Ministry of finance and central bank warn for the 'world-euro'

This press release (in Dutch) is a warning to the public to not try to buy so called World Euro's, issued by the European Union, as avertised last friday. The advertisement claimed that for 10 euro people could buy world-euro coins. 5 Euro would be given to charity, and the other 5 would be converted to world-euro's, to be used as regular cash.

A couple of days later, it now turns out that the one page ad was a free assignment to an advertisement agency. They were asked by the Volkskrant (a morning newspaper) to attract attention of the public for an issue that really should be on the European agenda. And they came up with the idea of the World-euro (and really started believing in it...). But as a result of all the compliance fuss, the real story behind this advertisement was disclosed prematurely and the website of the world-euro was adapted to comply with bank supervision law.



Well, that's 10 points for the ad-agency, I would say.

Or perhaps eleven?

Interpay, Chess and LogicaCMG cooperate to deliver Ideal-platform

Planet Multimedia reports that Interpay, Chess and LogicaCMG have signed a cooperation agreement to deliver platforms and services related to the Ideal-payment standard.

OV Chipkaart becomes reality: first launch this monday

Automatisering Gids report that tomorrow, the first public transport contactless chipcard will be distributed to customers of the ferry service Vlissingen-Breskens. It is the first pilot group to be followed by the whole of Netherlands later.



Last week, I noticed that the Rotterdam underground is also preparing for the contactless chipcard. There is a confusing mix of new and old machines. The new entry doors are installed but we are still able to walk alongside of these towards the regular ticket validating machines.



Anyhow, as also our National Railways will be migrating, next year will definitely be the OV-chip year...

Mobile Payments 2004: brief summary

Some highlights of an interesting conference in Amsterdam:

1. Consumers are willing to pay for mobile payments, especially for parking, public transport and road pricing.

2. RTL Netherlands receives about 60 million premium sms-es per year; their demand to better payment mechanisms focuses mainly on squeezing the current operator marging of 20-40%.

3. Netsize estimates the EU market for mobile services at 23 billion euro and the Dutch market at 1 billion euro.

4. Mobile operators still are the opinion that pre-paid purses with eurovalue in them, from which third parties are being paid, have nothing to do with e-money, money and need not be regulated. The representatives of those operators that effectively operate the most use mobile payment channel, downplay the importance of their payment channels, while not disclosing any data to back this up.

5. Banks intend to expand the internet payment mechanism Ideal for use on mobile channels as well. But first concentrate on the Internet part

6. Simpay will go live in second quarter of 2005; merchants accepting simpay will be faced with 30% fee to be paid as a merchant service charge.

Brr... order confirmation spam

It's quite annoying. Spam that has the form of order confirmation. But given my consumer rights I have no need to worry. It's a pain though. And the obvious mislink leads to: http://onestepgo.com/



Dear Customer,



Thank you for your order. Your credit card has charged for amount $560.00.

Charges for the transaction will appear on your credit card statement under the name INTEGRAL LLC.



To view transaction status and order details, point your browser to the following URL:

http://www.mybill.com/order=SD25xxx



Sincerely,

MyBill Team

IInternet: browsing not buying...?

Research by Dutch retailers organisation RND demonstrates that a huge group of consumers uses the Internet to look before they buy. Of the 8,7 million active Internet users, 93 % uses the web to be informed about prices/products. Of this group of 8.7 million, 39 % has actually bought something over the web.

Size matters...

Small countries can more quickly cooperate and produce new products. Therefore the Estonians attract Ian's attention with smart cards that work on a national level:

Surprise and Shock! Identity smart cards that work on a national level!.

Dutch Standard for Internet payments: Ideal

In September Rabobank, ABN AMRO and ING announced the development of a Dutch standard for internet payments. The standard protocol essentially routes the shopper from the site of the merchant to the shopper's internet-banking environment, where payment is made in the usual manner. After the payment the merchant gets a guarantee en the shopper is brought back to the merchant environment.



The standard will be available to merchants and consumers from mid 2005 onwards. The name of the standard: Ideal, was announced during an e-banking track of e-Netherlands conference on November 11. It is expected that other Dutch banks will also incorporate the standard for their customers.



Research by Multiscope showed that 87 % of the Dutch population find the standard a good idea; 60 % expect to immediately make use of it. Especially a bunch of those consumers that at times still fear the Internet (70%) expect to use the product.



The poll also outlined that the awareness of bank internet payment products was:

- ING's paypal like scheme Way2pay: 32 %

- Rabodirect betalen: 28 %

- ABN AMRO E-Wallet: 14 %

- Rabo Minitix: 3 %

- ING Tootz: 1 %

Of these current payment products, only Minitix will continue to be offered by Rabobank. Rabodirect betalen will become Ideal; the other schemes will be dismantled.



By the way, during the conference it was stated that the current level of Internet payments in the Netherlands is 10 million. This number allows for some further calculations and estimations as to the total number of internet-payments in the EU. But I will leave that to others.

German Federal Institute for Financial Services Supervision Issues Germany's First E-Banking License to A Telco Operator

The German Federal Institute for Financial Services Supervisions authorised the NCS mobile payment Bank GmbH under NAK 32, Para. 1, Clause 1 combined with NAK 1, Para. 1, Clause 2, No. 11 German Banking Act, to issue and administer electronic money (e-money business). See: http://www.newratings.com/analyst_news/article_501499.html.



Undoubtedly this is the first of many more operators to follow. A new market is now emerging, which is the market of regulated or unregulated mobile operators. In that market NCS mobile payment Bank is now officially the first mover (with Vodafone UK being the unofficial zero-mover; operating under the waiver of a small e-money operator). See also the website: http://www.crandy.com/homepage/en/include/index.html.

Yahoo Direct gives in to Paypal

Emerce reports that Yahoo will stop its payment method: Yahoo Direct as of November 22 this year. It was unable to get a substantial foothold in the market for auction-payments alongside competitor Paypal (who has two thirds of this market).

Dutch banks join hands to develop standard for e-payments

Having built a joint system in 1997 (I-pay met SET) and having discovered the complexity of public key infrastructure technology, Dutch banks set out to develop their own Internet strategies. Having done so, now is the time to join hands once again.



Recently the Dutch banks announced (see in Dutch: Planet Multimedia) that a new internet payment standard will be developed. Current e-payment initiatives by ING (Tootz, Way2Pay) and ABN AMRO (E-wallet) will be stopped. Rabo continues its Minitix however and aims for the mobile market with that application.

9210 (nine to ten): the zip code of another IT-soap

9210: the zip code of another IT-soap1 is the page where interested readers get to learn more about the costs of changing numbering systems in banking.

This blog: plots for horror stories?

So every now and then I check my referer stats to find out how people end up on these pages. Today it turns out that someone seeking plots for horror stories ends up with a single hit: one of my blog-entries on systemic risk.



Although I personally can imagine quite some horrorful payment stories, I can't imagine the world to be so dull and unexciting as to need to revert to retail payments for inspiration. So whoever was looking for those plots: good luck with your quest !

President Bush's picture on a fake $200 bill

Well, here's a nice one. A (undoubtedly visionary) woman pays in a shop, using a 200 dollar bill with the picture of George Bush on it. See this CNN-story. It's not that strange an idea. If Bush wins the upcoming elections he may start thinking he is a brilliant statesman that ranks alongside Franklin and all the others.



I wonder if, in case I were a US states official, I would be able to make Bush sign a Presidential Decree that -to celebrate his election victory- he's going to be on the next bank note. My guess is that Bush checks the details of such a decision as good as the intelligence reports he gets every now and then. Which would be interesting, because these details state that according to US law, only dead man may become immortal by appearing on US bank notes.

Moxmo, small e-money issuer, is broke

Emerce reports that Moxmo, the small e-money issuer that has been operational for 2,5 years, has gone bankrupt. This is the second failing e-money startup who focused on the mobile phone as a payment mechanism. The first one was Digipay.



Now was their business assessment to focus on the mobile phone as a payment mechanism wrong? No. The market for ringtones, premium services, ticket sales is huge and getting a slice of that at provision percentages (10 %) well below those of mobile operators (30 to 40 %) attracted quite some investors.



What did go wrong was the legal part. The start-up were held to comply with supervision law, given that their payment mechanisms was e-money. And they assumed, given the EU-regulation on e-money, that any player who was operating a similar scheme would be held to the same standards. After all, the regulation clearly aimed at a functional approach; the supervision would apply regardless of technology.



