BCG report suggests regulators to hold their horses on their 2010 ambition to phase out national products in Europe

See this press-release on BCG's 8th report: Global Payments 2006. In which specifically the EU-comments are quite sensible:
The report says that the Single Euro Payments Area (SEPA), the legislation intended to harmonize European payments platforms, will bring measurable benefits to consumers and is worth the investment that European banks must make — an estimated €500 million— to meet the requirement of bringing pan-European payments capability alongside domestic schemes by 2008. But the next step in SEPA, the expected elimination or conversion of all domestic schemes by the end of 2010, will require roughly €5 billion in additional investment with little additional benefit. Full migration to the SEPA standard by 2010, the report says, will in fact decrease efficiency and possibly reduce functionality by compelling banks, payments processors, and corporations to adopt pan-European products and to discard highly-efficient domestic ones.

“The bottom line is that pushing for the full SEPA concept to be achieved by the end of 2010 will actually destroy value,” says Nick Viner, a senior vice president in BCG’s London office and lead author of the report. “A far more workable solution would be to allow payments players to invest in the full SEPA requirements in line with their natural investment cycles for IT infrastructure, cards, terminals, account engines, merchant contracts, and related elements.”

But would the regulators really want to hold their horses and listen to this?

ABN AMRO and Rabobank concentrate cash processing activities

See this press releaseto find out that:
- Rabobank Nederland and ABN AMRO will launch a joint cash processing company named Gavea on 1 October 2006.
- Both banks are taking a 50% interest in the new company. Gavea will provide employment for 225 employees (full time equivalents) who will all be from ABN AMRO.

The two banks decided to cooperate in this field because the Dutch Central Bank will largely phase out its cash processing tasks from 1 January 2008. The daily counting and recirculation of euro notes and coins will then be transferred to recognised parties capable of meeting the very highest quality standards, as set by the Central European Bank. This means that responsibility for cash circulation and related activities will be transferred to the bank.

Cash processing is a relatively cost-intensive activity owing to the substantial investments as well as additional costs for e.g. security and continuity facilities. By joining forces, Rabobank Nederland and ABN AMRO aim to keep the long-term costs of cash processing under control.

Google launches Checkout-service

After a lot of speculation Google has now launched Google check-out which aims to make repetitive payments via credit-card easier. Essentially it is a new button which does al the fill-in work for the consumer, while keeping the consumer data confidential. Merchants do not get the full credit-card number, just the ok on a transaction.

As a mechanism for the user it is similar to verified by Visa. The difference is that with verified by Visa the bank kwows that you're in the program while with Google-check-out it doesn't. So the liability rules will be different.

Commission takes on Mastercard interchange fees

See this press release to find out that the European Commission confirms that it has sent a supplementary Statement of Objections (SO) to MasterCard on 23 June 2006. In its SO the Commission takes the preliminary view that MasterCard restricts competition between member banks by pre-determining a minimum price retailers must pay for accepting MasterCard and Maestro branded payment cards. The Commission’s preliminary view is that such behaviour is contrary to the EC Treaty’s ban on restrictive business practices (Article 81).

The SO is a follow up on a previous statement of objections. And the Commission is very eager to state that the enquiry is completely unrelated to the Cards Enquiry that is now pending. The direction of the intervention is quite clear from the press statement: either a prohibition or a redraft of interchange fees for Mastercard.

Small terminal supplier points to outdated retailer dogma's that PIN (POS) is expensive

Yesterday, Mr Mogendorff of Pinlinq, stirred the Dutch retail payment industry with an article in the Financieele Dagblad on POS-payments. He explicitly stated that retailer interest organisations have an over-fixation on the supposedly high cost of POS-terminals. That's quite interesting and correct.

In general the bank fees for retailers are quite insignifcant compared to their other business costs such as communication (ADSL), printer paper and what have you. But it is a historical habit of retailers to persist in complaining on the bank fees; they started doing so when Dutch POS-payments (PIN) were introduced and haven't stopped since. Meanwhile, the communication market has opened up (lowering fees), the terminal market has changed (with Pinlinq offering GPRS terminals for 200 euro) and the bank market has opened up (with fees lowered to 4 to 5 eurocents).

Stil, the Dutch retailers persist in whining on bank fees. And while it is now common knowledge that the cost of cash payments exceed those of PIN-payments, you can still see signs at the teller of retailers stating that low-value PIN-payments will be charged for 10 eurocent (that is still approximately the 25 guildercents they used to ask in 1990 when all the PIN started). And the retailer representative organisations remain unwilling to ask their constituency to remove those signs (and penalties for efficient payments). And they keep on demanding even lower fees than the 4-5 eurocent per PIN-transaction.

Similarly, their website on payment terminals (www.betaalterminal.nl) has not so very accurate information on the best deals for payment terminals, suggesting that a GPRS-terminal would costs 1000 euro for the retailer. Of course that fiction is necessary to persist in the opinion that Dutch POS (PIN) is expensive and that all that it the bank's fault.

