Interesting week this week. First of all it became public that the EU has put a bunch of Duth convicted terrorists on the EU-freeze list. This means that banks are forbidden to provide those clients with financial services (cards, insurances etc) beyond the most basic bank services. Which is in line with Know-Your-Customer and integrity requirements of all kinds of supervisors.
Second, the mayor of Amsterdam, Job Cohen, is now litigating against exploitants of sex-houses. Which in turn take the Amsterdam city to court. And as a part of the solution of getting rid of illegal money, Cohn suggests that banks more actively participate in the provision of loans to sex-companies/prostitutes.
So what should banks do? First of all they need to keep the system clean and kick-out all kinds of vague customers. Having done so, they should accept those same customers and provide them with basic banking services, loans etcetera, in order to kick the criminals out of their financial business. But doing so will be a violation of the former integrity-requirements as well as the individual freedom of banks to choose with whom they want to do business.
The end result of this discussion can be no other that sometime, somewhere in the next years, we need to set up a state owned bank that provides these services/loans to 'bad customers' so that the public policy goal of accessability of banking services can be guarantueed without demanding banks to execute political inconsistent orders.
Saturday, December 30, 2006
Wednesday, December 27, 2006
SNS Banks joins iDeal
Emerce reports that SNS bank joined the internet-payment scheme iDEAL. Of the 23 million webpayments in the Netherlands already 20 % are now done through iDEAL. Which signifies that the product has value to the merchants/consumers alike.
Friday, December 22, 2006
Update on further research following parliaments discusson on the draft bill Crone
This year, Dutch parliament discussed a draft legislative proposal by socialst MP Crone. The goal of this proposal was primarily to order the banks back into local communities where they closed bank branches. See my previous post. As the discussion in parliament developed, the MP's acknowledged that there was no real problem that warranted this draft law, yet given the upcoming elections they ordered a final study to seek out and solve any remaining issues. The Ministry of Finance released the preliminary results of this study last week. Also this report, produced by consumer union, retailers etc, confirms that the distance to a bank branch/service is not a real issue for consumers or merchants.
Does this mean that the proposal will be shelved? Most likely not. Two left wing parties (Socialist Party and Labour) have joined forces to keep the proposal alive by focusing on article 2 in the draft law. This draft-article prescribes that payment services must be safe, accessible and reasonably priced. And in a real nagging mood, MP's Irrgang and Crone, asked about the price asked by Postbank for its debit-card. Would the new draft bill not be useful to prevent Postbank from abolishing a free debit-card?
Interestingly the answer of the Ministry of Finance is a clearcut no, albeit formulated in diplomatic terms:
One may wonder if 'free payment services' can be considered reasonable, given the considerable costs involved in setting up and maintaining a payment infrastructure.
As in real sequels.... discussion to be continued...
Does this mean that the proposal will be shelved? Most likely not. Two left wing parties (Socialist Party and Labour) have joined forces to keep the proposal alive by focusing on article 2 in the draft law. This draft-article prescribes that payment services must be safe, accessible and reasonably priced. And in a real nagging mood, MP's Irrgang and Crone, asked about the price asked by Postbank for its debit-card. Would the new draft bill not be useful to prevent Postbank from abolishing a free debit-card?
Interestingly the answer of the Ministry of Finance is a clearcut no, albeit formulated in diplomatic terms:
One may wonder if 'free payment services' can be considered reasonable, given the considerable costs involved in setting up and maintaining a payment infrastructure.
As in real sequels.... discussion to be continued...
Sunday, December 17, 2006
Barclaycard adds Oyster to credit cards
See this article that outlines that Barclaycard plans to release a credit card that incorporates a London Transport Oyster card. Providing trials are successful, Barclaycard plans to roll out its next-generation credit cards to its customers in London next year.
The idea of combining an Oyster card with Barclaycard and Barclays Connect Visa cards follows an exclusive contract between Barclaycard and TranSys, the consortium which runs Oyster card in partnership with Transport for London (TfL), due to run for at least three years.
The idea of combining an Oyster card with Barclaycard and Barclays Connect Visa cards follows an exclusive contract between Barclaycard and TranSys, the consortium which runs Oyster card in partnership with Transport for London (TfL), due to run for at least three years.
EU Commission: charming the citizen into unworkable rules
Last week we had an interesting analysis in the Financieele Dagblad by Mr Dekking. His view is that the Commission tries to sell the European concept by easy and straightforward rules to the benefit of the user. The example provided is the discussion on roaming fees for teleco. Those should be equal for phoning within and beteen countries. But, Dekking reminds the reader, one should always remember that such easy charm-concepts never make it fully into regulation. Member states will discuss and modify rules into a more complex set of rules. Leading to something which may be less easy to explain and less workable.
