stations. It is expected that this does not change the overall picture however.

Greenspeak: The payments system in transition

Alan Greenspan recently addressed the participants of the Federal Reserve Payments System Development Committee 2003 Conference and spoke about the Check 21 Act. Download the speech here.

Pilot to reduce 1 and 2 eurocent in circulation

Raad Nederlandse Detailhandel announces that it will start a pilot to round the payments in supermarket to 5 eurocents. The goal is to eliminate the time-consuming payment with small coins at the supermarket counter (and the costly counting process). Raad NDH estimates that, when introduced in the Netherlands, savings may amount to 30 million euro.



The initiative for the pilot has been discussed in the Social Platform on Payments, a forum of interest groups and regulators, that regularly discuss developments in retail payments.

Way2Pay to mail 1,5 million Postbank customers

Planet Multimedia reports that Way2Pay, the Paypal-like payment service of ING, is going to mail 1,5 Postbank customers to convince them to use Way2Pay. Apparently the operational issues have been resolved and Way2Pay is ready to gain market share. As a part of the promotion Way2Pay also gives away 5 euro for the first sale.



Way2Pay manager Peekel explained to Planet that some thousands transactions are done each month, notably in the webshopping segment. P2P payments hardly occur. Of the 450 shops contracted, some 150 are actually operational. Soon, a feature will be available, where a transaction in the Way2Pay-account leads to a notitification in MSN Messenger.



With the promotion campaign, Way2Pay may just be one step ahead of Rabobank, which - according to their earlier announcements - should also be introducing their payment service shortly now.

KBC to bring domestic payment processing to Finforce

Having just noticed a real herd of visitors from Belgian bank KBC reading this weblog made me curious if there would be something interesting to blog about KBC. So I ended up reading this press release, which explains that KBC is to outsource its domestic payment processing to Finforce. Finforce is the 90 % KBC, 10 % EDS company that currently processes KBC's cross border payments.



An interesting observation in the press release is that, according to KBC, the current international banking markt appears to be insufficiently ready to outsource payments processing to a specialised third party processor. KBC also 'invites' other players to bring their payments processing to Finforce (and become shareholder as well).



These are interesting times. The next 10 years we'll all be slowly moving to European scale processing but nobody really knows the exact end result....

IMF will investigate supervision in the Dutch financial sector

The Ministry of Finance reports that the IMF will investigate the supervision of the financial sector in the Netherlands. This is all part of the Financial Sector Assessment Program (FSAP) that has this website where the results will be published.

VendexKBB introduces its own ATM's.....

Retailer Vendex/KBB just issued this press release to inform the public that the HEMA formula will do a trial with 20 ATM's to test the usage of cash dispensers in its retail stores. Consumers will not be charged for withdrawing cash (as is the case with the Moneybox ATM's). It is VendexKBB's intention to also replace the current 65 ATM's at the Bijenkorf and V&D formulas and to further expand the concept, when successfull.



The introduction of own-name cash dispensers is taking place in close cooperation with Vendex KBB Cards & Financial Services (CFS), a Group company which was set up last year to develop and market financial products and services for various retail formats. For the introduction of cash dispensers Vendex KBB is working together with the British cash dispenser supplier De La Rue and Staalbankiers.

Willem F. Duisenberg: time to say goodbye

Text of his speech at a special ECOFIN dinner.

228 million SMS/e-money payments in 2003 in the Netherlands

Yesterdays information by Orange Netherlands about its turnover allows for an estimation of the value and number of Premium SMS in the Netherlands. Starting with the press release we know that:

- the quarterly turnover was € 124 million euro leading to an estimated total turnover of € 457 million in 2003,

- more than 10 percent of Orange's turnover is related to data income, resulting in an amount of € 45 million data turnover in 2003,

- about 75 % of the data income is SMS income, resulting in € 34 million SMS turnover for Orange Netherlands,

- Orange has a 10 percent market share, resulting in an estimated € 340 million SMS turnover for 2003 or approximately 523 million SMS's in the Netherlands,

- two thirds of the SMS's are coming from pre-paid users, resulting in 345 million SMS messages for a value of € 224 million,

- two thirds of the premium SMS's are not delivered by the operator itself but by third parties.



