Now that the voting on the PSD is done, the real work starts...

The second Payments Services Directive, also known as PSD2, will be officially established today. In the plenary session discussion yesterday all political groups backed the achieved consensus and highlighted the benefits to consumers, the increased security of payments, further innovation in the payments area and lower cost overall.

Some work ahead...
We should realize however, that with the promulgation the real work will start for a whole range of involved players. First and foremost, there is a lot more work ahead for regulators and supervisors in the transposition process, but in particular also for the European Banking Authority. The PSD2 that seeks to open up access to banks and customer bank accounts for new players, leaves quite a bit of work to be done by EBA.

EBA should:
- develop rules on level of guarantee/professional indemnity insurance for payment initiation service providers and account information service providers,
- set up standards for cooperation and data exchange between local supervisor and resolve disputes on different applications of the PSD2,
- set up a central register of payment institutions and agents licensed under the directive,
- develop regulatory standards that define when the appointment of a central local contact point can be demanded by local supervisors and what its functions should be,
- be informed immediately in the case of emergency situations (such as large scale fraud),
- coordinate requirements as to the security frameworks applied,
- specify the requirements of common and open standards of communication to be implemented by all account servicing payment service providers that allow for the provision of online payment services,
- develop guidelines on a harmonised set of information to be provided during the application for a payment institution license,
- publish local exemptions under article 3k and 3l in the public register,

Clarity for industry on EU-application of definitions and scope
When the first PSD was delivered, it turned out that quite some players in the market required timely insights as to the future scope of the directive and how it would impact them. The European Commission then published an FAQ that further outlined how definitions should be understood.

It seems to me that it would be worthwhile to perform a similar exercise right now as there are quite some areas that can give rise to questions. As an example: the recital on the agency exemption leaves open the existence of agents for both buyer and supplier as long as the agent does not enter into posession of the funds. Yet, the definition of acquiring appears to be purposefully wide, meaning that such commercial agents might after all be viewed as acquirers.

The sooner this clarity is provided, the better it is, as the lead time for setting up and getting a license as a payment institution is similar to the lead time that now exists for transposing the PSD2.

I therefore hope that, for the sake of a proper EU level playing field, the collective of regulatory players involved in the transposition and application of the PSD2, will seek to address those scoping and definitions issues early-on.

Digital Money Forum 2012... 15th anniversary and lively as ever

The Digital Money Forum is an event that this year reached it's 15th anniversary. And a special event it is. My previous visit to the Forum was probably some ten years ago, when everyone was pretty much into the e-money way of life. But technology, money and society continue to develop and that's where Dave Birch and his team of Consult Hyperion come in. In setting up the forum they provide for a lively and thought-provoking event where money is dealth with from all different angles. And as before, it was a pleasure to participate.

So this years event was special in many ways. We all got a better look at the evolving phone payment landscape, delved into possible future scenario's for the world and money, we spoke about the future and death of cash, about social inclusion and lots, lots more. And, quite fascinating, I got to issue my own currency, PunkMoney, via Twitter, by promising the developer, Eli Gothill, two beers and a financial history tour in Amsterdam.

A bit more on the principles of Punkmoney (as I understand them). If we look at money it is an invention to facilitate transactions in society. But before the official money we had mutual obligations and trust relations in society. I would help my neighbours out with building their house, assuming they would do the same for me, in time. And so on. So there was this web of mutual obligations and promises that cemented the relations in society.

Now what Punkmoney does is to leave all the monetary issues and digital money aside and elegantly replicate this web of promises. With some rules as how to form proper messages, Twitter as the carrier and a software enige that scans twitter for any promises of Punkmoney. And when it finds one, it registers it and there you have it. Not the real money, but something even better: real promises. Just as trustworthy as... yourself.

After Punkmoney, we moved on to another kind of money. Monopoly money, sitting on a Samsung phone (with an application neatly developed by Easan).

Six teams on six tables started playing and as for me personally, I was literally quite lucky. I landed on 3 airports in the beginning of the game, won some lotteries and eventually turned into a big shot property owner. I turned out to be the winner of the competition, with an awesome price: this incredibly beautiful banknote (an official German forgery of a UK 20 pound note; part of the Bernhard operation):

Some more on that will follow on my financial history blog later.