Unfortunately, the functional approach was one bridge too far in practice. The Dutch supervisors did not dare to apply the e-money law to the incumbents in the mobile payment market (5 operators, generating hundreds of million euro in the third-party PRS-market). So during two years, the supervision of these players was stalled. Which was just long enough to wear out the new startups who had betted on equal supervision for all e-money players in the market.



It is only too sad that it took the Dutch supervisors two years to formally recognize that mobile phone operators that allow third-party payment from their pre-paid accounts are indeed e-money institutions that need to be supervised. Even sadder is the fact that we will most likely need some 2 more years of European and national discussion before the whole market is properly supervised.



So in the Netherlands I would like to close the chapter on innovation and regulation with the following hypothesis:

The succesfull innovation of new payment schemes in a previously unregulated market depends not so much on the existence of regulation, but mostly on the willingness/boldness of the supervisor to ensure compliance with the rules, regardless of size and power-position of the supervised.

Oops... payment of 3000 euro via the phone?

An active student, Tjalling Kuipers, has started a public discussion on the new product feature of a phone payment product: KPN Switchpoint. The product now allows for payment up to an amount of 3000 euro. Quite a lot and all the checking is IP-address, account number and phone number. So the premium services fraud and 'ghost-bill' problem may now become bigger due to the unsecurity in the home environment.



In the back office, KPN makes use of a one-off direct debit mechanism. Although formally not allowed by banks, an increasing number of players in the Internet market 'forget' these rules and find their bank willing to use the mechanisms to ensure quick payment. The consumer however has to suffer, as they are unable to reverse the payment in case of fraud.



My solution to this problem, which will hopefully be introduced any time soon now, is to shift the reversability and fraud problem to the acquiring bank involved in these set-ups (see this previous logentry of one and a half year ago). Consumers should always be able to reverse the payment of an off-line direct debit. This provides the merchant, payment service provider and acquiring bank the incentives to ensure that fraud levels remain low.

BRINXPAY.NET ?

Speaking of Paypal immediately makes Brinxpay show up in the Ads. A German version of Paypal, so it seems. See theirsite here.

Receiving payment for Adsense

This summer I received Googles first cheque for payment of the Adsense ads. Of course a cheque, because that's the US way of doing payments. And although the cheque is an obscure payment instrument for the Dutch, I only needed a few mouse clicks to arrive at this Postbank page for information on cashing the cheque. Too bad, that the fee for cashing turns out to be € 12,3 (on a sum of € 104 euro).



It would be better for both Google and me if they would use Paypal instead. Perhaps for the next payment?

Paysquare to lower fees for some

Het Financieele Dagblad (paid access) reports that Payquare is countering the B+S bid for credit-card fees in the restaurant sector by lowering its merchant service charge with 0,5 %. The lower fee is applicable to enterprises that are members of the Koninklijke Horeca Nederland.

Bibit to merge operations with Worldpay

Worldpay, focusing on small and medium sized enterprises, will merge its operations with those of Bibit, focusing on the large European players. Read the Dutch Emerce - article.

Electronic Payments Interoperability (RFI)

See this OMG Document.

European Commission sees bank kartel in France deter entry for newcomers

Het Financieele Dagblad (paid access) and the IHT report that the European Commission has issued a statement of objection to nine French banks and their collective organisation: Groupement des Cartes Bancaire (GCB) of forming a cartel to prevent market entry in the market for payment cards.



Good news is that the Commission's press release also reads:

The Commission’s statement of objections in no way challenges the legitimacy of GCB as the joint and effective operator of the CB card payment system in France.

So it's not a call for a different structural or institutional arrangement of the card industry.

T-mobile allows Wap-billing: 3 merchants signed up

To add to the continuing debate on e-money payments via mobile phones, Planet Multimedia reports that T-mobile has payment via WAP-billing operational. So where Vodafone needs to further develop its system, T-mobile has it up and running (with only 3 merchants though...).



Wap billing allows for payment of greater amounts than with SMS and has a business model where T-mobile shares revenue with the content provider.

Norwegian central bank study on (e-)payments and fees

The Annual report on payment systems is an important part of Norges Bank's oversight of the payment system. The report provides an annual update of developments and prices in the payment system. The report for 2003 also provides an overview of important events in the area and a review of various issues related to international payment systems. The report, including a statistical annex, is now available in English on Norges Bank's website.

Rabo and Privver cooperate

A long time it was silent around Privver, the digital post and e-billing company on the web. But E-merce reports the cooperation with Rabobank in the domain of e-billing. Rabobank will present the digital bills in their e-banking application, avoiding the type-errors now made by customers that pay via e-banking (and need to type in a 16 digit payment reference number).

Rounding cash payments

Yesterday the Dutch central bank announced that a trial with rounding cash payments has succeeded. As of September this year, merchants and retailers will choose to round cash payments to the nearest 5 cents (as we did before when we still had the single guilder-cent). The cost-savings will amount to approximately 30 million euro. And the Society Platform for Payments Issues may take the credit.



Also on the central bank website: a free CD-Rom to learn yourself the safety features of euro bank notes. Given that the CD-rom is free for the public, my guess is that the central bank will soon run out of CD-roms. And they will also experience the above average demand that occurs if you provide something for free.....

Further developments in the m-payments arena

Planet Multimedia reports that Vodafone is developing a payment method whereby a click on the WAP-link effects a payment for tickets up to an amount of 10 euro. Essentially the Dutch version of m-pay, I presume.



Meanwhile Beep.nl is investigating how to add the Rabobank payment product Minitix to its payment portal for mobile payments. Effectively Beep acts as an integrator just like Bibit, but then for payment via mobile means.



Where will this end?

I think large retail players will operate their own payment brands; all the others will work with integrators or choose the most efficient and cheap payments brands in the market.

Insiders guide to eCommerce payment

A very useful piece of work with 20 practical tips for better e-payments.

Goodbye Jan !

Today we see another retirement. This time Jan Jonkheer leaves the Dutch payment scene after a multitude of productive years in direct debit, coins (he transported the special purpose coin that was used in the 1974 Final of Germany-Netherlands), credit-card and what have you.



Good bye Jan, and until we meet again !

Phones Become All-Purpose Payment Devices

See this article in PDAs News - Designtechnica News.

Retirement J. Verhaegen

Today is the day that payments-veteran J. Verhaegen retires after a long and productive career in the industry. Long ago, when too many policymakers were too vaguely debating the formation of a national payment circuit, he set up a small group of 4. This group decided on a workable migration path for the realisation of the national payment circuit (a more effective set of interoperability standards between the two payment circuits in the netherlands). And this is only one of his many achievements.

Royal Bank of Scotland buys Bibit Payment Service Provider

The Financieele Dagblad reported on June 16 that Royal Bank of Scotland has

bought payment service provider Bibit in May. Price was most likely 90

million euro. And so we see how innovation may occur outside the banking

sector to become part of the sector as soon as viability has been proven.

Add another payment mechanism and make more money...

Scott Loftessness informs us:

CyberSource has released the results of a recent study it performed that concludes that merchants can convert as many as 20% more customers by offering them more payment types to choose from.



Those merchants offering one payment type, such as general purpose credit cards, for example, convert 60% of their shoppers. Those offering four types, e.g., credit cards, gift certificates, eChecks, PayPal, etc., convert 72% of their shoppers -- a 20% increase.



The survey results are incorporated into a new industry whitepaper from CyberSource, "The Insider's Guide to eCommerce Payment".

Albert Heijn stops with savings account (cooperation Aegon)

It started out in februari 2001 as a loyalty card that also allowed savins. To that end Albert Heijn cooperated with Aegon. This week the announcement is made that the loyalty-savings card has 275.000 customers and will be taken off the market. So does this mean that retailers entering financial service won't work?



My guess is that retailer banking might work, but the current situation at Albert Heijn is one of cost cutting and streamlining. So all eyes are now fixed on KBB Vendex with their financial services unit.

Stimulating mobile payments...?

Planet Internet informs us that our Ministry of Economic Affairs is setting up a group that wants to stimulate a common standard/payment procedure for payment via the web and mobile phones. What is intruiging is the referral to Chipper/Chipknip in the accompanying press release.