It would be interesting to draw up a list of regulation which suffers from the above European charm-tactic. That list might actually be quite a long list of symbol legislation. The funny thing is that, in order to sell the European concept of a competitive internal market, regulators choose to intervene severely in such a market. Such legislation may charm some European citizens. But do the politicians really think that all citizens will be fooled into the EU-concept? And that such symbol legislation will help?
Perhaps, the fact that EU-legislators and parliament really assume that citizens will be fooled so easily, may be at the heart of the Euroscepsis. Why would citizens transfer more rights to institutions that seek pearls and beads rather than policy-consistency to achieve a true competitive internal market ? And that, according to the transparant communication on the EU-website dismiss the NO-vote in 2 member states to continue making up a constitutional treaty that the EU-citizens really do not want?
Brr..
It would be interesting to draw up a list of regulation which suffers from the above European charm-tactic. That list might actually be quite a long list of symbol legislation. The funny thing is that, in order to sell the European concept of a competitive internal market, regulators choose to intervene severely in such a market. Such legislation may charm some European citizens. But do the politicians really think that all citizens will be fooled into the EU-concept? And that such symbol legislation will help?
Perhaps, the fact that EU-legislators and parliament really assume that citizens will be fooled so easily, may be at the heart of the Euroscepsis. Why would citizens transfer more rights to institutions that seek pearls and beads rather than policy-consistency to achieve a true competitive internal market ? And that, according to the transparant communication on the EU-website dismiss the NO-vote in 2 member states to continue making up a constitutional treaty that the EU-citizens really do not want?
Brr..
Tuesday, December 12, 2006
Dutch competition authority pleased with competiton for POS-switching but concerned/monitoring competition side-effects of evolution towards SEPA
Today the Dutch competition authority released their financial monitor 2006 (in Dutch) which contained two chapters on payments. One chapter outlined that as of the structural change to move the responsibility for negotiating POS-switching fees to banks, the competition increased. Small and large retailers get cheaper POS-switching. So that was a bit of good news.
But a bit of bad news as well. Chapter 6 demonstrates that the Dutch competition authority is still struggling to come to terms with SEPA. Their description is not so bad, but then again; not completely accurate either. The report speaks of one SEPA-system (implying one scheme/brand rather than standardised messages) and suggests that SEPA stands for Single European Payments Area (forgetting the focus on the Euro-zone: Single Euro Payments Area). Furthermore they take the migration deadline 2010 as a fixed deadline where all credit-transfers and direct debits in all the Eurozone will be sepa-compliant (whilst some national variations may still exist).
Furthermore the analysis of risks occurs on a card-based view of payments. Leading to a situation where the competition authority may forbid Dutch banks to agree bilaterally on lower interchange fees amongst them (in order to preserve the possibility for outside players to compete with the Dutch in the Netherlands). And funnily there is still the fear that the acuirer market is concentrated with one player (while effectively there are about 20 active in the market right now).
So, if one thing is clear, it is that it will be impossible for banks to satisfy all expectations. Politicians desire no fee hikes but do wish a payment service directive (which is going to cost). Retailers wish no fee rise but competition authority will not allow low-cost local agreements between Dutch banks. Central banks do not wish to see local variations of debit cards, but local interest groups do wish such a thing.
Where this will end is quite clear. Continued debates, bank-blaming and no consensus whatsoever. And later, when we are all old, we will come to realize that at this point in time we were trying to come to terms with the shift from domestic retail payments markets to European markets. Which brings us in a situation in which many fear to lose what they have and few are able to imagine the future and the benefits of what is to come. But assuming that we will not be hindered by geopolitical interruptions, these benefits will in the long run stand out: a deeper market in Europe, more competition, lower cost and convergence of fees.
But a bit of bad news as well. Chapter 6 demonstrates that the Dutch competition authority is still struggling to come to terms with SEPA. Their description is not so bad, but then again; not completely accurate either. The report speaks of one SEPA-system (implying one scheme/brand rather than standardised messages) and suggests that SEPA stands for Single European Payments Area (forgetting the focus on the Euro-zone: Single Euro Payments Area). Furthermore they take the migration deadline 2010 as a fixed deadline where all credit-transfers and direct debits in all the Eurozone will be sepa-compliant (whilst some national variations may still exist).
Furthermore the analysis of risks occurs on a card-based view of payments. Leading to a situation where the competition authority may forbid Dutch banks to agree bilaterally on lower interchange fees amongst them (in order to preserve the possibility for outside players to compete with the Dutch in the Netherlands). And funnily there is still the fear that the acuirer market is concentrated with one player (while effectively there are about 20 active in the market right now).