Finnius conference on e-money

As some of you may know, I have had quite an interest in electronic money in the Netherlands in the past. And yesterday I had the pleasure of visiting the conference on e-money by Finnius. The conference was concise and clear with talks by Andries Doets on the regulation and a speech by the supervisor (DNB: De Nederlandsche Bank). This provided a good overview of rules, exemptions and clarified the role of DNB.

After the beautiful and energizing musical break (Duo Sottovoce) Casper Riekerk moderated a discussion that focussed on business models and the difference between paper-based and digital electronic money. The panel and audience agreed that the margins in the e-money/payments business are quite slim, certainly given the rule that the float cannot be used for other purposes (which happened when giftcards where still paper-based).

At the end, following a suggestion by DNB, the thought of setting up a representative organisation for e-money issuers in the Netherlands came up once again. So perhaps we will see a new organisation emerging as a result of this conference. Time will tell.

Personally I couldn't help thinking that quite a lot of effort by the supervisor is spent on values and amounts of e-money that are irrelevant, compared to the busloads of similar-type payments via mobile phones and Ov-chipcard (exempted from regulation). It is clear that both market and supervisors have digested and codified this exemption into their rules/system. So no one questions it (if anyone still remembers the history of this exemption).

But it remains a paradox for someone like me, who witnessed and joined the discussions on e-money dating from the rise of e-cash and Mondex. It was in particular the digital forms of pre-paid e-money that raised the awareness and need for legislation on e-money. Everyone got a head-ache when they thought of a situation in which money (and goods) were digital. Because this would create a situation in which central banks in the end will not know any more how much money is in circulation. And consumers might see their digital cash disappear if it was not secured properly.

So the headache lead to the legislation on e-money. And when introduced, supervisors decided to create an exemption for precisely that form of money that made us develop the legislation in the first place.

As such I think the whole e-money debate is quite an interesting casebook example of the Politics of the European Union.

The PayPal Blog: Observing Trends in the Payments Industry

Interesting article here on Payment industry trends on the PayPal Blog. Essentially the trends are:
- cash will lose out slowly
- convenience will make the customer chose for debit
- rewards are what matters in a saturated market.

Well, the first two are clear; I'm not sure about the third one. There's bound to remain a lot of national culture in payments. So the decisive factor in a saturated market can take a variety of forms, not necessarily being rewards. But for example the eco-image of the provider, the image of a brand, the actual customer service if stuff goes wrong, or perhaps price.

Still, an interesting article by Dan Schatt.

SanDisk and Philips join forces on cell phone payment via NFX

Tweakers.net had a post linking to this EETimes.com article that outlines that SanDisk and Philips join forces on cell phone payment:
Flash memory card supplier SanDisk Corp. has struck a deal with Philips Semiconductors to embed the Philips SmartMX smartcard controller chip in certain types of flash memory cards to allow them to be used for near-field communications (NFC) and in particular, when the cards are inserted in mobile phones, to pay for things.

SanDisk (Sunnyvale, Calif.) said the SmartMX would be embedded in TrustedFlash cards allowing consumers to use their phones as bus or train tickets and perform secure “contactless” payments and other contactless transactions by simply waving their phones near a contactless reader in a mass transit turnstile, checkout counters or drive-through windows.

TrustedFlash cards with SmartMX technology for NFC transactions are available to OEM customers in the microSD card format. SanDisk has started pilot programs and expects broader commercial rollout in 2007. The company did not state where the pilot programs are being run.

Brussels agrees on roaming regulation and closes competition investigations ....

Sometimes, the news comes in bits of pieces and only makes sense if you put the two together on a later date. Take for example the EU regulation to establish more modest roaming fees for mobile operators. At last the mobile industry stopped battling the initiative, understanding that it wouldn't make sense, given their pricing practices in the consumer domain.

And then a couple of weeks later, the Commission suddenly announces that it drops the competition investigation for mobile operators. Quite unusual as the FT notes:
The decision to draw a line under the high-profile cases is unusual because EU competition regulators rarely stop such inquiries without either securing a settlement or imposing a fine.

So where was the deal/settlement...?

My guess is that one and one makes two. The agreement between Commission and mobile operators clearly was that if they stopped resisting the roaming regulation, the Commission would stop the competition investigation in roaming.

