Sunday, November 30, 2003

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.

Saturday, November 29, 2003

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.

Friday, November 28, 2003

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).

Thursday, November 27, 2003

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).

Tuesday, November 25, 2003

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.

Monday, November 24, 2003

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:

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.

Thursday, November 20, 2003

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.

Tuesday, November 18, 2003

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).

Friday, November 14, 2003

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.

Thursday, November 13, 2003

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.

Wednesday, November 12, 2003

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.

Saturday, November 08, 2003

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.

Friday, November 07, 2003

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.

Thursday, November 06, 2003

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


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.

Wednesday, November 05, 2003

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.

Tuesday, November 04, 2003

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.

Saturday, November 01, 2003

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.