It is only too often that people say that the e-purse schemes Chipper and Chipknip were not a success given that the technology was incompatible. However, this is incorrect. From the outset, both schemes aimed for and allowed for interoperability, given that any business calculation shows this is the best way forward (see also the dissertation of Leibbrandt). And as soon as the specifications were available, terminals were built that allowed both schemes.



What happened in the market however is that the competiton between Chipper and Chipknip became very tough, including big advertisements, deals with merchants to only accept the one scheme and not the other etcetera. But fact of the matter is that in 1997 a common chipknip/chipper terminal was available and in use on counters in retailers shops.



Given the competition between Chipper and Chipknip and the uncertainty as to their future market position, many retailers refused to choose the one or the other. This buyers boycot lead Chipper (second in the market) to re-evaluate their market position and their possibilities to become bigger than Chipknip. The conclusion was that it would be best to eliminate Chipper and migrate to Chipknip.



So the Chipknip/Chipper history is not one of incompatible technical standards, but one of strong competition in the banking market, followed by consolidation towards a more efficient setting. Now isn't it interesting that most people don't want the Chipper/Chipknip history to be repeated while on the other hand banks are urged to be more competitive?

Danish e-purse scheme Danmont closes down

PBS announced (end of May press release)that it will close down the scheme as of December 31, 2005.





Nils Hilbard, director of payment cards in PBS A/S states among others that:

"The perspectives of having an electronic purse has not attracted enough merchants to accept Danmønt. The limited user possibilities have limited the Danes' interest in having a Danmønt card. We have therefore decided to close down the scheme from 31 December 2005. Cards can still be acquired, used and loaded until the end of 2005."



Dankort (the debit/credit-card) will fill the gaps that Danmont leaves. And I'm sure some other payment mechanisms (contactless) may enter the scene some day.

Online banking becoming killer-app on the web

Emerce - Technologie reports that a study by Insites shows that after e-mail (92 %), e-banking (60 %) is the big killer application on the Dutch web.



4,9 million Dutch surfers (70 %) work with an on-line banking application. And 86 % of the Dutch on-line population has once bought over the web (books, clothing, airline tickets). On average the Dutch surfer buys 4 products/services via the Internet with an average price of 96 euro.

Electronic ID via the bank

Smaller countries are prone to innovate more speedily. So it should not be a suprise that the Danes have developed an Internet-service: Electronic ID via the bank. It is absolutely the way forward and similar to the Dutch A-select authentication system. Now why is this relevant?



Well, my guess is that the decomposition of the payment transaction chain, means that previously coupled functions, such as identification, authentication and autorisation, may be independently sold, resold, and packaged by banks. Banks may well consider positioning these products, if only to make sure that any future identification requirement can be taken care of against a proper commercial price rather than as a legal obligation that must be provided for free....

Credit-card acquirers all over the place

Todays Financieele Dagblad informs us about a trial that the cafe-restaurant organisations have done with another credit-card acquirer than Interpay/Paysquare. The article is about B+S systems. But it fails to mention that for example in Amsterdam City, Citibank is the big acquirer, undercutting all others. Other acquirers are not mentioned either, while currently this market is quite competitive.

Payment instruments and network effects: why Americans still write checks

Next week, Gottfried Leibbrand will defend his dissertation Payment instruments and network effects: Adoption, harmonization and succession of network technologies accross countries in Maastricht. His dissertation fits nicely in the research tradition of the Maastricht Economic Research Institute on Innovation and Technology. And the summary for layment, Why Americans still write checks, fits similarly in the McKinsey tradition to provide well written executive summaries.



The dissertation contains two models to further explore and explain network effects in payments and the stepwise innovation and adoption of technology. So after reading the dissertation one understands why:

- payment systems are national (as a result of the underlying transaction patterns),

- one single technology standard may not be the only equilibrium outcome on a national or European level,

- choices for technological innovation and adoption build upon previous choices and existing infrastructures,

- stepwise innovation is the way forward rather than paradigm shifts and payment systems that are built from scratch.



The theory is applied to a number of cases and thus allows testing and discussion on the basis of empirical data. And although some theoretic deliberations on network effects do actually reach this more detailed level, the adapted models of Leibbrandt provide more insight into the subject matter and are more close to reality in the payments industry.



In sum, the dissertation makes particularly good reading for public policy makers in the payment industry as they might want to reconsider the popular one-single-standard idea (and some more issues...). Other than that, we can rest assured that the content of the work and its paradoxical copyright notice (in which copying, pasting, disseminating of the work is encouraged) will contribute to its visibility to both practicioners and academics.

The Myth of Systemic Risk

Ian Grigg points to these remarks made at the St. Louis Banking Conference by Professor George Kaufman:

I also come from the perspective that "systemic risk" in banking is not a threat and has not been a great danger in world history. It is a scare term, much like the use of the word "fire" in a crowded theater. Systemic risk is used shamelessly by regulators to justify their own actions, and by novelists and movie script writers to provide plots for horror stories. This is my bottom line, and if I had two hours I could go on and give you all the evidence.

Dutch flavour of EU directives....

For reasons unknown to me, Dutch government still wants to add a Dutch sauce to EU-regulation when implementing these. Yesterday, two lawyers identified this same behaviour of government in the Financieel Dagblad (Onno Brouwer, Kees Schillemans). They noticed that the implementation regime of Regulation 1/2003 de facto withdraws previous exemptions as issued by the competition authority. In the retail payment sector this would mean that the exemption rulings for interchange fee acceptgiro and atm-usage may be immediately up for legal testing.



Apart from their observation, the Regulation 1/2003 holds promises for more competion in local markets. Market players may now take one another to court if they observe collusion/kartels. Interesting enough, this change has not received a lot of attention in the media.

Laws or self-regulation?

This SEO research report is about the cost and benefits of regulation. It concludes:

1-the cost of regulation are lower for self-regulation when compared to using laws and legal rules,

2-at the moment, the possibilities of self-regulation have not been explored/used to their fullest potential. Common choices for self-fegulation now often lead to a certification structure (with a transfer of compliance costs to the private sector),

3-in practice, there is still hardly a systematic discussion of the possible regulatory options: laws/rules vs self-regulation.

Undesirable research...?

While browsing I found an interesting speech (oratie: Dutch download) that discusses the tensions that may arise when research for policy-makers does not provide the results that are desirable from a policy perspective. To resolve some of the problems that may arise, the author (Carl Koopmans) suggests that all research that has been commissioned by government, will be published actively on the web.



He provides (and illustrates) five arguments:

1-improved public discussions, deliberations and decision making due to the availablity of all information,

2-improved research, due to the scrutiny of the results by peer-researchers and the reputation effects of the publication,

3-citizens pay taxes for this research so they deserve to see the results of what has been paid for with their money,

4-improved confidence in government and elimination of the element of secrecy that now exists if government refuse to publish reports,

5-keeping it secret is impossible; one slip of the tongue/pen by the involved researchers/researched will lead to further questions about the nature of the research, its contents etc. And to the questions why the results are kept secret, which is the content of the reports etc..

Cost / income ratio flawed...?

As this weblog evolves into a literature/article linkdump, I hereby present some interesting material. First of all a report by Peter Welch of BankEcon (download summary) that discusses if the cost/income ratio is really useful for determination of a bank performance.

Pre-paid funds of mobile operators are e-money (when used to pay others) !

In July 2000 (!), when I was still working as a senior policy analyst at the Dutch central bank, I wrote an article on the relevance of e-money rules for mobile operators, concluding:

The adapted infrastructures and billing engines from mobile phone network operators may fall under the future local legal implementation of the EMI-directive and (for the billing part of it) under local law with respect to payment instrument. It appears to be useful, therefore, for mobile phone operators and regulators to further consider and discuss the potential legal consequences of the current technical developments.



Regulators may benefit from this discussion and be better able to decide on the best local implementation of the EMI-directive. The mobile phone network operators may benefit by better understanding the supervisory consequences of some of the technical choices to be made.



Today, May 10, 2004 (more than 2 years after the obliged implementation date for the emi-directive), the European Commission releases a consultation paper on the treatment of mobile operators under the E-money Directive. Their conclusion is similar to mine:

According to Member States experts and the Commission services, pre-paid mobile phone cards are likely to be a form of electronic money when they are used to buy and pay third party products or services.



Assuming that it will take some 2-4 years to sort this stuff out, we will eventually have a level playing field for e-money players in 2008.



Better late than never ... (?)

What is play and what is reality in money and payments?