Now, let's compare that deal to the situation in the banking sector. Already for 5 years there is the regulation that bank chargs should be equal (whether paying inside or to another euro-country). Which is effectively worse than the current roaming regulation (that allows for some higher prices in cross-border phoning). And at the same time there are still all kinds of threats and rulings to be expected with respect to interchange fees (the bank's equivalent of roaming agreements). With no one ever considering to drop those actions...

So why would it be that the Commisison continues to the debate on interchange rulings and interbank practices while completely dropping the roaming investigation?

My guess is that the Commission and EU Member States' governments, rationally distinguish between industries that are making them money and those that aren't. Any government would of course be more likely to be friendly to an industry that makes/has made you a lot of income (by buying some air/frequencies to do phoning) as opposed to an industry that is constantly ripping you of income (by killing cash seigniorage which is a nice source of government revenue).

Perhaps just another one of those cases of Schizophrenia?

Payter™: another nfc-phone payment pilot aiming to become a product

See the Payter™ website to find out that:
- Payter is a new pre-paid nfc-phone payment application,
- which will start as a pilot in Rotterdam,
- where pilot-participants use a special Nokia phone that they get on loan during the trial,
- and surfers can preview a slick demo,
- but currently no one can apply, due to massive sign-up (as it says on the website).

So, we have a C1000 trial being postponed as well as this pilot not marching on. And Rabo's minitix being also able to do NFC-payments. So these are definitely interesting times for innovation.

If we realize that there were some 6 years between the first trial with an IC-e-purse (Woerden, 1990) and the first product (Chipknip,1996) my guess is that we will be well beyond 2012 before we will have a standardized nfc-phone payment system in the Netherlands. That is, unless retailers will want to boycot this product as well...

PSP Global Collect sold for € 200 million

See the (paid access) FD-article. Global Collect is a Payment Service Provider, born out of the need to collect magazine subscription fees worldwide. This service used to be an inhouse service for TNT Post. But is was spun off and sold for € 14 million two years ago. And now it's been sold again for € 200 million to private equity firm General Atlantic.

GlobalCollect processes and reconciles payments for KPN, Skype, Nike, HP, Apple and so on. It's turnover was € 23 million in 2005 and € 37 million in 2006. And its net result last year was € 5 million. Lehman Brothers advised during the sale of GlobalCollect.

I'm curious if they would ever imagined this price to be paid....

Paypal results are out...

See the files here:

PayPal had another exceptional quarter, with accelerating Total Payment Volume (TPV) and revenue growth. PayPal’s Merchant Services business recorded outstanding results, as PayPal expanded its global footprint to new geographies and currencies during the quarter.

PayPal net revenues totaled a record $454 million in Q2-07, a growth rate of 34% over the $339 million reported in Q2-06. Global TPV was $11.69 billion in Q2-07, a 32% increase from the $8.86 billion reported in Q2-06.

PayPal Merchant Services contributed $4.92 billion globally to the $11.69 billion in global TPV in Q2-07, representing a 57% increase from the $3.13 billion reported in Q2-06.

PayPal reported a transaction revenue rate of 3.70% for the quarter, a transaction expense rate of 1.12% and a transaction loss rate of 0.29%. Interesting benchmark for those starting a business.

New statistics on Dutch payments: 20 % market share for non-bank payment instruments

The central bank published a new statistic on Dutch payments which is on page 13 of its statistical bulletin. See also the press-release.

It is one of the very few statistics that is compiled on a voluntary basis together with banks. Generally the central bank obliges banks to report all kind of stuff. But while the central bank may sometimes have to deal as a supervisor with payments (in its role as a supervisor of banks) it has no formal responsibility for payments as such. Which means that there is no detailed reporting obligation.

Still, in their apparently continued move to openness, banks now provide all their data to the central bank to compile this statistic. Which shows that the debit-card at POS (PIN) is still on the rise (with 9 % last year) to reach the number of 1,45 billion.

Interestingly the central bank also roughly estimates the number of transactions, apart of cash, that are outside the scope: retailer cards, tank cards of petrol stations, gift cards, payments via 0900, sms and wap-billing. And states that this accounts for at least a number of 1 billion transactions and EUR 4 billion in value.