So, if one thing is clear, it is that it will be impossible for banks to satisfy all expectations. Politicians desire no fee hikes but do wish a payment service directive (which is going to cost). Retailers wish no fee rise but competition authority will not allow low-cost local agreements between Dutch banks. Central banks do not wish to see local variations of debit cards, but local interest groups do wish such a thing.
Where this will end is quite clear. Continued debates, bank-blaming and no consensus whatsoever. And later, when we are all old, we will come to realize that at this point in time we were trying to come to terms with the shift from domestic retail payments markets to European markets. Which brings us in a situation in which many fear to lose what they have and few are able to imagine the future and the benefits of what is to come. But assuming that we will not be hindered by geopolitical interruptions, these benefits will in the long run stand out: a deeper market in Europe, more competition, lower cost and convergence of fees.
Thursday, December 07, 2006
Postbank hits the news twice this week... no free basic card and possible brand elimination
This weeks financial news featured the Postbank a couple of times. In the beginning of the week FD reported that mother company ING Group was reconsidering its branding strategy. As a part of that exercise, the brand Postbank might be taken off the market. Which would be the end of a nearly 90-year separate branding for the payment services of Postbank (before: 1986 government postal giro payment services). So all the experts each had their own opinion whether this was good or bad.
To the more-insider, the news of course didn't really come as a surprise. Every 5 or 6 years the board level management at ING comes up with the question whether or not to maintain or change the brand strategy. Usually nothing changes. So much ado, perhaps about nothing. Although... one might wonder which is the real Postbank in a more consolidated European payments market. There is a Postbank in Germany as well and some confusion might arise if these two start crossing borders and competing. So in the light of European developments, things may become different this time around.
European developments are also at the heart of tonight's news-item in the NRC. The NRC reports that Postbank will abolish its last debit-cards which were for free. There some 1,56 million of those cards which essentially only had a domestic ATM and POS functionality. But, referring to the SEPA-developments, Postbank informs it customer that they will not support the use of this low-end card as of july 2007. Customers that do wish to continue using this card must choose to upgrade to a full panEuropean debit card (for € 10,95 a year).
Although reactions at the present moment are still scarce, there is bound to be some rumour in the market. Given the image of Postbank as the former postal giro, with a mission to make payment facilities accessible to all people, there may be questions in parliament. Which will undoubtedly link this move of the Postbank to the current perception in public opinion that these European SEPA-developments will make life more expensive. In which case Postbank in turn will undoubtedly refer to European institutions such as European Commission and European Central Bank. The ECB for example recently published its vision and stated that:
...
Ideally, citizens should be able to use their cards anywhere in the euro area.
...
A SEPA for cards will have the following characteristics:
all technical and contractual provisions, business practices and standards which had formerly resulted in the national segmentation of the euro area have been eliminated.
...
Well, of course all ideals come at a price and in my opinion it would be up to the ECB now to step forward and compliment and support Postbank which has had the audacity to act as a first moving issuing bank towards a Single Euro Payments Area for cards. Which is to be preferred above banks merely paying lipservice to the European Ideal and not moving at all...
To the more-insider, the news of course didn't really come as a surprise. Every 5 or 6 years the board level management at ING comes up with the question whether or not to maintain or change the brand strategy. Usually nothing changes. So much ado, perhaps about nothing. Although... one might wonder which is the real Postbank in a more consolidated European payments market. There is a Postbank in Germany as well and some confusion might arise if these two start crossing borders and competing. So in the light of European developments, things may become different this time around.
European developments are also at the heart of tonight's news-item in the NRC. The NRC reports that Postbank will abolish its last debit-cards which were for free. There some 1,56 million of those cards which essentially only had a domestic ATM and POS functionality. But, referring to the SEPA-developments, Postbank informs it customer that they will not support the use of this low-end card as of july 2007. Customers that do wish to continue using this card must choose to upgrade to a full panEuropean debit card (for € 10,95 a year).
Although reactions at the present moment are still scarce, there is bound to be some rumour in the market. Given the image of Postbank as the former postal giro, with a mission to make payment facilities accessible to all people, there may be questions in parliament. Which will undoubtedly link this move of the Postbank to the current perception in public opinion that these European SEPA-developments will make life more expensive. In which case Postbank in turn will undoubtedly refer to European institutions such as European Commission and European Central Bank. The ECB for example recently published its vision and stated that:
...
Ideally, citizens should be able to use their cards anywhere in the euro area.
...
A SEPA for cards will have the following characteristics:
all technical and contractual provisions, business practices and standards which had formerly resulted in the national segmentation of the euro area have been eliminated.
...
Well, of course all ideals come at a price and in my opinion it would be up to the ECB now to step forward and compliment and support Postbank which has had the audacity to act as a first moving issuing bank towards a Single Euro Payments Area for cards. Which is to be preferred above banks merely paying lipservice to the European Ideal and not moving at all...