Ron Onrust sent me this link to an article that describes how stuff in multi-player on-line games may get a real-world value. And how that real-world value might be traded by using Paypal as a payment mechanism. But it also shows a potential weakness in Paypal: multiple accounts for single individuals, allowing the beefing up of positive feedback for accounts......

Competition authority fines Interpay and Dutch banks

As a first conclusion of the debate on the fee levels for pin-authorisation network services provided by Interpay, the NMa (Dutch competition authority) has published its findings and list of fines:

Interpay: € 30.183.000,

ABN AMRO, Rabo and ING: € 3.900.000

Fortis Bank and SNS Bank: € 1.900.000

Friesland Bank en van Lanschot: € 500.000



See also the reaction of Interpay and their additional report on the issue.

On competion law and payments

I think this weblog will evolve into a linkdump on retail payments literature:

EC Antitrust Law in Payment Card Systems.

The world's first scientifically researched/backed design parameters for e-payments

Kicking a habit is tough, especially if one has been blogging for more than two years and a unique piece of research work is on the table. So this blog is the exception to confirm the rule.



Today I've been reading a bit of research by Dennis Abrazhevich on how to design payment systems in a proper way. It is a Ph D study that is solidly scientific as well as practical. See this summary of the Ph D. The Ph D will be defended next monday in Eindhoven (also the place where Stefan Brands defended his Ph D) and I will make sure to show up.



As far as I can see, the Ph D study is the first bit of scientifically screened research on user interaction in retail payments. Most work in this domain remains limited to in-house knowledge of banks and card-organisations which is not scientifically checked but checked against a gut-feeling: 'fitness for use' in combination with some user testing. And more often than not, legacy systems are the constraints that limit the actual product features.



In the case of this study, the actual validation of design criteria occured with a system called: Payphone. The system was set up and tested by Postbank and Comsys, companies that are both open to new developments, learning and innovation and perhaps therefore not afraid of the results of scientific testing of applications. While it is impossible to summarize the results the research demonstrates that there may be a lot of trust to be wun by informing users better on the security measures and security policies.



As I understand it, the author is (still) on the look-out for assignments or regular jobs in his specialty. Given the fact that Dennis has also reviewed the user interface of e-wallets and websites, I can only assume that his Ph D marks the beginning of a fruitful career.

April's fool ?

I guess today is a good day to announce that I will stop this weblog and start working for the Dutch Bankers Association... ;-)

Last days....

Today is the day of last days. The last day of this quarter (with its inevitable administrative burdens, tax forms). It's also the last day that the Postbank m-phone solution (in cooperation with Telfort) will be operational. And my goal is to be actually the very last customer that has made a transaction with the system.



Today also marks the end of an era (1992-2004) in which drs. J. Koning was the executive director of De Nederlandsche Bank NV, responsible for payment systems and retail payments. Under his guidance the central bank stepped into the time of the Euro; new systems (TARGET) were built and the bank started supervising electronic money in all its forms. Also DNB reported on the structure of retail payments (advising a better governance structure for Interpay) and further trimmed down the work force in cash handling.

Contopronto sells its technology to Saudi Arabian Company Zafa

See this press release. But do visit Contopronto's website as well. It turns out that they no longer accept customers and that the usage domain is restricted to Norwegian mobile phones.



What I think has happened here is that Contopronto has wrongly assumed that its Norwegian license as an e-money issuer would allow the use in all EU-countries. Having boasted about this in the media, the bank supervisor may now have informed Contopronto about the proper scope of their license (local at first, international only after notification of other bank supervisors in Europe).

First World Retail Banking Report demonstrates local banking playing field

Yesterday the first World Retail Banking Report was presented during an afternoon session in the hotel Okura. The report was a collective effort of the European Financial Management & Marketing Association and Cap Gemini Ernst & Young. Todays Financieele Dagblad reports on the meeting to highlight the following:

- banking is still a local business in EU-countries, with considerable cost for banking/payments,

- each country knows a delicate balance between banking sector, merchants, consumers and regulators,

- pricing information is widely available and consistent on a loca scale but international comparisons are quite hard.



The interesting thing is that the study also indicates that this local situation will not quickly change. If so, it would most likely be large players such as ING that may do so by introducing new and cheaper services upon entering different markets. Hans Verkoren, responsible for ING Direct is quoted to have said that ING might -given the 9,1 million customers of ING Direct- consider offering payment facilities as well.



In fact such a choice appears imminent. All over on TV we can now see ads for ING Cards. It would appear quite sensible that this infrastucture will also be used to enter other markets.

New release of Interpay Internet cash register for banks...

Interpay E-commerce services provide the back-office technology for some Internet cash registers of banks (TWYP, ABN AMRO, BNG). And as of tomorrow a newer version of its software will eventually allow end users more options such as:

- support for Mastercard Securecode and Verified by Visa,

- layered login (allowing merchants to use more than a single username/password and create their own sub-users/profiles for the internal treasurer, the customer care employee etc),

- more detailed reporting of transactions, more language options,

- etc.



Interpays technology is now in use by banks such as TWYP, ABN AMRO, BNG. Rabobank however has built its proprietary Internet cash register. And there are of course other providers such Bibit, Ogone, Triple Deal, Global Collect etc. Their offerings are sometimes based on using Interpays back-office or on the use of independent international acquiring agents.



The respective websites of these players are quite different in terms of transparancy on features/fees etc. For those who want to do a quick tour of the webinfo on cash registers and payment service providers:

- Abn Amro,

- Bank Nederlandse Gemeenten,

- The Way You Pay (ING Bank),

- Rabobank,

- Bibit,

- Global Collect,

- Triple Deal,

- Ogone,

- Multipay,

- Netgiro Nederland,

- ontwikkelaar Chess met PURE transactie techniek,

- Buckaroo,

- Virtual XS.

E-gold scams....

I've just received another 'brilliant' e-gold scam. Behind the href part of the html-mail (asking me to update my e-gold account data) I did not see the e-gold.com website but this other site: http://finsinox.biz/. The scam uses the @-problem in old Explorer versions (that does not show the proper e-mail adres of the website). And, interestingly, the website asks consumers explicitly to check certificates. Also the link to e-gold examiner (on the normal website an explanation of how much real gold backs the e-gold) is now this broken link (http://ruweb.net/?page=suspended) to an obscure russian server.



So would really no one fall for this? Imagine that only 1 in a million users in the Netherlands would fall for this one there will be about 3 or 4 account data collected.



Update: only 5 mails later in the same mailbox another try. This time the link is: http://fun4girls.risp.biz/cp/scripts/guestbook-doc/.ego/acct/acct.html.

Payments and Settlements News, nr 4 is out

The fourth issue of Payments and Settlements News, the newsletter of the European Central Bank on retail electronic payment is now out. It contains references to regulatory developments in the UK, Australia and Europe as well as to card fraud figures in the UK and a working paper of the IMF on e-money.



On the Epso website there is also a discussion on on-line payment instruments by Roland Uittenbogaard of the Dutch central bank, In it I particularly like the following obvservation:

Presumably, there will never be a single standard payment product satisfying all payment needs, just as there currently are several payment products alongside each other, satisfying different needs. Transactions involving different products and services go hand in hand with different ways of paying for them.



And the more diplomatic central-bankerish statement:

The manner in which the [electronic money, SL] Directive is to be implemented has not fully crystallised across Europe (or indeed in the Netherlands).

Dutch most satisifed with their bank (but don't feel it that way...)

Todays Financieele Dagblad reports that a comparative study by KPMG shows that of all European citizens, the Dutch are most satisfied with their banks (90 %, compared to a European average of 57 %). KPMG's Stef Kroon observes a discrepancy between this outcome, the efficient Dutch payment infrastructure and the public perception in the Netherlands that banks are expensive.



I think the Dutch people may be sitting too much on the penny. KPMG's research also shows that of all nationalities the Dutch are most negative about the euro (73 % says that it has not been beneficial). So my hypothesis is that the Dutch are overly sensitive to direct pricing. As a result the comparatively cheap banking sector appears to be too expensive and the Euro is viewed as a failure.

Paypal coming to the Netherlands..?

Planet Multimedia reports that Paypal will soon start operating in the Netherlands as a part of an eBay offensive to challenge market leader: Marktplaats.nl

MP demand free and transparent payment services

A good old Dutch saying says: only the sun rises for free. But some Dutch MP's feel that a set of basic payment services should always be provided free of charge. This is reflected in their quesitons to the Minister of Finance. The Ministers reply (in Dutch) essentially states that this goal is reached through a convenant with the banking sector. And for the rest, the economic principles and self-regulation ensure transparency and a proper level of fees.

