Monday, January 29, 2007

Bill Gates in Davos: Microsoft going for the micro-payments...

See the articles in CNN, Àrstechnica, ZDnet and Planet Multimedia (in Dutch) to find out that Microsoft is heading for the micro-payment space.

Gates apparently said:
If you want to charge somebody $0.10 or $1 a month, that will just be a click…you won't have to manage some funny thing or pay some big credit charge, where half of it goes to the clearing.
By undercutting credit card fees, the Microsoft offering would enable an online newspaper to profitably charge small fees for individual articles, Gates put forth as an example.

Well, it still is a huge oil tanker this Microsoft thing, so it will take some time to steer towards the payment space. Once there however, it may sink the smaller boats....

EU-Commission report on Commission likely to be quite mild and unimpressive

Reuters reports about a peep it was offered in the outcome of the retail banking competition enquiry. After having barked terribly, it seems that the EU Competition watchdog isn't likely to bite on an European scale:
BRUSSELS, Jan 29 (Reuters) - Sweeping change to the credit card system in the European Union has been ruled out in favour of a more cautious approach, the bloc's antitrust chief will say on Wednesday, a source familiar with the situation said.
Neelie Kroes' report on EU retail financial services will stop far short of the actions urged by retailers, who want a ban on the complicated fee structure that has come under attack in Australia and other jurisdictions.

So it's most likely going to be business as usual, with Commission and competition authorities stepping up their efforts to eliminate market inefficiencies.

Saturday, January 27, 2007

ABN Amro selects Equens for Sepa debit card processing

See this Finextra article. Pan-European payment processer Equens has won a five year deal to provide debit card processing services to Dutch banking group ABN Amro in support of the introduction of the single euro payments area (Sepa) in 2008. Papers in the Netherlands suggest that ABN AMRO achieved a significant price-reduction.

The news is in itself not stunning but had some more impact as an official of ABN AMRO outlined in the Financieele Dagblad that ABN AMRO would not pass on the benefits of cheaper processing to merchants but rather use those to try to prevent prices from rising in the future.

Thursday, January 25, 2007

New crypto-tools (hashes) required ...

Iang points out that the NIST (National Institute of Standards and Technology) is initiating an effort to develop one or more additional hash algorithms through a public competition, similar to the development process for the Advanced Encryption Standard (AES). This is needed as a Chinese professor Wang is succeeding in attacking the current hash-standard SHA-1 (a sort of check-number algorithm).

See NIST-site for more techy details.

Tuesday, January 23, 2007

Equens to lay off another 400 people...

Dutch processor Equens (former Interpay) is in the news ( as it will lay off another 400 workers. It states that until 2010 some 25 % cost-cutting is necessary. It will focus on hiring less external consultants to achieve the result. Good thing ! But I hope they keep and cherish the good old faithful personell that keep Equens running.

Another remittances report, this time by the BIS...

The Committee on Payment and Settlement Systems (CPSS) and the World Bank issued a report today entitled General principles for international remittance services. Not for use by the market, merely for use by governments/regulators.

The CPSS-World Bank report provides an analysis of the payment system aspects of remittances, on the basis of which it sets out general principles designed to assist countries that are seeking to improve the market for remittance services. The report contains five general principles, covering: transparency and consumer protection; payment system infrastructure; the legal and regulatory framework; market structure and competition; and governance and risk management. The report highlights the roles of both public authorities and remittance service providers in implementing the general principles.

Monday, January 22, 2007

Nordea subject to phising attack (loses $1.14 million)

Automatiseringsgids and Itwire report that criminals have robbed Nordea by sending a 'security-mail' to clients, asking them to use anti-spam-software. This software installed an additional trojan horse ( that harvested the customer's login data when they logged on to Nordea. By harvesting this information, the crooks robbed 250 Nordea users from an amount of in total 1.14 million US dollar.