The resulting conservative estimate is that 228 million SMS e-money payments will be made in 2003 for a value of € 150 million. These payments qualify as e-money payments, as they are being paid out of the electronic money value issued by the mobile operators and to companies other than the operators themselves.



Last years estimate was a value of € 65 million and 100 million e-money SMS-messages. As can be expected with successfull retail payment mechanisms, the current growth percentage for e-money SMS-payments is 230 %. Consequently it may be expected that in 2004 the number of Dutch SMS/e-money payments will outnumber the total number of paper-based and Chipknip payments in the Netherlands.



So do I hear anyone claiming that e-money will not work ? Or that it is an obscure development ?

How does the Dutch competition authority work..?

See this document for a brief introduction and further links.

Halifax e-mail scam....

WebWereld reports that Halifax has been the subject of an e-mail scan. The scam demonstrates that user-id, password combinations may be insufficient to secure access to bank sites. And that consumers may still need to be educated to be careful and not to provide their bank details to strangers.

Sony, DoCoMo team up for e-money cell phones

The Japan Times online reports that Sony and DoCoMo will set up a joint venture to further develop and exploit mobile phones that have an integrated IC-chip with electronic money in it (based on Sony's Felica Smart Card). The new joint venture will license the contactless technology out to third-party businesses, such as public transportation operators, retailers and event organizers.

New billing... what's that ?

Yesterday I've had the pleasure to contribute to a seminar of TPG Post on new billing. You may wonder what that is.



Well, in New Billing a direct marketeer views the physical bill not as something alien and costly, but as an opportunity to once again reach the customer and further intensify contact. Given the animated discussions and case sessions at this seminar we may expect to hear more about this concept in the future.

Het Financieele Dagblad

Het Financieele Dagblad (paid access) reports that due to repeated raids, Rabobank will stop providing cash services in its branches in Utrecht. This is not to say that there are a lot more holdups than before. Last year we had 80 bank robberies and right now the counter stands at 68.

Napster to offer prepaid cards

CCN reports that Napster will offer prepaid cards as a means to pay for the music that users download. The Napster Card will cost $14.85, entitling the user to 15 downloads.



The company is aiming the card at teen-agers without credit cards and parents who want to give the gift of legal music downloads. The card features the familiar Napster "kitty" logo and is activated at the point of purchase.



So, with the end of the 'everything for free-era' on the Internet, we now see the rise of pre-paid mechanisms to allow controlled spending on the web.

Belgium Argenta may offer current accounts in the Netherlands

Also in this weekends Financieele Dagblad: Belgium bank Argenta is about to enter the Dutch payments market. It will offer current accounts with a debit-card, Chipknip purse and a high savings interest rate. Argenta will use the intermediaries as their sales channel.

Two pin-codes for one debit-card?

The Financieel Dagblad reports this morning about an innovation by a former debit-card/pincode victim. Mr Jantoon Roos suggested to the banking sector the use of two pincodes on one debitcard. The pincode a and b would both be 4 digits long and be used in alternation. The second pincode would be chosen by the customer himself.



The banking sector has taken the idea into consideration but explained to the inventor that it would be technically too complex and that it would confuse the consumers. But the inventor seems keen on pursuing the idea, now that he has invested a couple of thousands euro's in Patent application.



What disturbs me in the article is that it might suggest that banks would not be willing to adopt good ideas that may reduce fraud. They do adopt those ideas, yet operating and designing retail payment systems is a little more complex than people may imagine. So the chances that an outsider comes up with a brilliant solution to such industry problems are close to zero.



The exception to this rule is of course the Memo-card; this is small piece of carton on which you may encode / hide the pincode by using a four-letter word in between a number of other four letter words.