Eastern Europe source of false Euro-notes

In reply to questions from Dutch MP's the Minister of Finance explains that indeed the number of false Euros is increasing rapidly. The source is often Eastern Europe (Bulgaria, Litouwen) but a lot of police effort is spent in preventing/detecting and arresting the fraudsters.

Collecting with chipknip not a success yet

Het Financieele Dagblad reports that twelve volunteers have tried to recieve chipknip donations in the cities of Amsterdam, Haarlem and Koog aan de Zaan. Their efforts lasted 6 days and only lead to a collected amount of 60 euro.



Now it could be that people just don't want to spend money. But perhaps the collections would have ben more succesfull in cities with obligatory chipknip-use for parking (such as Rotterdam). I hope this will not mean the end of this idea; as it is safer it does deserve another try.

Goodbye Interpay, hello Trans Link Systems... ?

Last week, Automatisering Gids (paid access) featured an article on payments in public transport. One company, Trans Link Systems (TLS) will process all payments on behalf of transport companies.



Now the interesting thing is that until this month, we had a real monopoly in transporting debit-card authorisations. This was all done by Interpay and merchants had to have a contract with Interpay. This led to a lot of complaints on the monopoly structue and fees involved. Having studied this structure, the central bank advised that the system should become more open; a second processor should be allowed and merchants would no longer need to have a contract with Interpay but with their bank. This change took effect this month.



But with TLS we will see a comeplete copy of the old Interpay monopoly structure emerging for public transport companies, using the TLS_payment system. Except for one different detail. Although indeed there is a monopoly, the shareholders of TLS have agreed that the maximum return on investment for shareholders will be 10 %. So if profits of TLS are larger it should show up in lower fees....

Trust in e-commerce

The most revealing information that puts a lot of EU-policy talk into context is the result of Eurobarometers poll on confidence in e-commerce:

Trust is not the only factor deterring the EU's consumers from shopping online. A majority (57%) does not buy on the Internet simply because they have no access to it.

AOL launches on-line bill payment

Emerce and Planet Multimedia picked up a press-release and/or WSJ-article on AOL's new bill payment feature. AOL allows its users with AOL Bill Pay to pay bills to 2500 companies. Essentially the idea is similar as the Dutch Privver. But AOL is an ISP in an environment with awkward cheque-processing while Privver is an off-spin of our main mail delivery company TPG in an efficient billing environment (135.000 users and 13 billers)

A media dilemma rather than a payment crisis...

The last couple of days, a lot of people end up on my web site as they are looking for information on Fons Schirris and more background information on possible bank fraud with direct debits. For those non-Dutch readers not into this story: Fons Schirris sees himself as todays Robin Hood revealing all the 'flaws' in Dutch banking systems. Readers of his 'book' may gain more insight into the ramblings of his mind.



Having read the book and all the technical errors it contained, I decided not to spend a lot of time in this blog on his whereabouts (see this serie of blog-entries and this last conclusion). But I discovered that in general the Dutch media are so keen on getting more readers/viewers and audience, that they do not check their sources properly and that they are unable to view the ethical dillema they face.



Let us have a look at the real dillema. The main objection of Schirris to the Dutch direct debit and acceptgiro system is that is built on trust. It is because of that trust that we are able to process about 1 million direct debits and 250 million inpayments quite efficiently. And only some criminals and fraudsters (such as Fons S) deliberately seek to take advantage of consumers, banks and enterprises collectively. So they (try to) insert false payments into the payment system. And although this does economical damage to all players concerned and can be considered an act of violence, the media are happy to jump into the story and give such fraudsters quite some attention.



Now what is the media dilemma? The dillemma is that, due to the publications in other media, I am obliged to spend some time on this weblog on this theme, as it is my goal to report about all stuff that happens in the Dutch payment industry. Similarly other reporters and news shows may face a 'need' to report on this issue. But I would personally rather not spend any time/space on this issue at all. Research of the central bank (download here) has already shown that there are no serious security issues. So we need not be concerned.



The real thing happening here is that Schirris, as an (alleged) fraudster, is involved in legal proceedings and has apparently decided to fight back with all (publicity) means possible. So reporters may want to steer clear from this man and his musings and realize the ethical component of their role.



If anyone would come up to newspapers with a story that he can disrupt traffic in society completely by throwing stones from a number of viaducts above important highways onto all the cars in traffic, such a person would be:

1-completely right,

2-quite deranged.

Now, if the media would not take such a person seriously (nor provide him a voice that would increase his possibility to find supporters for his plan), why should they spend any time on the digital equivalent presented by Schirris?

CARDERPLANET.COM

So are these these the good or bad guys... too bad I don't understand russian.

Mailed credit-cards as basis for web-scam

De Telegraaf reports today that a number of webshop-owners face financial losses as they delivered goods to Indonesian buyers that used credit-cards. Those cards weren't reported stolen by the owners, simply because the owners had not received them (yet). The crooks intercepted the cards (or card data) in the mail, after the cards had been issued.



In the Netherlands this does not work, given that new credit-cards need to be activated before use. But other countries work differently. The result is that the webshop owner believes he can deliver services but is faced with a chargeback a couple of weeks after the transaction (when the legitimate card holders see a transaction they did not do).



Now, although the credit-card companies have such conditions that the shop owner pays the losses of the chargeback, we might wonder if the legal basis for doing so is not getting a little weak. Mail fraud with credit-card has been around so long that it could be considered best practice to have a separate activation procedure. Why should the merchant pay if an issuing bank is too sloppy in its issuing procedure?



I think that, although some of the merchant may have been somewhat naive, they might have a legal case and may hold the issuing bank responsible. Meanwhile everyone is best advised not take any large-value orders from Indonesia or Russia without sufficient risk assessment. Or choose a procedure in which irrevocable payment by money transfer precedes delivery.

Charity donations by Chipknip

Norbert Sijm pointed me tothe article in todays Telegraaf that explains that as of next week some pilot charity collections will only accept the use of the chipknip. Another indication that we are now speeding up towards the cash-less society.

Citychip uses loyalty-concept as a means of payment

The company ChipTeC that has developed the so called Citychip, a loyalty card that can be used to pay for parking, will further roll out this concept to shopping mall Brusselse Poort in Maastricht.



Although the concept of loyalty points and payment has already been tested and proved to work for gas stations it is now expanding. And as long as consumer get the points for free we have an electronic means of payment that is not electronic money, but may work as such for payment.



Reason being that the legal definition of electronic money is narrower than the economic definition (anything electronic that is being used as a means of payment). The legal definition aims at tackling all electronic money-products where the consumer first gives away money (loading a purse) to later spend it. Thus, the money of the consumer is protected. If however the retailer provides electronic points as a gift, it is not considered electronic money.



By the way, let's not underestimate this payment market. In Germany more payments are being made with electronic 1l1oyalty-points than with the e-purse.

Rabobank starts promoting services via i-mode

Emerce reports that Rabobank currently has 3000 customers that use -mode for its services. It aims for 90.000 at the end of this year and hopes to achieve this by a multi-channel (sms, outdoor, snail-mail, mail) promotion campaign that lasts some 11 more days.

Dutch e-commerce in 2003

Thuiswinkel org reports that in 2003, 3,4 million consumers were active buyers on the web. The amount spent was € 1,24 billion euro (on average € 364 per shopper, with a repeat frequency of 3,35).



The most lucrative segment in the market is the travel domain (€ 520 million euro) with hard en software (app 160 million euro) and consumer electronics (app. 140 million euro) as runner-up. It is most likely that the entertainment sector (ticketing) has made the 100 million euro benchmark.

The cost of payments: a balancing act

Yesterday, the Dutch bank sector organised a conference to inform all players in the payment industry about recent and upcoming developments. It proved to be an informative and constructive day during which both cash-issues (falsifications) and e-payments (direct debit on internet, EMV) were discussed by representatives of the Ministry of Finance, Consumer Union, retailers, banks, central bank and Interpay.



Quite some time was spent on the discussion of costs in retail payments, Euro-falsifications and solutions to make payment systems in the Netherlands more efficient. And at the end of the conference, central bank director Jaap Koning presented the results of joint research (done by the Social Platform on Payments) into the costs of retail-payments at the point of sale.