Nordea has given the victims their money back. And while the technical trace ended in a serverpark in Russia, the Police in Sweden have already arrested over 100 middlemen in Sweden, who it would seem were working with the Russian hacker criminals.

Next up is a huge discussion on the possibility of man in the middle attacks. Wich is better. A two-factor authentication in which you use an additional device for secutiry-codes. Or would a traditional extra security code (distributed off-line or via SMS) be a better alternative. Interesting to note that this latter method, in use by the Postbank and sometimes discarded here in the Netherlands as user-unfriendly or less advanced/safe, is actually the more secure one.

Friday, January 19, 2007

Netteler subject to actions by US troops ....

Planet Multimedia reports (based on reuters and AP) that two former executives of the company Netteller were arrested by US authorities on charges of money laundering. It's a cheap shot from the hip by the US, who are of course well experienced in intervention in foreign markets / countries. In this case they use the Unlawful Internet Gambling Enforcement Act to justify a pre-emptive attack. And it's not weapons of mass destruction this time, it's money laundering.

The US Unlawful Internet Gambling Enforcement Act is yet another example of the US seeking to prevail morally and legally by extending a ciminal reach for the sake of...? It left a lot of companies no other choice than to avoid risks and leave the US gambling market. Wich was also an important market for Netteller (65 % of revenue). Netteller hadn't apparently left the market yet, so the US authorities felt the best way to proceed was to arrest previous board members of Netteller. An interesting move, because if the alleged crimes are real, the only proper way to proceed would (IMHO) have been to start a supervisory dialogue with the UK supervisor of Netteller (the Financial Services Authority) rather than arrest former board members/large shareholders.

Yet, the dialogue is of course a cumbersome road that doesn't bring quick results (a bit like asking the UN permission for invasion of a country on ill-founded suspicions of some kind). So the alternative is to focus the attack on the former executives and hope that the mother company gets the message. Well, they did, Netteler stopped their business, and the US once again demonstrated its creativity in dealing with (international) legal rules and conventions.

But, can we really blame the US?
It is of course how the West was won.

Thursday, January 18, 2007

Visa commissioned report on cross-border payments

Visa spent some money and commissioned Dr. Yoon S. Park, an expert on global financial markets and Professor of International Finance at the School of Business at George Washington University, to examine the current challenges of the cross-border payments process and how a combination of forces are influencing the future of payment processing. See his report here.

In itself quite a nice study that identifies the following trends:
1: Transnational payment systems are growing
2: Government-led initiatives and mandates are increasing
3: Risk and liquidity are being closely managed
4: Multinational banks and businesses are expanding
5: Operational efficiencies are being sought through outsourcing.

Case examples by trend 2 relate to the interference and further regulation of payment regulations such as OFAC rules and the FATF-rules to send payers information with a payment message as an anti-terrorist measure. Indeed a pain, but some necessary evil. Interestingly on page 15, professor Park describes SEPA as another case example:
SEPA is a government-led initiative as defined by the European Payments Council that is having a significant impact on both banks and corporations that make euro-zone payments.

Here we see that being on the other side of the ocean does help in putting things in perspective. Here in Europe bankers and regulators may still be pointing at each other when the discussion is about the Single European Payments Market. Regulators say the the banks, organised in the European Payment Council, asked them for further regulation in the payments domain, to support the market led initiative towards harmonized payments. And some bankers insist that the EPC is a market driven proces.

Yet in its essence it is regulation 2560 and the continued nagging and threats of regulators that kickstarted this 'market driven' SEPA-process out of fear from further intervention by government. Which is probably one of the reasons why Mr Park views the SEPA-thing in Europe as a government driven project rather than a business-driven activity.

Rightly so, I would add, although I would also agree with his conclusion:
The volume and velocity of cross-border payments is made all the more complex by the differing standards of domestic payment systems, increase of international regulations and the changing landscape of emerging transnational and global systems. Market pressures and the expansion of multinational banks and businesses are driving the search for operational efficiencies.