Way2Pay: 450 shops and 15.000 users

In its latest newsletter, Way2Pay states that it has 15.000 users and 450 shops. Especially the amount of shops connected is quite large for a product that has only gone live half a year ago. The tricky thing remains however the pricing for the consumer. Loading the Way2Pay wallet regularly costs 0,6 % of the load value, with a minimum of € 0,25 per transaction. These load fees are now being waved for a period of two months.



Earlier this year Rabobank announced it would introduce its own version of Way2Pay. I'm curious as to the pricing structure and load instrument that they've decided to use.

More and more euro-falsifications

Raad Nederlandse Detailhandel, an umbrella organisation for retailers, has announced that the quality of bank note falsifications is so good that false bank notes are difficult to detect at the point of sale. As a result, retailers may get stuck with false bank notes for which they receive no money when depositing it at the bank. Consequently Raad NDH has called for adapted reimbursement conditions.



The amount of false bank notes taken out of circulation was 145.153 in the first half year of 2002 and is 230.534 in the first half year of 2003.

Consultations of our Ministry of Finance

Quite a number of consultations are taking place in the Netherlands. And since it's not so easy to find the full list at the website of the Ministry of Finance I hereby provide the startpage for consultations (in Dutch) on:

-settlement

-publicatiebevoegdheid

-marktmisbruik

-Wet Financiële Dienstverlening

-trustkantoren

-markttoetreding banken

-publicatiebevoegdheid

-financiering toezicht

-herziening financieel toezicht

-toezicht accountants.

Financial Action Task Force on money laundering: session of October 1-3, 2003

Our Ministry of Finance regularly informs us of the proceedings of the FATF meetings. This document (in Dutch) informs the parliament that the Netherlands will abide with the FATF 40 recommendations. It is observed that Nauru is the country with dubious 'shell banks' in the hands of criminal organisations. Banks and supervisors are therefore urged to take all possible precautions in their contacts with any bank from that country.

Scan, pin and go at the Hema !

Reacting on the previous post about the Chipknip goody at Albert Heijn, Ron Onrust was so kind as to send me some pictures of a new Dutch retail payment development, that he witnessed at the Hema-branch in Noordwijk:

Scan, Pin and Go



Additional research on the web shows that it is a NCR product, installed by BK Vision. It has been in use since februari 2002. See also the images below.

Great goody for Chipknippers at Albert Heijn...

This week Albert Heijn gets a lot of media attention because the food chain has started a price war in retail. But to me, something else is more interesting. Todays field research learns me that all customers that use the chipknip will receive a free key fob with a silver coin in it with the brand Chipknip. Now why is this and what's the use ?



Well, Chipknip and Albert Heijn have agreed to promote the use of the Chipknip for small payments in the shop. This eliminates the need for coins, but then again, we often need those coins to unlock a shopping cart for use in the shop. So if we are to use the Chipknip, Chipknip might as well provide a solution, a coin in the format of the 50 eurocent, for future use in the Albert Heijn shopping cart. Which is exactly what Chipknip en Albert Heijn do, provided that the shopper pays with Chipknip (and perhaps gets his first time Chipknip-experience).







So although I don't often get excited in the supermarket at the point of sale, this time I really admired the work of the marketing team that developed this promotion. It's very well focused, targeted and fully in line with the need to make payment and shopping as easy as possible. Excellent work !

Can existing payment networks meet future needs?

This was the major question at a conferency by the Chicago Federal Reserve Bank.

The conference summary is available here.



What I appreciated in the summary:

Payment innovations may take longer to adopt than innovations in other industries because of the need to balance the interests of multiple agents—consumers, merchants, financial institutions, and networks. In addition, payment providers must often operate both legacy and new systems side by side, increasing costs in the short run.

Visit of Her Majesty Queen Beatrix to ECB

Today our Queen Beatrix is visiting the European Central Bank (press release). I take it this is a formal 'Goodbye and Thank You-visit' to thank Wim Duisenberg for his efforts as the first President of the ECB.

Credit-cards repayment rates too high....? !

News Independent reports:

The Chief executive of Barclays - the largest credit card provider in Britain - said yesterday that he would not use a Barclaycard to borrow money because the repayment rates were too high.



