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).