Visa launches mobile platform and dives into merging bank-nfc-mobiles

See Paymentsnews and Textually org to find out that:
Visa in a deal with Nokia has announced the launch of a mobile platform that Visa says "lays the foundation for the commercial availability of mobile payments and services to millions of mobile users around the world.

Well, that is essentially the result of a lot of years of hard work. I remember this announcement in 2000: Nokia and Visa Sign Agreement to Introduce Solutions for Advanced Mobile e-Commerce. At that moment it was all about WAP. And now it is all about NFC.

Regardless of the eventual technical shape, the direction remains clear and the same: mobile technology and banks and hansets and credit-cards all merge and blend to facilitate payments of all sorts and kinds. Yet this time the digital content market is a bit bigger.

Wednesday, January 17, 2007

Partial evaluation of regulation 2560 reveals true (better?) regulation agenda of European Commission

See this link that brings you to a Commission Staff Working Document addressed to the European Parliament and to the Council on the impact of Regulation (EC) No 2560/2001 on bank charges for national payments. It concludes that generally charges for cross-border payments decreased considerably as a result of Regulation 2560. Furthermore the Regulation provided an incentive for the payments industry to modernise its EU-wide payment infrastructure.

The conclusion also states:
Whilst being a first significant step towards the achievement of SEPA, Regulation 2560 was followed by other measures, which are currently under way. These mainly include a proposal for a Payment Services Directive, whose objective is to establish a harmonised set of rules applicable to the provision of payment services in the EU.

Furthermore, one of the aims of the Payment Service Directive, which is currently before the Council and European Parliament for adoption, is to introduce new competition into the payments market. This should help to keep prices down and will have a range of practical consequences on the functioning of Regulation 2560.

As explained above, the Commission will issue this full review and evaluation of Regulation 2560 by mid-2007. Any follow-up for future modification of Regulation 2560 would be determined by this review, and by the final text of the Payment Service Directive, as well as by the outcomes of the industry–led initiatives to create SEPA.

- the Commission will not revoke regulation 2560 (although its direct price regulation is opposite to the principle of cost-based fees, which help achieve the 50 billion euro benefits of the Payment Service Directive),
- the Commission may sometime in the far future revoke or alter it if banks sufficiently do their best in creating SEPA and lowering prices in the retail payments market.

Interestingly, a similar idea is not being fully applied to mobile operators but allows the mobile operators a cost plus- based fee for international calls/data services. So all animals are equal, but apparently the banking animal requires a more stringent approach when it comes to creating a European market.

Now, let's have a look at how the European Commission deals with the better regulation principles in the domain of payment services. The intentions are clear: McCreevy outlines this in a million of speeches:
Ladies and Gentleman, this Commission is taking a more variable, more modern approach to regulation. Strict adherence to better regulation principles. Wide consultation. Full impact assessments to ensure that initiatives are fully thought through. Legislation only where clear benefits are apparent.
Yet practice shows a consequent delay in the evaluation of regulation, a delay in preparing it and effectively only pays lipservice to the better regulation principles. The money is not where the mouth is, as we can see from the following actions.

1-start a huge SEPA incentives consultation in march 2006, to find out more about the future of the European Payments Market (and how to proceed towards it) and then shelve the initiative without explanation,
2-ignore the better regulation principles, more particularly in the minimum standard E on consultations (page 21 in this document), and do not publish the responses to the SEPA-incentives exercise on a website, even if the ECOFIN calls for publication without delay of those responses (see p. 21 of the ECOFIN-paper),
3-perform an evaluation and consultation on VAT-treatment for pre-paid vouchers that acknowledges the existence of e-money payments by mobile phones (0900 and SMS/MMS/I-mode etc),
4-ignore the above facts on m-payments during the evaluation of the e-money Directive (and its application to mobile operators) and assume that telephones are hardly ever used for making payments (be it pre-paid or postpaid) ;
5-shelve the discussion and issue of a level playing field for e-money players and mobile operators for a number of years (until when the Payment Service Directive is drafted and ready),
6-ignore the inconsistencies between existing regulation (2560) and planned regulation (PSD, revision of VAT-regimes, e-money, SEPA-incentives) and continue a fear tactic towards banks by not revoking a regulation which can be revoked as it has served its purpose.

