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 !
Wednesday, June 30, 2004
Tuesday, June 29, 2004
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.
Wednesday, June 23, 2004
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.
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.
Thursday, June 17, 2004
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".
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".
Tuesday, June 15, 2004
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.
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.
Sunday, June 06, 2004
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?
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.
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.
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.
Thursday, June 03, 2004
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....
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....
Wednesday, June 02, 2004
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.
Thursday, May 27, 2004
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 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.
Wednesday, May 26, 2004
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.
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.
Tuesday, May 18, 2004
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.
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.
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..
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..
Monday, May 17, 2004
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.
Monday, May 10, 2004
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 ... (?)
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......
Friday, April 30, 2004
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.
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.
Thursday, April 29, 2004
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.
EC Antitrust Law in Payment Card Systems.
Wednesday, April 14, 2004
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.
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.
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