So all in all, it's quite refreshing to observe that Pinlinq, this new competitor in the payments terminal market is now not only stirring up the terminal-market but also the policy-market on payments (effectively challenging the policy dogma's of retailer representative organisations). Hurray for competition....

Remittances via money transfer agencies more expensive than via the bank

Here in the Netherlands, the press are so keen on blaming banks for not competing and not giving the best deal to their customers, that we found articles in the newspaper suggesting that the Ministry of Finance wanted credit-transfers to be cheaper.

Upon closer inspection of the source of the news: the Ministry itself (click here) it turns out that the Ministry of Finance has decided to make life easier for money transfer agents, hoping that their current high level of prices, will be lowered and that the remittance market can better flourish (not so much in the underground sector, but legally).

Effectively, the underlying documentation presents a picture that demonstrates that bank fees are systematically and substantially lower than money remittance fees. Still, the Ministry does not find the market for international remittances sufficiently developed and will ask the competition authority to look more deeply into the issue.

Well, remittances are indeed on the agenda now ......

SEPA compliancy for cards

In the SEPA discussion, there is one concept which is quite confusing: sepa compliancy for cards. Looking at the sepa cards framework, one can deduce that a sepa compliant card is issued by a sepa compliant bank and that the brand is also sepa compliant. And it is also clear that sepa compliancy means that one must be able to use the card in one country as easily as in others.

Still, what does make a card sepa or SCF-compliant?

Visa doesn't worry too much. See this article. It simply opens up processing and all that and states that they do comply. That's quite pragmatic, and actually, no one can prove them wrong. For all the vague phrasings that are all around, they might even be right.

Pilot with NFC payments in Amsterdam

Lanmagazine reports that JCB has set up, together with CCV van der Velden, a trial to facilitate payments using the Near Field Communication Chips of Philips and transaction software of JCB. Other partners in the project are: KPN, PaySquare, GemPlus en ViVoTech.

The idea is to provide a phone to 100 Amsterdam people so that they can use it to pay for small payments at retailers in and around the World Trade Center Amsterdam. The goal of the pilot is to obtain more practical experience and user feedback.

Google to hit the scene with payment functionality

Automatiserings Gids reports that Google will introduce its payment function on June 28, with a fee of approximately 1,5 - 2 percent (just under Paypal). Let's see if that works out.....

Phishers build brick ING office to phish

ING has confirmed after an article in the Telegraaf that phishers have set up a fake website as well as a fake office of ING. Customers were persuaded to phone 'ING-employees' on their private mobile and arrange a physical meeting (in a street where there was also a real ING Bank).

Another example of a phishing trend that increasingly becomes multi-channel, using phone, offices and web rather than just phone, web or office.

Payment & Settlement news nr 39

is now available here.

UK Chip and PIN already obsolete?

A Midcounties CO-OP experimented with a so-called Pay By Touch product, allowing payment with the use of a finger, rather than card (see link). At the checkout the shopper uses a simple finger scan for identification and, in doing so, a payment is made directly from his or her bank account, while members’ Co-op dividend points are automatically awarded.

Research showed that overall, shoppers were very supportive of this new initiative. Over half of those surveyed said they had either already enrolled in the service or intended to do so shortly. Over 75% of shoppers questioned said they would like to see the service available at other local retailers like M&S and Somerfield. When compared to Chip and PIN, 85% of shoppers felt Pay By Touch was more convenient and 76% felt it was more secure.

Undoubtedly there will be more to this than the press release tells us. It just isn't that easy to do the biometric stuff in payments.

Paypal Netherlands has started....!

Today marks the entrance of Paypal in the Dutch market. It has gone through the EU-notification procedure so that its UK e-money passport is also valid in the Netherlands. So, thanks to the e-money irective, Paypal can operate quickly and legitimately in all Eu-countries, without the need to apply over and again for local licenses. A nice demonstration of innovation, stimulated and backed by a Directive (the e-money directive).

And still, some argue that the e-money directive halted innovation......

EU: Consultation on future Internal Market policy

The EU consultation on internal market strategy has started some time ago and will end on June 15.

Fees review in Australia: consumers do not wish to see transaction prices....

Payment News had these two nice pointers to fee studies. One is from the Reserve Bank of Australia, the other from the Australian Bankers Association.

The RBA noted that the revenue feel due to lower merchant service charges, yet the overall growth in fee income that occurred was due more to increases in the use of banking services than increased charges. The Australian banks analysis confirms this and adds that:
- the user pays system allows customers to make choices about their banking and the average price of banking is falling as consumers gravitate toward low-cost options,
- expansion in the availability of free transactions, and of accounts offering an unlimited number of such transactions, means that many mainstream customers today pay little or no banking service fees at all because they transact within fee-free limit conditions on their accounts.