Anyone still wondering why Europe and the European Constitution is in crisis?

Instant payment flow: essentially the 0900-payment form

See this site for more info on a 'new' concept. Instant payment flow. I'm not sure if I grasp it completely. Looks to me as the 0900 payment form (as long as you call, you pay an incremental amount of money, depending on the time that the phone call lasts) but perhaps in a different technological jacket.

Polish competition authority bans interchange fees

Interesting topic, those interchange fees. The Polish competition authority decided to fine some 20 polish banks for using it, at least for not demonstrating that it was cost-based. See also the happy news at this site (polish retailers):
The Office for Consumer and Competition Protection (UOKiK) has decided to accept the arguments of The Polish Organisation of Commerce and Distribution (POHiD), which, five years ago, accused a group of banks of an illegal agreement to keep interchange fees for paying with Visa and MasterCard cards at stores, at a specified, high level. The UOKiK has fined 20 banks an aggregate sum of PLN 164m (€42m).

Interestingly the decision appears to be based (amongst others) on the reasoning that in other countries (such as the Netherlands) there is no interchange fee for debit-cards. So why need in Poland?

To be clear: while there is no formal interchange fee for debit-cards in the Netherlands, Dutch banks continue to stress that there is a compensation mechanism (in the form of dividends of the processor) which is the equivalent. So the Dutch appearance of the interchange fee is not the traditional interchange fee but higher dividend to shareholders in the POS-switch. So to refer to the Dutch as not having an interchange fee and thus implying that there is no compensation mechanism, is in my view incorrect. And it would be quite interesting to know if this correction to this Polish mis-'understanding' of the Dutch situation (which one can also encounter at the European Commission) would also change their judgment?

Other than that, this appears to be a case where Poland wishes to demonstrate its good EU citizenship by repeating the generic claims /thinking on interchange fee and ruling something which is deemed to be most popular among regulators. Only to find out later that the Commission itself is not daring to take a similar stance as it realizes that the issue is much more complex than they thought at first...?

Update: see also this overview article at Euractiv.

Tuesday, January 16, 2007

Debit card moves in on low-value payments

FD reported that last year the debit card was increasingly used for low value payments. On average the Dutch paid € 44,22 in 2006 for each transaction (which was 44,61 in 2005). Meanwhile the number of payments rose with 8,8 % to 1,451 billion in 2006. Meaning that the total amount spent with debit-cards decreased. Meaning that the debit-card eats up the low value segment.

At the same time, the e-purse payments increased to 164,6 million payments (with an average transaction amount of 2,68 euro). Those payments are really the niche/vending payments. So they have their own spot in the market and will not be eaten up by the debit-card until such time that we have EMV-cards that can work in vending segments just as well.

Monday, January 15, 2007

SEPA deadlines under threat...?

This Finextra article quotes the chair of the European Payments Council (EPC), Gerard Hartsink. He stated that banks will miss the first single euro payments area (Sepa) deadline for direct debits because of delays in passing a new Payment Services Directive (PSD). The news was picked up by the Financieele Dagblad with the Dutch Ministry of Finance commenting that indeed the PSD is delayed and outlining that they rather see a solid PSD than a quick and dirty one.