While I personally think this is seriously too low an estimate (with the real number of non-bank payment transactions via the phone-channel in itself almost reaching a total of 2 billion transactions) even the low estimate already demonstrates that in terms of numbers already 20 % (1 billion out of 5) of the Dutch payment transactions is effected by non-bank players with non-bank instruments.

New blog on the block: Mobile Money and Banking

See the Mobile Money and Banking Blog.

Rabobank adapts Minitix to penetrate m-payments market

See the news of last week on zibb.nl and Emerce, explaining that Rabobank is adapting its e-purse application Minitix (10.000 users and 100 shops) for use with the mobile. Ths user may now load the purse with 99,99 euro (this was 10 euro) and then pay for all kinds of digital stuff, that you usually pay with the mobile phone. Paying with Minitix can be done by using a shortcode.

The benefits are really there for the merchant; they are now glued to the mobile phone companies which only allow for payments of 1,50 euro max and then take a slice of 40-50 % as all-in merchant service fee. So Minitix add to the range and competition. Of course they will outsmart the sms; that is not so complicated: see the list of payment mechanisms (and cost) to buy a ringtone of 99 eurocent (with a popular radiostation radio538) are:
- 0900 (€ 0.31 extra)
- 0909-Pay Per Minute (€ 0.41 extra)
- Click&Buy (€ 0.15 extra)
- iDEAL (Rabobank, Postbank, ABN AMRO, SNS Bank)(€ 0.65 extra)
- MasterCard (€ 0.44 extra)
- MiniTix (€ 0.32 extra)
- PayPal (€ 0.40 extra)
- SMS (€ 2.01 extra)
- VISA (€ 0.44 extra)
- Waardecoupon (€ 0.00)
- Wallie-Card (€ 0.18 extra)
- YourGift (€ 0.00 extra)

Well, whats the use of such a payment mechanism if it is not freely available across closed mobile portals? Not so much, so that's why Rabobank also focused on the Open Mobile Internet initiative (OMI). This aims for open m-portals rather then the current closed shops where customers of Vodafone can hop around in the vodafone portal but really get charged when outside that portal (with Vodafone of course taking in the kick-back fees from content-providers on their own portal).

As it turns out that the customer doesn't like this closed shop idea (imagine that the internet started with a bunch of paid content available from the start, rather than as the free web it was) even the mobile operators feel that they have to change their business model (and there may be of course a bit of a concern that competition regulators start to understand their current business model with extraordinary high merchant service fee charges). So thats why they're also in the OMI.

By the way, the Rabobank Minitix is operator and bank-independent; just the same as earlier initiatives (that may have been too early in the market): Moxmo, Digipay (read the public report on their liquidation here). So let's see if this next shot at the m-payments market will have an impact.

Dutch domestic web-payment method iDEAL outsmarts creditcard as web payment method

Scheme-owner Currence notifies us in a press-release that IDEAL, the home bred Dutch domestic web-payment method, is now more often used as the credit-card for online-payments in the Dutch market. Market research shows that customers find iDEAL easier, faster and safer. So within 1,5 year after its introduction, iDEAL usage now stands at 15 % while credit-cards are used 13 % of the times. We should note that this is quite a nice track record, given that iDEAL was launched only 1,5 years ago.

Currence expects the role of iDEAL to become even bigger in the future. Already in the month March, the total number of iDEAL-payments was 1 million (compared to 3 million for the whole of 2006). So we definitely have a winner here.

Some more information on other payment methods can be found at Planet's website. This shows that other payment methods, often used are:
- bill payment (acceptgiro) via internet banking: 24 %
- credit-transfer via Internet banking: iDEAL: 16 %
- bill payment (acceptgiro) via post: 7 %
- one off direct debit; 7 %
- Paypal: 3 %.

Which does leave another 15 % for obscure/other payment methods (payment via SMS, 0900-phone lines, pre-paid systems/cards etcetera).

Google moving in with e-money license

Following up on all the news of Skype, I was wondering whether or not major players such as Yahoo, Microsoft and Google were up to further financial business yes or no (see also this report on Microsofts hiring choice for financial services EMEA). If so, the most likely place for them to be active would be the UK, basis of Paypal (assuming Paypal has chosen its home based an a thorough analysis of the best regulatory climate or doing cross-border banking and e-money business).