Matt Barrett, one of Britain's best paid executives who earned £2.7m last year, made the unexpected comment to MPs on the Treasury Select Committee, which is examining the consumer effects of the credit card industry.

No real risk for money laundering in electronic payment systems !

Today, Ton Schudelaro will defend his dissertation on electronic payment systems and money laundering (see this Dutch press-release). His work is voluminous and provides a good overview of the topic. His analysis is brief and clear: there is far too much of a hype about money laundering in new electronic payment systems. Reality is that current countermeasures are sufficient and illegal whitewashing is not a real threat. This analysis nicely counterbalances the fear-driven Financial Action Task Force Fraud measures.

Maersk Sealand and Citibank announce on-line B2B payment solution

Erwin Boogert was so kind as to point out this article in The China Post that discusses a new B2B payment service by Citibank:

Citibank developed a customized implementation project to meet Maersk Taiwan Ltd's requirements by incorporating the advantages of Citibank's on-line banking and financial service. CitiConnect Online Service is part of Citibank's EBPP (Electronic Bill Presenting and Payment) architecture, which covers complete on-line solutions from presenting bills, managing disputes, and online payments.



Through the integration of CitiConnect Online Service and Maersk Sealand's e-commerce website, Maersk Sealand customers in Taiwan may pay from non-Citibank accounts and even release payments after banking hours to proceed with the printing of Bills of Lading.

Credit-card more popular in the Netherlands...?

Het Financieele Dagblad notices a nice article of the Dutch statistics agency on usage of credit-card as a means of credit. Usually the amounts are low and the money is paid back in a couple of months. But in the summertime, there is a peak in credit:

1998: 120 million euro

2003: 280 million euro

Meanwhile, the actual numbers of credit-cards in circulation, according to the Dutch Bankers Association, is diminishing from 4,7 to 4,5 million. How can this be?



My explanation is that the summerpeak reflects already existing lending behaviour rather than suddenly increased popularity of the credit-card. We used to go on holidays and bring our guaranteed cheques with us to obtain money (and overdraft our current accounts). Now that since 2002, this type of cheque is not in use any more, some of the lending has shifted to the usage of the credit-line with the credit-card.

SMS Gold Rush: beware of the e-money rules

This website, startups.co.uk explains that money may be made on SMS (the SMS Gold Rush) but has some good advice on the legalities:

Some services that are legal in one country may be illegal in another and often the interpretation and implementation of regulations can be different in the same market. For example, Vodafone UK does not allow micro payment services for all of its customers and 02 only makes such services available to its contract customers due to individual interpretations of the recent E-Money legislation.

It's all about prepayment now....?

New products on the market:

Oriental Bank of Commerce and Mastercard: OBC Prepaid card; The card is available from Rs 1,000 to Rs 50,000 and can be recharged any number of times at select OBC branches. The card is accepted at more than 60,000 merchant establishments and for withdrawing cash at MasterCard's network of 4,700 ATMs in India,

-Starbucks Duetto card, is the first prepaid card that also functions as a credit card. In addition to “loading” the card with cash that you can then spend inside Starbucks stores, as with most prepaid cards, you also can use it as a credit card at any merchant that accepts Visa. When consumers use the card as a credit card, they earn points that can then be redeemed for beverages or merchandise at Starbucks,

-Digi Beyond Prepay, automatically reloads pre-paid accounts from Visa-credit-cards,

-American Express Prepaid Travel Card, the new TravelFunds Card can be loaded with up to $3,000, or an equivalent amount of euros or British pounds. It can be used at any retailer or automated teller machine worldwide that accepts American Express cards. Consumers must fund the TravelFunds Card through an existing credit or debit card,

-CAMEL 3: SMS roaming for prepaid phone users, developed by Comverse. CAMEL-3 for SMS allows GSM operators to offer real-time charging for Mobile Originated Short Messages (MO-SMS) without the need for proprietary devices. The Comverse system supports a wide variety of real-time billing options. Charges can be based on the location of the sender, the destination of the message, the date and time, and more. Similarly, CAMEL-3 allows real-time charging for data services.