Most interesting is that while all theory outlines the need for transaction fees to be transparent to the user, the actual consumer quickly reverts to packaged deals which make the fee intransparant. Consumers do not want to be bothered with detailed billing for convenience services. They know they need to pay something but prefer to be not aware.

SEPA time: Germans do interconnection pilot....

While the Belgians simply eliminate their local scheme in order to gain EU-wide acceptance by choosing Maestro, the Germans choose to pilot interconnection of existing debit-card schemes. See this press release of German Banks (Payment News). To that end the first letters of intent are signed between:
-EUFISERV, a European supplier of processing services for card payments,
-SIBS, the operator of the ATM and card payment system “Multibanco” in Portugal,
-Raiffeisen Landesbank Südtirol and Südtiroler Volksbank.
To follow are (if all goes well) EURO6000. Dutch Interpay has already announced to join the trial.

And the name of this new interconnecting animal will be: Euro Alliance of Payment Schemes (EAPS...).

Belgium chooses for Maestro to replace local brand

Belgian newspaper Standaard informs us that Febelfin, the Belgian Finance Federation, and Banksys, operator of the entire Belgian debit card system, announced that the Belgian banks chose to replace the national Bancontact/Mister Cash (BC/MC) system for domestic card payments and money withdrawals by 2008 with the issuance of Maestro cards, MasterCard's debit card mark. This is all a part of the move to SEPA.

The press release informs us of all the benefits. And there is a slight hint that the prices may rise:
It goes without saying that investments will have to be made for the switch-over from BC/MC to Maestro. The Belgian banks and Banksys will cooperate with all parties concerned in order to ensure a smooth switch-over. Good coordination between the representatives of the parties concerned will make it possible for the Belgian users to switch to SEPA without any major problem.

Japan's Seven-Eleven operator to launch e-money service and multi-accepting terminals

Taken from this google alert:
Seven & I Holdings Co. (3382.TO) said Friday that it will set up e-money reader terminals at its group stores starting this autumn in a bid to lay the groundwork for accepting different types of electronic cash.

The Japanese retail giant, which operates Seven-Eleven convenience stores in Japan, said it will install "multi-reader writers" in registers at 11,000 of its stores. The reader system, developed by Matsushita Electric Industrial Co. (6752.TO), will allow customers to pay with Seven & I's "nanaco" prepaid e-money available next year, as well as with JCB Co.'s QUICPay pay-later e-money service.

So Japan is well up to the non-cash e-money types. And in doing so the Japanese market is living proof of the inevitable interoperability and acceptance of multiple cards at one location.

ABN AMRO will issue securer debit cards as of June 2006

ABN AMRO announced yesterday that it will start equipping (as the first bank in the Netherlands) its bank debit cards with an EMV chip. Earlier this year, all ABN AMRO's Dutch ATMs were made EMV-compliant.

Another innovation on the basis of iDEAL: Paydutch...

Planet Multimedia reports that PayDutch will introduce a light-weight escrow service for securing Internet payments. The system is based on the iDEAL internet-payments functionality of Dutch banks. For 1 euro per transaction, a buyer can get added security by paying/escrowing via PayDutch. Once the goods have arrived in good shape, PayDutch will forward the money to the seller.

It will be interesting to see if this light-weight type of escrow will fly...

Dutch slow in migration to EMV, according to terminal supplier CCV

Today one of the most important terminal suppliers and processors in the Netherlands, CCV, briefed the public (see nu.nl) that the Netherlands are getting behind in the migration to EMV. And despite the fact that current fraud cost in the Dutch debit card system are still very low, CCV appears to use fear tactics and points out that we face a possibility that magnetic stripe debit-card fraud will move to the Netherlands.

While at face value there appears to be a bit of self-interest here, with CCV being one of the major terminal suppliers, CCV's self-interest will not be the major issue. No single supplier of goods will be seeking publicity to boost sales if at the same time he has no goods available. And that is the case: CCV has not a single EMV compliant terminal for the Dutch market available.

So what is happening here?

We need to keep in mind that CCV is dependent on Interpay for the certification of its terminals. So my guess is that it's more likely that CCV tries to fire up Interpay to get going with the certification.

First mobile chip terminal approved in Danmark

See the press release from PBS:
Elite 8200 GPRS, which is the name of the approved mobile chip terminal, is sold by LD Betalingssystemer A/S. Using a chip the terminal's transaction time is ten seconds, which is the same level as a magnetic stripe-based transaction.

Actually, those ten seconds is a long wait from a Dutch perspective. In the Netherlands we have an option pre-authorisation meaning that you do the pin-code and stripe thing while the cashier is still checking yout items. So once the amount is known, we only have to key in YES and the transaction is on the way and approved in 2-3 seconds. But for a mobile terminal it's not so bad.