In brief, the costs amount to 2,9 billion Euro in 2002, with a considerable potential for savings if we use the debitcard for payments of a value of € 11,63 and more and chipknip for the lower value payments. See the full report (in Dutch) at the DNB-website.



Essentially the conference may have been a break-through on the old fee-for-payment transactions discussion. Even the Consumer Union was willing to discuss under which conditions introduction of fees could best be done. So we may look forward to a complicated but successful balancing act on this issue.

Cards & Financial Service of Vendex/KBB expands....

Het Financieele Dagblad reported this morning that retailer Vendex/KBB will start selling financial services to the public (filling the gap that banks create by closing their branches). In its Hema-branches Vendex will sell the more simple insurances while up-street Bijenkort will sell insurances and mortgages.

Designation of Visa Debit Card Scheme in Australia

The Australian central bank, the RBA informs us on February 23 that:

Following a decision by the Payments System Board, the Reserve Bank has today designated the debit card scheme operated in Australia by Visa International as a payment system under the Payment Systems (Regulation) Act 1998. Designation is the first step in the possible establishment of standards and/or access regimes for a payments system.



Once again Visa faces a road of next steps (research, hearings, questionairre etc). So they may choose to go that road and await the decision of the RBA on interchange fees, honour all cards rule, access regime etc. But they could also skip the proceedings and determine/implement the appropriate end result:

- lower interchange fees,

- elimination of honoud all cards and no surcharge rules,

- open access to Visa system.



Given that the RBA's work provides us with a lot of solid research and analysis, I actually look forward to the Australian proceedings. It may cost a lot of work, time and effort, but the result is exemplary for regulators all over the world.

Mobile operator and leading banks in Norway launch mobile cash

The HS Business & Finance web edition of last week reports that mobile operator Radiolinja and leading banks in Norway (Nordea Bank, Sampo Bank) will launch mobile cash. The mobile wallet will allow consumers to pay for various services with SMS messages.



Loading the wallet requires a transfers between the consumer's bank account and the mobile wallet. This is done free of charge. The minimum sum that must be loaded is five euros, and the maximum mobile balance can be 400 euros.



Compared with existing SMS payment systems, the major difference in the new system is that the payments are not made via the consumer's mobile phone bill. Many Finns with mobile phones as a prequisite are not allowed to purchase personal services with their mobile phones.



The announcement in my view demonstrates the inevitable trend towards bank-based sms-payments.

2003 transaction data for Mastercard

See this press release.

Target phasing out "smart" Visa cards

CNN reports that retailer Target is phasing out 'smart' Visa cards. The cards were introduced in 2001 as a part of a multi-channel loyalty and cobranding approach. While the Visa co-branding worked out fine, the loyalty points in the IC-chip were not used enough to justify the continuation of the programme.



In 4 years time we'll know if this decision was:

1-accurate, given that RFID or mobile phones will take over,

2-wrong, as the programme was introduced too early....

My guess would be that it's a smart move to move away from smart.

Brands & Licenses for chip and pin services

Automatisering Gids reports that Interpay has announced the separation of its activities. The so called 'Brands & Licences Betalingsverkeer Nederland' wil now be responsible for product features of on-line debit card transactions and e-purse payments. Interpay will only be a processor of these transactions.

Sign here for cash back please

Yesterday I wanted some additional cash and asked for cash-back in the supermarket. I got my 40 euros but was also asked to sign the slip. The shop-owner told me that quite a number of people forget that they've received the cash-back money. Afterwards these people make a fuss in the supermarket and claim that they did not get the money at all. The signature is a simple precaution that makes them aware that they've already put it in their wallets.

Ship registration with SMS in Amsterdam

Planet reports that bargeman that enter Amsterdam with their ship may notify the city tax by means of an SMS. The skippers need to send the sms as well as a separate pincode and will then be registered. Payment of the tax will be done by means of direct debit or invoice (acceptgiro). See also the Amsterdam city website.

Online Postbank gets a lot of customers

Automatisering Gids reports that the number of new clients for Postbanks' on-line banking is so high that the on-line queues block the traffic. The disturbance in services is one in a series. Last week the autorisation center in Arnhem was unavailable for some time; in the beginning of this week the Leeuwarden location was hit by unavailable systems. Postbank says the incidents are not related.

RFID Tags in New US Notes Explode When You Try to Microwave Them

Ron Onrust mails me this link to an article on prisonplanet in which supposedly RFID tags in US notes explode when you try to microwave them. And he also provides this link with a further discussion and explanation.

ERG steps out of contact chip cards

The West Australian reported on February 28:

The new chief executive of struggling technology group ERG yesterday officially ended the company's costly push to be a world leader in smart cards and promised to focus on its core public transport ticketing business.



So much for contact-chip as the e-purse of the future?

Single number to report lost and stolen cards

The EU observer reports about a Commission initiative that aims at establishing a single European telephone number to report lost and stolen cards.



The proposal to establish a single number is linked to possible future EU legislation aiming to create a Single Payment Area. To prepare the ground for this, in December 2003 the Commission issued a Communication on a "new legal framework" for payments in the Internal Market, seeking views from consumers and businesses (see this link).



The proposal is a perfect example of the estethics paradox in policy making. This paradox (first observed and outlined by yours truly in a presentation for a financial markets policy makers course) tells us that if you give policy makers a desk and a vague job description, the first thing they do is make an overview of the world. Then they discover the confusing reality of multitudes of systems and solutions. And then they immediately jump to the conclusion that a single policy is desired. Or for that matter, a single phone number for lost and stolen cards.



Meanwhile the policy makers forget to answer more relevant questions such as:

- is there a problem in practice and what is the size of the problem?

- who is the problem owner: the market or government?

- are there indications that, if a problem would exist, the market is not going to solve it?

- if government or regulatory intervention is required, which is the most appropriate form that does most justice to the roles of market and government?



Instead they go about finding backing for their theoretical and esthetic plan(s). In this case they seek an alliance with the public, who can fill in a questionairre here. Still us EU-citizens are not allowed a single character of free open response to further detail any objections to the questions asked.



So is there nothing positive to mention here? I guess there is. We should all be happy that the EU policy makers didn't conceive and consult us on the real solution to all their esthetical/observer problems: fast track regulation to ensure that each EU-citizen gets one single card for all payments, issued for free by one single European bank.

Tax payment no longer free of charge... the end of cash as we know it

One of the pillars of accepting physical cash for payments of debts is that government accepts cash at all times for tax payment. And generally, government does not charge for that. Here in the Netherlands however, our Tax Office informs usthat as of November 2003, the free payment facility at post offices will no longer be continued. Anyone who pays to the Tax Office will have to pay for the payment itself. Or they can choose to send in the acceptgiro for debiting their current bank- or giro-account, but this may result in charges by the bank.



Now, what's relevant here, is the fact that government starts charging for cash. This can be no other than the beginning of the end of cash as we know it. How can such a government demand that other players in the market (banks, retailers) do not charge for the use of cash (or worse: continue providing payment services for free)? Or as we say: if there's one sheep over the fence, others will follow soon.



The end-result will be that in five years time we will actually see quite a number of retailers and banks agressively steering towards non-cash payments. The security and cost issues for those who handle cash will eventually lead to a proper pricing and elimination of this previously government sponsored product. And the losers in the game, the central banks, will undoubtedly find other ways to generate income (via direct or indirect taxes).

Interpay cuts jobs and will sell giro-services

Alerted by a brief article in De Financiële Telegraaf, Het Financieele Dagblad reportedmore details on the changes at Interpay:

-350 of the 1750 employees will lose their job but get an offer to do something else,

-300 of the 1750 employees will move to either synsis or paysquare or the company that will take over giro-processing,

-1050 full time equivalent employees will remain to do mostly electronic processing,

-the credit-card acquiring activities will be done by a daughter company Paysquare.

ING not interested in EGG

E-merce reports that ING is not interested in buying Egg. The main reason is that ING's penetration strategy in foreign markets is based on targeting the savings market rather than the credit-cards market.

Simpay goes for € 1 billion digital content market

This press release of Simpay demonstrates the stakes in the digital content market. Simpay aims to be the main scheme, allowing for a total amount of € 1 billion in payments. Now, if that doesn't illustrate the size of the e-money market, nothing will. Consequently, the Commission will have no alternative but to fully regulate this sector under the e-money rules.