The Review of Network Economics: special issue on payment systems

The June 2003 issue of the Review of Network Economics was dedicated to the economics of payments and card network schemes.

Legalities in parking payments

Newspaper AD reports that recently a judge has ruled on the issue whether or not payment for parking in Dutch cities may be limited to using the Chipknip only. While in September a judge in Den Haag rules that the city of Den Haag has the right to limit parking meter payment facilities to the use of the Chipknip (see the Dutch text here), this time the ruling is different (see new ruling here).



The jugde in this new case is actually basing the verdict on some independent thinking rather than looking at the similar trial in Den Haag. Actually the judge is diving into a non-decided legal debate on the status of a Chipknip betaling. And chooses to view the Chipknip betaling as different from a giro payment.



In my view, the judge may want to reconsider his/her opinion on the basis of reading the single one best thesis on this issue: a thesis by Elvira Büchner. In 1999 she won the legal faculty price of the University of Nijmegen for her graduation paper about the legal aspects of chip payments. Essentially she views the chipknip payment as a split up giro payment, where there is a time lag between the debit-side of the payment (the load) and the credit-side (the actual payment).



Although some people are happy with this verdict my guess is that some personal irritation of the judge may have played a role in the ultimate ruling. And my prediction is that the ruling will be overruled in due time.

Visa and Mastercard to reduce interchange fee in Australia

Australia's two largest credit card schemes, Visa and MasterCard, suffered a decisive courtroom loss on September 19, when a judge ruled the Reserve Bank of Australia's landmark credit card reforms were valid. The Federal Court judgement opens the way for the central bank to force banks to reduce so-called interchange fees by an estimated $400 million.



See also the press release of the RBA and their page on the reforms to credit card schems. Briefly, the reforms include a 40 per cent cut in interchange fees that banks charge each other for processing the transactions, estimated to be worth $1 billion a year. The changes will also allow retailers to charge customers extra for using a credit card and allow new non-bank players to enter the market.



Chris Connolly, of the Consumer Federation of Australia, said the ruling meant savings of up to $600 million in the first year of the reform.

"It's a big victory for consumers," he said. "There will be a domino effect across the banking system. We are hoping people will move from using . . . credit cards to cheaper options like Eftpos. That will save merchants and consumers a lot of money."



Well, speaking about landmark cases. This year the Wall-Mart settlement was already a blow to credit-card schemes. And now, they're being hit by the regulators as well. Credit-card schemes won't ever be the same no more.....

Paying to charities... why use cash?

Now that people are increasingly reducing the amount of cash in their wallets, charities may want to use new means to receive payments. See for an example the Donorpoint; a shoe-box like machine that allows people to donate by credit- or debit-card.

Wellink states that consumer is going to pay for more efficient payments

Mr Wellink, president of our central bank, has made this speech on efficiency in payment systems. He explains that in the Social Platform on Payments a number of investigations is taking place to find out which are the more expensive payment instruments. And he also reveals the outcome: credit-card and cash.



Faced with the question how to make the payment system more efficient, Wellink suggests that we use the price-mechanism. In plaintext: consumers may prepare because they will be facing the introduction of fees for their retail payments. And this will be backed by the research in the Social Platform on Payment Systems.

ABN AMRO: pilot or operations first?

Today ABN AMRO released this press release explaning that it is teaming up with Douwe Egbert (DE, a coffee label here in the Netherlands) to open a Café DE in a brand new ABN AMRO bankshop in the centre of Enschede on 20 December 2003. The pilot represents a next step in the further development of their bankshop concept.



By adding Café DE to our bankshop, we hope to make the bank even more inviting for our customers. It also gives us a chance to discuss the customer's banking needs in a more informal setting.

...

The bankshop will have the same opening hours as the surrounding shops, which means that it stays open longer and will also be open on late-night shopping days and Saturdays.