Reuters today also reported that Visa Europe stated today:
Scrapping retailers' credit card proceesing fees would jeopardise the European Union's plans to create a cheaper cross-border payments system for the bloc's consumers and companies.
The Visa-statement anticipates the outcome of the European Commissions card enquiry (of which the final results are due to be unveiled on Jan. 31). And it does hit the hammer on the head. For European business models to work, one needs a true European approach. And not one that bashes banks and/or card schemes but one that respects the necessary ingredients for payment systems: interchange fees for new products being one.

What I find interesting here is that the interchange fee issue is not mentioned by Mr Hartsink as an obstacle. Why is it that apparently only the players in the cards-market seems to be worried as to the outcome of the Competition Enquiry of the European Commission? Would not a competition authority inspired no-go for direct debit interchange also be a serious barrier to the whole SEPA-exercise?

Sunday, January 14, 2007

Spanish demo on ATM-fraud

Here's a nice (language test and) demo of how ATM-fraud can work. If I'm not misstaken this is what they call the Lebanese Loop-fraud.

And don't try this at home of course...

P&S News 45 is out

See this link and discover amongst others:
- the website of the PCI Standard,
- the establishment of Click&Buy as e-money issuer in the UK,
- the pre-paid mastercard offered by Wirecard,
- the sepa brochure by the ECB,
- the Eurosystems view on cards (quite interesting to see how within a little number of years the eurosystem, essentially responsible for just the interest rate and monetary policy, has moved outside of its legal territory and now positions itself as being (morally) responsible for retail-payments),
- the Target2Securities discussion (even more interesting to note that while in the cards domain the eurosystem warns for limited functioning of the market when there will be a duopoly, while in the securities domain it is planning to become an active market player (in the end kicking out the others in the market and getting a monopoly itself).

Wednesday, January 10, 2007

Contactess reaching tipping point of adoption in retail

Payments news refers to an Aberdeen report titled "Retail Contactless Payment Systems: Improving Customer Retention & Loyalty". The conclusion is that contactless payment systems are fast approaching the tipping point of adoption within retail. After numerous pilots and deployments in the last three years, the continued pressure to improve the customer shopping experience is prompting retailers to adopt this technology.

Michael Steinbach to replace Ben Haasdijk as Equens chairman

See Finextra:
On 1 May 2007, Ben Haasdijk (1943) will step down as Chairman of the Board of Directors of Equens. His successor will be Michael Steinbach, currently Deputy Chairman of the Board of Directors.

Monday, January 08, 2007

Lessons for SEPA from the US checks ...?

I haven't as of yet had time to read this research paper completely, but I imagine there may be some lessons for SEPA in this historical paper on development of check-systems and interstate clearing in the US. If not just the message that payments and payment infrstructures develop/follow the economy. As an economy grows and becomes integrated, payment systems will follow.

It is going to be quite interesting to see if the EU-approach of putting the horse behind the carriage (starting with monetary and payments integration and hoping that the political and economic structures will follow) is going to work. While we all seem to be used to the EU regulators beating and slave-driving the horse (banking system) onto the SEPA-road, any more distant observer will note that there is no use beating it when it is still behind the carriage.

Yet, it appears that reflection is an attitude that is not appeciated in Brussels. Rather than fundamentally challenging and rethinking Europe, we seem to push forward to EU-constituencies, EU-payments, fully open markets and what have you. So, in style with the mythology we are taken hostage by the forceful Zeus (representing of course the forceful power of open markets ideology taken to the extreme).

What I don't remember from the history books is if that companionship of Zeus and Europa was a happy one. Well, we're bound to soon find out.

Friday, January 05, 2007

Paypal to test virtual card number for payments over the web

Emerce reports on the fact that Paypal is testing a virtual card number system for use on the web. Essentially the Paypal user gets a one-time credit-card-format number. To be used once within a specific time period. Good thing for the Paypal customer base is that it allows them to also pay at merchants that do accept credit-card but don't accept Paypal. And it helps Paypal to increase user value and draw in more money in the account.

Well, this is at least an interesting effort. I'm personally (and intuitively) not sure if this will fly though.