Social Platform on Payment Systems

The Dutch central bank has made the progress report of the Social Platform on Payment Systems available on its website. The report outlines the following plans:

- solve the availability issues of bank branches in a pragmatic way,

- create a good working group to discuss introduction of EMV,

- further work on fraud issues for false euro-notes,

- steer towards more efficiënt payment instruments on the basis of the outcome of cost-research (to be published in March 2004),

- introduction of the rounding rule (round towards 5 eurocents) provided that enough players agree.

European Commission aims to clarify e-money before the summer

In an interview with Erwin Boogert of Planet Multimedia, Commissioner Liikanen states that the Commission aims to clarify the interpretation of electronic money before the summer (see this article and this interview). The rest of the article states that it is unclear what Vodafone's role is. But the FSA website shows that Vodafone Ltd and Vodafone Mobile Commerce Ltd are a certified small e-money issuer in the United Kingdom.

PayPal guarantees eBay auctions up to £250

Planet Multimedia reports on a ZDNet-article that informs us that Paypal will protect its UK EBay buyers by launching a buyer-protection fee that gives customers £250 of insurance.



At first sight this looks great, but it should be noted that the PayPal Buyer Protection Programme is only available on transactions involving sellers who have sold at least fifty items and who have a 98 per cent positive feedback rating. Qualified sellers are indicated with a Buyer Protection logo at eBay, but buyers must use PayPal to settle to qualify for protection.



In other cases, eBay's standard purchase protection programme offers up to £120 of coverage with a £15 processing fee.

Postbank stops m-banking on April 1 this year

Postbank today announces to owners of its mobile-banking application on the Siemens phone, that it will stop offering m-payment facilities via WAP. Instead users are suggested to use the generic voice-response application Girofoon to transfer money (up to amounts of € 700 a day).

Transfer of POS-contracts Interpay to banks

The website of Interpay now informs us about the procedure and rules that govern the transfer of the Interpay-POS-contracts to the bank of the merchants. The interesting thing is that merchants now have to choose a single bank to which all payments will be credited. Previously they could opt for split crediting to accounts in both the Postbank and former BGC domain.



Most interesting is the possibility that this transfer leads merchants to reconsider their banking relationship altogether. The transfer can then be viewed as a switch-moment which leads to additonial decisions and changes with respect to the preferred bank relation of merchants.

And a solution to phishing...?

Passmark is a concept/technology that is furhther discussed here. It works like this:



When a customer logs in to a bank's Web site, the bank shows the customer his PassMark -- a personalized image known only to the customer and the bank -- before asking for his password. Since a fake Web site will not know the customer's PassMark, it's safe for the customer to enter his password once he sees his PassMark. And PassMarks can also be used to authenticate outgoing email from the bank to the customer.



See also this analysis by Scot Loftesness.

E-mail scam hits MBNA customers

BBC NEWS reports how another E-mail scam this time hits MBNA customers.

Break-In at one of Israel's largest banks

Ron Onrust sent me this link/article, that summarizes the news in Isreal on a break-in that allegedly resulted in theft and deletion of critical client information at one of Israel's largest banks.

Verifone SC 5000 pinpad certified

Finextra reports that the Verifone SC 5000 pinpad has now been certified by Interpay for use in the Dutch market. So the pinpad now complies with Belgian, Swiss, Dutch, Visa and Mastercard rules and complies with EMV level 1 and 2 requirements. And Dutch company CCV announces a commercial deal to go with the pinpad, thus allowing retailers to be ready (or almost ready) for the introduction EMV in the Netherlands.

Urban Legends Reference Pages show ATM Camera

The website called: Urban Legends Reference Pages shows pictures of an Automated Teller Machine (ATM) and skimming equipment, used to catch magstripe info and pincode.

Yahoo launches money service

Erwin Boogert just reffered me to NEWS.com.au where an article and further explanation can be found on the PayDirect money service offered by Yahoo, in collaboration with HSBC Bank. Essentially it is a money transfer service, rather than web-payment. Thus, Yahoo aims to get a slice of the global remittances market estimated to be $US140 billion ($189 billion) to $US200 billion dollars a year.

Moxmo also in the mobile top-up market

Planet Multimedia reports that e-money institution Moxmo will also offer its customer the possibility to top up their mobile phones from the m-purse that they have with Moxmo. This is all part of a trend in which pre-paid top-up cards are losing market share and operators either choose an additional Point of Sale application (Albert Heijn) or a connection with the banks (Orange and Interpay) to ensure that pre-paid customers can more easily load their airtime.



Meanwhile, the GTIAD is still working on its consultation document which will outline that mobile operator airtime earmarked for payment to others than the operator, will be treted viewed and regulated as electronic money. Both a short-term and long-term philosophy will be presented for comments to the market. And that will definitely change the regulatory wheather in favour of Moxmo.

Risk of magstripe continues

In this article of Globetechnology, Mary Kirwan deals with the security risks of still having debit-cards around that work with a magnetic stripe. It provides an insightfull overview of ATM-fraud risks.

More supervision on payments (systems)

Our Ministry of Finance has now published this letter to explain that a separate supervisory structure will be set up to ensure safe infratsructure for payments. Essentially all providers of payment infrastructures will need licenses. As such a long cherished desire of the central bank will be realised.



But as with e-money, we will undoubtedly face many more discussions on what payment systems are and what the specific roles will be of Authority Financial Market, De Nederlandsche Bank and the Nederlandse Mededingingsautoriteit.

Postbank unsafe..?

Rob Blaauboer sent me this link to an article in De Telegraaf.nl. It suggest that Postbank does not check the name and number for each credit-payment transaction. That suggestion, to my knowledge, is incorrect but may be widespread. I have recently received an acknowledgement that a payment order (of a very small amount) could not be executed due to the fact that name and number of the receiver of the payment did not match.



Legally, anyone who receives a payment without any underlying legal basis (contract, gift etc) has a legal obligation to pay it back to the sender ('onverplichte betaling'). So even if one tries to keep hold of the money, the judge will rule that is has to be paid back.

Phase 2 of revision of financial legislation: prudential supervision

This page of the Ministry of Finance has the details of its proposed reform of legislation with respect to prudential supervision (of banks, money transfer agents etc).

Report of Financial Expertise Centre: charitative foundations do whitewashing...

This report of the Dutch Financial Expertise Centre investigates the role that charitative foundations play in supporting illegal activities. It noted a number of weaknesses in law that allow illegal or suspect behaviour to go unobserved. Among the examples is a church foundation that effectively operated 0900-telephone lines with explicit sexual content. But also it observed that suspect money transfers that previously were done by individuals, are now done via the associations (which do not have members and only have to report if turnover/income is more than 3,5 million euro).



Whereas these observations are disturbing the report notes that what's most disturbing is the likelhood that the research group has definitely only seen the tip of the iceberg. So we have a serious issue here.

Vodafone launches first UMTS-service

Emerce reports that Vodafone launches the first UMTS-service. It is a datacard for laptops, allowing data access with ten times the speed of GPRS. The services focuses at the (postpaid) business segment of the market (which strategy is in line with the concept of Piet Maclaine Pont to always start new innovations for the business consumer first).

What to Think of Online Credit Card Fraud

Just a link to a nice article at Emarketer.com.

Paypal UK Ltd is an e-money institution as of February 12

Ben Putter informs us that Paypal has notified its European users that as of February 12 Paypal Europe Ltd will officially be an electronic money institution, supervised by the Financial Services Authority in the UK. More information can be found on their website.



This is a very remarkable moment, demonstrating that of all EU supervisors, the British FSA operates best. They did not hesitate to give licenses to Internet-based new entrants companies such as Moneybookers, Prepay Technologies and now Paypal. They've made Vodafone realize that a substantial part of its pre-paid business effectively is e-money, as a result of which Vodafone has a small issuer license. And as such they best contribute to creating a level playing field for electronic money.



Given the position of the FSA and Paypal, a lot of regulatory discussions on e-money may soon be untimely and out of date. All of a sudden EU-banks face a serious licensed competitor with a techological and market headstart. And while these main players battle for the digital e-money market, mobile telco's are left to find out how to solve their billing and regulatory issues. And unless they move quickly they will see their revenue from data-income from pre-paid users disappear completely.