The announcement comes at an interesting time. Right now I am on the receiving end of payment from an ABN AMRO customer. This customer informs me that at this very moment no payments can be made. Customer service of ABN AMRO informs him to try again tomorrow. Apparently the systems are down since yesterday evening when this customer first tried to arrange for the credit-transfer by phone.



So if we generalize these two events, we can draw up an important lesson from payments industry. Pilots are a very good thing to test the waters. But pilots should never stand in the way of the continuity of core operations such as payments.

Dutch build Arab SMS-payment facility

Planet Multimedia reports that LogicaCMG has agreed to build SMS-features for the Saudi Telecom Company. These include the reverse charge billing functionality to facilitate payment (and increase revenue). Now that's what I would call successful further diffusion and export of innovative payment instruments.

Dexit ; RFID e-money application

ePaynews reports:

Canadian banks, TD Canada Trust and National Bank, and wireless operator, Telus Mobility, are participating in Dexit debit express, a new stored-value cashless debit payment system. With Dexit, consumers can easily make small-value purchases by tapping an electronic tag on a merchant’s reader. Payments are debited from the consumer’s account, which can be reloaded to a maximum of CD 100 daily, at a cost of CD 1.50 per reload.



With Leo van Hove (who provided the link) I share the opinion that the future will see more similar hybrid payments instruments that are inbetween the pay now and pay before segment. Another one of those examples is the pre-authorised debit application by Mastercard. This provides the consumer with a guaranteerd payment facility at Point of Sale, but the money does not need to be loaded on the card. Instead, the payment facility draws on a blocked amount of money (reserved for this purpose) in the customers current account. And this would then not be e-money but remote access.. !



See also:

- article in Star

- the website of Dexit.

Interoperability is a matter of common sense

Het Financieele Dagblad features an article on Herman Roebersen, director of Parkline. Parkline is a product to be used to pay for parking with the GSM. What's interesting in the article is that it becomes clear that last week he visited his competitor to discuss the common technical features of GSM parking. As a result, users would not be confronted with different systems and different interfaces.



Now, although this appears to be common sense to all, it appears that regulators or supervisors are only too often unware of the fact that standardisation will occur as a matter of common sense in the market. For a more elaborate discussion of this issue, please read this chapter on Standardizing Retail Payments.

The Future of Money .....

.. may be the eternal newsgroup topic around the world. Will new technology change our payment habits? When will there be one all-encompassing worldwide coin? Are non-monetary electronic payments going to be the future's payment instrument?



Those interested in joining a debate/conference on these topics might consider going to The Future of Money Summit 2003.

Payments in the media this weekend

This weekend, retail payments were in the spotlight in the Netherlands. First of all newspaper Trouw published an interview with departing CEO of Interpay, Willem Stolwijk. And Trouw decided to highlight his statements on debit-card fraud on the front page, suggesting that the magnetic-stripe fraud appeared to be unstoppable.



Then on the Saturday edition of Kassa, the use of the direct debit instrument was once again subject of debate. Gijs Boudewijn, representative of the Dutch Banker's association assured the public that banks would take additional measures to get rid of errors and fraudulent use of the direct debit by companies.

C2it ends...

Planet Multimedia (P7) reports that C2it, Citibanks P2P e-mail systeem will end this year. The number of users will not have been more than 200.000. Paypal with its 30 million users is no match to them.



Now, where is this going to leave the other P2P e-mail systems (Send Money, Way2Pay .. etc)? If Citibank doesn't get this one to work within their business model, how will ING make Way2Pay work?

Internetbanking could be better ...

... according to a survey of the Dutch consumer union. Consumentenbond.

Wallie, a pre-paid card for on the web

RTLZ reports as did 1.1a2, about the initiative of the Distri-group to issue pre-paid cards, to be used for payment on the web. These kind of cards can be considered e-money, similar to the www.bon concept.



The card is named Wallie-card, some brief info can be found at the Wallie-card- homepage. It appears as if the card will be targeted at younger customers and that a free game will be part if the introduction strategy.