So what do you get if you go to the FSA register search and type in....:
Yahoo - 433351 - Yahoo! UK Limited - insurance mediation - not much.
Microsoft - 209864 - Microsoft Online UK Ltd ; some stuff about Egg, valid until 31/08/2005
Paypal - 226056 - Paypal (Europe) Ltd, authorised, issuing electronic money,
Skype - nothing
Vodafone - nothing, also their small e-money license has disappeared from the radar.
Google - 462517 - Google Payment Limited, authorised, also for issuing electronic money.

Well, what would they be up to?
Can we conclude that Google have gotten themselves a license, and are 'forgetting' to tell us all about it. I've tried googling the question (as Google knows ;-)) but that didn't get any results. So I guess we'll have to wait and see for further announcements.

Meanwhile I may go about checking the Dutch central registers to see if they have similar stuff in their books.

Banxafe for m-payments via the Belgian bank

The belgian banking/telco community has developed and launched m-payments that combine access to the bank account and holding a mobile telephone (see todays announcement here). I think it requires a smart sim somehow (so the customer who doesn't have one needs to get one in the shop). Automatiseringsgids informs us that one payment costs 25 cents to the consumer and49 cents to the merchant and that the minimum amount payable is 6 euro.

The flash animation for the product is quite amusing: (click here) and confirms a market positioning for the more than small-value payments. The payment functionality is branded: Pay2Me and the only company now accepting it is Pizzeria Arrivero (who undoubtedly dislike carrying cash).

Well, witnessing the highly succesfull current payment facilities of telco's, we can only hope the best for this initiative. It is built with high bank involvement, so it will have quite some hurdles, caused by bank regulation (identification, security, monitoring of transactions etc). Meanwhile the home-bred telco payments (paying for information, ringtones etc. from the pre-paid funds or from mobile account) will continue to eat up the real low-value market and may remain unregulated if the assumed Commission-telco lobby (described by the Dutch bankers on pages 11/12 of their reply to the Commission Enquiry into competition in banking).

Mobile phone as payment tool at POS and for remittances

GSM announced that the worldwide use of mobile phones for payments at point of sale is the aim of a new initiative announced by the GSM Association (GSMA), the global trade organization for mobile operators. The announcement is a sort of spin-off from the 3GSM conference. During which conference operators also announced their ambitions to be more active in the remittance market: "By exploiting the extensive reach of the mobile networks, the programme will complement existing local remittances channels and make transferring money internationally significantly more affordable. "

And still there are regulators around that claim that the mobile phone is not a payment instrument but merely a communication tool that is only incidentally used for payments...

I always wonder, don't those regulators have kids that spend 50% of their pocket money on payment via mobile phone? And don't they try it out for themselves?

Last week I joined the crowd here in the Netherlands and sent an SMS to vote for X6; a womens group running up in the Dutch X-factor (sort of Idols). Of course I got a response thanking me for the vote, but also another invitation to send in another SMS to increase my odds for winning a free ticket to next weeks' live show.

And then, this sms was again followed up by another quiz-question inviting me to sms the right answer and once again increase my odds. I was quite curious how many questions they had for me. The answer: 5 more questions (and as I flunked one, that meant 6 more SMS's costing 0,60 euro). And only one of those sms-es had a warning: don't sms too much.

So much for my contribution to the more than 1 billion euro revenue for Dutch data services (2006).

And another payment-phone innovation

Paynews reports Visa International and SK Telecom have announced plans to launch "what they expect to be the world's first contactless payment application on a universal SIM card which is personalized over-the-air.

Subscribers will be able to install the Visa Wave contactless payment application directly onto their handsets via OTA without having to visit their bank. The user simply sends a message to the bank requesting the Visa payment application. The bank then sends the application through mobile internet into the secure USIM chip. As the payment application resides on the subscribers' USIM card, they will not be restricted to making payments only from that device. SK Telecom 3G subscribers who wish to change to a new handset need only move the USIM card to the new device.

IMEVRYWHR: further integration of e-cash and phoning

Dave Birch refers and comments on this article about IMEVRYWHR. A service that integrates payments even further into the mobile phone. The myGlobe IMEVRYWHR provides an integrated mobile environment where users can connect and share through a range of communication, commerce and content tools and is claimed as the first service of its kind in the world.

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.

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.