Saturday, January 29, 2011

Dutch contactless chip (OV Chipkaart) in trouble

Hello there again.

As you can see from the dates on the blog. I have been out for a while, taking a good number of sabattical years off and enjoying myself with other stuff than payments. But developments here in the Netherlands remain entertaining enough to take up some blogging. No too much, because I shouldn't overdo it.

Hottest news here in the Netherlands is that last week the OV-Chipkaart once again became the subject of media attraction as a tv program explained how to crack the card. A free program to increase the credit on the card became available and known through Geenstijl. And contactless card readers got sold out, even via the Internet.

So discussions in parliament and media once again occured and the province of Zuid-Holland decided to not completely migrate to the OV-Chipkaart but allow the old Strippenkaart to be used. And the Dutch Parliament did not wish to discard the whole project yet. Still, we should note that this is all not really new: already since 2008 the dutch newspaper Trouw decided to open a separate corner in their website for the 'Drama' of the OV-chipkaart.

Translink systems formally claim they can handle the frauds and point to the fact that also bank cards are prone to attack/fraud (forgetting to mention the differences in financial and technical impact). So thay play it all down. But we keep on discovering unintended or hidden consequences. For example: the sigar/tobacco shops that used to sell the strippenkaart found out sme serious financial impact of decreased visitors to their shops. And the new OV-chipkaart loading machines that some install in their shops, don't give as much kick-back as the strippenkaart.

Now, this is quite a nice time to have a renewed look at the cost benefit analysis of the OV-chipcard. Effectively the business case gets a bit worse, because there will not remain a lot left of the 'income' made by the reduction of fraud or 'grey' travel (possible with the Strippenkaart and assumed to be non-existent with the OV-chip). This is calculated as a benefit of between 380-500 million euro. Also the re-use of OV-chipkaart in other applications would give benefits of 100 million euro. So we'll be seeing a slow meltdown of the business case of the OV-chipkaart.

So while the business case is slowly fading into the sea, what in the end may make or break the card is the consumer-side of things. For example, right now, the handling of consumer complaints in case of forgetting to check-out, is near to disastrous. So there is not much of a warm feeling with the Dutch citizens with respect to this card. Also, in practical terms, the card doesn't completely do what its predecessor can. Try taking a group of people (of a school class of 14) to the ZOO and you'll discover the hassle soon enough.

It's a matter of time before we'll move on to the next generation or next system. And with this experience of a non-bank issuer/provider of payments means, perhaps the public will now more appreciate the quality of service that they are used to from their bank-issuer provided system.