PayPal faces integration challenge

CNet News.com reports that better integration facilities would help Paypal improve its offering to the market:

'What would be perfect for me is if the user never had to leave my site,' said Safran, a Reseda, Calif.-based Web developer.

He also said he would like to see PayPal work better with his e-commerce software. Safran and other Internet merchants are raising issues like these as PayPal tries to diversify its user base beyond eBay's online auction community, which accounted for nearly 70 percent of the $2.8 billion in payments it processed in the second quarter

Yahoo adds e-commerce to Web hosting | CNET News.com

See this link for more information on how Yahoo captures the mom-and-pop segment of webshops.

SiNSYS, the new kid on the block....

After a lot of preparation, today the official announcement is made that a joint venture is established between Banksys, Interpay and SSB. It's name is SiNSYS. I assume the name stands for synergy in systems, or something like that.



The joint-venture is headquartered in Brussels. Banksys and Interpay each hold a 24.5% interest, SSB holds 51%. SiNSYS will provide services for the processing of international debit and credit card transactions of its shareholders. Current annual volumes amount to 800 million transactions for 18 million cards and 500,000 merchants. These figures are expected to rise to approximately 1.5 billion transactions for 30 million cards and 800,000 merchants by 2007.

Quality mark accessibility for service-bus of ABN AMRO

ABN AMRO has introduced buses which incorporate a bank branch in order to properly service the rural areas without a bank branch. In a press release issued together with the Dutch Office of Accessibility, ABN AMRO announces that its service-bus will tomorrow receive a trust mark. The trust mark tells consumers that the building (or bus) is accessible to the disabled.

Dutch on-line shopping increases 36 %

Thuiswinkel.org and Blauw Research issued this press release to inform the public that:

- on-line spending of Dutch consumers has increased with 36 % to an amount of € 575 million,

- the number of buyers on the web has increased 24 % to 2,8 million consumers,

- the number of first-time buyers on the web has decreased from 410.000 to 300.000 consumers,

- the average value spent increased from € 188 to € 205, due to higher spending in the travel and consumer electronics segment,

- the travel segment is largest with an on-line turnover of € 235 million,

- promising new segments are: insurances on-line, tickets-online and ordering DVD's and games,

- the expected turnover in 2003 will be € 1,200 million.

Consumers open wallets for paid content

C-NET news reports that US consumers increasingly open their wallets for paid content:

The Online Publishers Association (OPA) reported that spending on paid content grew to $748 million in the first half of 2003, an increase of 23 percent over the same period last year.

....

OPA said the top three paid content categories--personals and dating, business and investment, and entertainment and lifestyles--accounted for 65 percent of spending in the first half of 2003, up from 61 percent in 2002.

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Subscriptions continue to be the dominant price model, accounting for 88.5 percent of paid content revenue in the first half of 2003.

CEO of Interpay leaves his post

Het Financieele Dagblad reports that mr. Willem Stolwijk, CEO of Interpay will leave his post at the end of the year. Mr Ben Haasdijk will take over his position. The news is published two days before more details will be known of the future cooperation between Interpay and Banksys.



Interestingly, if I'm not mistaken, a similar event occured some months ago at Banksys with CEO Chris Lebeer suddenly leaving (see this article). So I wouldn't be surprised if more organisational changes will be announced in due time.

EU study on perception of security

Perception and reality may not always be the same, certainly not if the issue is security of payments instruments. The EU has commissioned a study, that was presented last week at a conference on Payments and Security.



At the conference, a range of distinguished speakers (including representatives of ECB, the Commission, Visa, Mastercard, European Payments Council) presented their vision. Hans v/d Velde, President of Visa Europe had some interesting Visa-information:

- 80 % of EU consumers also buy in the EU,

- EU exports a net amount of € 60 million euro per month in e-commerce (more people buy from other countries in the EU than EU-citizens buy in other countries),

- in July 2003 60.000 chargebacks were presented to Visa, totaling an amount of € 8 ,illion euro),

- of the chargebacks, 85 % is estimated to be fraudulent,

- e-commerce transactions are 15 % more probable to be fraudulent than regular transactions.