Amex signs MBNA as its first U.S. issuer ; ABN AMRO prefers Mastercard

BTNonline.com reports that:

Amex and MBNA this year will roll out co-branded cards, "at which time product details will be available," a statement said. The companies will begin issuing cards in the United States, followed by Canada, Spain and the United Kingdom. Amex and MBNA first must await a final appeals ruling from the U.S. Supreme Court



At the same time, ABN AMRO announced that it has signed a worldwide deal with Mastercard as the preferred card. See this article in Newswire.

The costs of a single currency: false bank notes and slower payments

Newspaper de Volkskrant informs us that the central bank will start an awareness campaign for consumers. As a result consumers will be encouraged to take our time to check whether or not a bank note is false. Of course this is a good thing to do. But why not take a step back and muse about the (hidden) costs and benefits of the physical currency.



The introduction of the physical euro has been quite an expensive political endeavour. The monetary benefits of the physical bank note for the capital market are zero (as the euro was already used as an accounting and payments unit). There are however some benefits for Europeans when they travel. Yet let me explain why the physical Euro, in practice, is a serious loss maker.



1. We had to replace all EU bank notes before their economic lifespan had ended. This is costly and, as stated before, only gave Europeans a slight benefit (not having to change money when travelling).

2. The coins were designed at a designers table but are highly impractical. The result of giving the 1, 2 and 5 cents and 10, 20 and 50 cents the same colour is that longer time is required for payment in shops. The economic costs involved are considerable: the payment process at retailers takes more time to both consumer and retailer and thus costs more.

3. All Point of Sale systems needed to be upgraded to start working with the euro instead of the local currency. Again: a lot of costs, without gains.

4. The collectively designed bank notes can -for cost and negotiation reasons- never be as safe as the previously safest bank notes (presumably Dutch/German). So while for some countries the new bank notes are safer than before, for others they are more insecure. In the Netherlands the result is that we have higher costs related to having more false bank notes around.



I think it would be a good thing for the European tax payer if, the next time we do this single currency thing again, we would also endeavour on a rational calculation with respect to costs and benefits.



And it would definitely be the 'royal gesture' if the Dutch central bank takes its responsibility by partly compensating retailers for the extra costs incurred as a result of having brought into circulation bank notes that are less safe than the old one.

EPC Card Group report

The Cards Working Group of the European Payments Council has issued asummary of its work. Its goal was to formulate a long term vision on the positioning of cards and electronic means of payment in the context of SEPA, the Single European Payment Are(n)a. Thus they split up in two groups, one discussing card fraud, the other discussing business models.



The recommendations focus on practical issues such as deeper standardisation and combatting fraud. But more generally they intend to improve the governance structure between banks and card organisations so as to allow more transparent decisions on which part of the card business a bank wants to be in. To this end, interchange agreements are a must, so this is also noted in the document.



Of course the document outlines the desire to work closely together with regulators, but it also points out some issues where no further regulatory steps should be taken. What struck me particularly:

digital certification services in the payment sector (a deeper understanding of the issues is necessary before progressing in this field),

I couldn't agree more.

European Banking Industry Committee now coordinates contact with European Commission

This press release tells us that on Thursday 15 January, European banking industry federations launched the European Banking Industry Committee (EBIC), aimed at facilitating industry consultation by the EU institutions.



The EBIC was established by the main banking industry federations: the European Banking Federation (FBE), the European Savings Banks Group (ESBG), the European Association of Cooperative Banks (EACB) the European Mortgage Federation (EMF), the European Association of Public Banks (EAPB), the European Federation of Building Societies (EFBS), and the European Federation of Finance House Associations (Eurofinas) / the European Federation of Leasing Company Associations (Leaseurope).

Private or public identity?

One of our major future concerns will be to ensure that one is who one is (on the web, mobile phone etc). Ascertaining one's identity is therefore a very major market. Worldwide there is the Passport initiatieve by Microsoft and the countervailing Liberty. But these two private initiatives are now facing a third opponent. The European Forum for Electronic Business (EEMA) is working on a white paper that should be a basis for all in the identity market (including banks of course). This paper will be called ‘Towards Understanding Identity’.

TACD's online survey on spam

The TransAtlantic Consumer Dialogue has issued a report of their online survey on spam, Oct - Dec 2003. It becomes clear that 52 % of the consumers are shopping less (or not) on the Internet because they fear being spammed afterwards.

TSYS cuts 4 % of its workforce

Ledger-Enquirer reports that TSYS, the major credit card processor, cuts a lot of jobs to ensure future profitability. Its revenue base decreased due to the loss of 18 Mexican banks, price renegotiations and the sale by Sears and Circuit city of their credit-card portfolio's.

Volkswagen will start bank in the Netherlands as well

Car producer Volkswagen often uses financing deals to stimulate the sale of cars. For that reason it already operates a German Bank. Ben Putter referred me to this article at AutoTrack.nl. It turns out that Volkswagen and Pon Holding (a car importer) will start banking in the Netherlands as of 2005. The name of the bank will probably Volkswagen bank and it will have an internet-branch.

False 100 euro notes for retailers and false credit-cards for air line companies

Today it was announced that the number of Euro falsifications in the Netherlands is now bigger than the number of Guilder Note falsifications. The Council of Dutch Retailers (Raad Nederlandse Detailhandel) has thus decided to develop a sticker that can be used at the counter to tell customers the the 100-Euro note will not be accepted any more.



Meanwhile, air line companies (notably KLM) face an increasing number of fraudulant credit-card transactions. Flights to Afrika or Latin America that leave shortly are more often being paid with falsified cards or card numbers. Some of the tickets that are being ordered are then sold cheaply via Marktplaats.nl. The buyers of these tickets however may never be able to travel as air line companies are now checking the validity of payments (and sometimes withdraw the e-ticket).

SIIT 2003 Program on Standardization

Only too often policy makers call for standardization (in retail payments for example) without really understanding the process and pitfalls. Meanwhile there is a considerable body of knowledge. For those interested in further study the SIIT 2003 Program has online slides available.

How telco applications are useful to banks....

Where the banking sector used to be a sort of solitair developer of bespoke applications, we can increasingly see technologies and applications from other industries being used. One example is the mobile operators billing technology that is now being used by ING for billing their payments. Another example lies in money laundering detection.



Neteconomy for example is a company that started out detecting false/fraudulent phone calls, to discover that its technology is also useful for banks. This press release contains a testimonial by Nationwide Building Society to that effect.

Skimming fraudsters convicted

Automatisering Gids reports that the court in Breda has convicted two criminals who have been part of a skimming organization. They used a smart device to collect magnetic stripe information at unmanned pump stations and used camera's to obtain the pin-code of customers.



With the information they made new debit-cards, which were used at ATM's in the Nederlands, Belgium and Germany. The revenue was 600.000 euro. The two criminals face punishment of 4 years and 2,5 years in jail as well as a fine to be paid to government. Tomorrow, the main suspect will get to hear his verdict.



Update thursday: the big mind behind the crime is convicted to 3,5 years of prison and needs to pay 35.000 euro to the State.

Russians stop using the dollar... Olympics stick to Visa

What does one do in a country where trust in its own government and justice is low? Theory tells us that the local currency will not be used, but rather gold or foreign currency. Consequently Russians were used to think, pay and store value in dollars. In Het Financieele Dagblad, Karel Onwijn describes that, now the dollar loses value, the Russians reconvert the dollar into local currency and Euro.



To remain with the subject. Theory also tells that the use of payment instruments is contingent on force: the power to prescribe usage of particular instruments. In the same FD it is noted that Visa has established its 11th sponsorship of the Olympic Winter Games in Turin. Meaning that all people either pay cash or with Visa (but not with anything else...).

AT&T PrePaid Web Cents Technology: nice white labeling example

In this article AT&T announces an agreement with 7-Eleven to market AT&T Web Cards. These cards allow customers to download music from RealRhapsody, the Internet jukebox service from RealNetworks. The cards will be available in 5,300 7-Eleven stores.



Prepaid specialty cards supported by AT&T PrePaid Web Cents technology are sold at traditional retail outlets. They carry a specific content provider's brand and are used to purchase that provider's online content.



The specialty cards can be used to purchase a variety of online content such as interactive games, ring tones, graphics, maps, guidebooks, digital music, streaming audio and video, software, research services, and more. Each card is issued by the content provider and is exclusively for use on its site.



I think this trend may also come to Europe. In the end all retailers/content provider want their own relationship with the customer. And if they can avoid legal hassles with respect to e-money while doing so, it will be all the better.