Wednesday, December 06, 2006
The price of banking; international comparison
This Oxera report compares the price and cost of the main banking products used by the vast majority of British consumers with the price and cost of those products in ten other developed countries.
Whilst the British bankers would have loved to say they were the best and the cheapest all across the board, such a statement was impossible due to the incorrect pricing structure of the Netherlands (where consumers are effectively sponsored by companies). So the conclusion became:
This study shows that a typical UK customer using a range of banking services is able to benefit from some of the cheapest services of all the countries covered in the study. This finding generally holds across the different consumer profiles. Finland and the Netherlands are also notable countries with low-cost banking services.
The report also contains a statement by external assessor: David T. Llewellyn, professor of Money and Banking. He vouches for the report and also makes the following two statements:
And yet, public debate in this area is often very subjective and frequently based on impressionistic judgements rather than concrete or robust empirical evidence.
....
Public debate on these important issues needs to be based on firm and robust empirical evidence rather than ad hoc impressions
I couldn't agree more.
We really need to stop wasting our time and resources on the current media policy circus on EU-payments and get back to the real world and real life problems rather than continue the ad-hoc and intuitive anecdotal media approach.
Whilst the British bankers would have loved to say they were the best and the cheapest all across the board, such a statement was impossible due to the incorrect pricing structure of the Netherlands (where consumers are effectively sponsored by companies). So the conclusion became:
This study shows that a typical UK customer using a range of banking services is able to benefit from some of the cheapest services of all the countries covered in the study. This finding generally holds across the different consumer profiles. Finland and the Netherlands are also notable countries with low-cost banking services.
The report also contains a statement by external assessor: David T. Llewellyn, professor of Money and Banking. He vouches for the report and also makes the following two statements:
And yet, public debate in this area is often very subjective and frequently based on impressionistic judgements rather than concrete or robust empirical evidence.
....
Public debate on these important issues needs to be based on firm and robust empirical evidence rather than ad hoc impressions
I couldn't agree more.
We really need to stop wasting our time and resources on the current media policy circus on EU-payments and get back to the real world and real life problems rather than continue the ad-hoc and intuitive anecdotal media approach.
Tuesday, December 05, 2006
Retailer action against credit-card
Dutch retailers have opened their own private war on credit-cards. Frigthened and appalled by the penetration of credit-cards in the supermarket domain they now try to influence public opinion. While the 40 million credit-card-transactions are clearly irrelevant in the Dutch POS market of approximately 3 billion transactions, there is a movement in the retailer domain. So this week we see an article appearing in Trouw, quoting the chief of the branche-organisation for hotels/restaurants. Of course he claims the fees are too high and that retailers should surcharge more than they do now (in the Netherlands surcharging is allowed for about 10 years, but little use is made of that for credit cards - while extensive use is visible for those who make small debit-card payments below 10 euro).
And today we see an article by a restaurant owner in Rotterdam in Financieele Dagblad. The interesting thing is that from the article you might deduct that someone at the branch-organisation has written it. First of all it is a retailer that states that he he very much supports the efforts of the two branche-organisations: Koninklijke Horeca Nederland and Platform Detailhandel Nederland to deal with this serious credit-card issue. This is interesting because he forgets to write: 'From now on I am going to surcharge in my restaurant. And I encourage others to do so'.
Furthermore it looks as if the ghost writer of that letter has apparently looked at the Australian debate (where a real forest of goodies/points/systems on credit cards is present, while we do not have such a huge variety in the Netherlands). So this Dutch retailer states that consumers wish to pay by credit-card because of the goodies that come with the card. When reading it I think: true for Australia, not so much for the Netherlands.
So we have an obvious retailer action going on. But I guess the superficial reader would not read so closely and see the articles as a sign that something is rotten in the state of retailers. Let's see if this credit-card banging will also be the main retailer item tomorrow at a conference on SEPA in The Hague. Or will they use the conference to refuel the Maestro interchange debate?
And today we see an article by a restaurant owner in Rotterdam in Financieele Dagblad. The interesting thing is that from the article you might deduct that someone at the branch-organisation has written it. First of all it is a retailer that states that he he very much supports the efforts of the two branche-organisations: Koninklijke Horeca Nederland and Platform Detailhandel Nederland to deal with this serious credit-card issue. This is interesting because he forgets to write: 'From now on I am going to surcharge in my restaurant. And I encourage others to do so'.
Furthermore it looks as if the ghost writer of that letter has apparently looked at the Australian debate (where a real forest of goodies/points/systems on credit cards is present, while we do not have such a huge variety in the Netherlands). So this Dutch retailer states that consumers wish to pay by credit-card because of the goodies that come with the card. When reading it I think: true for Australia, not so much for the Netherlands.
So we have an obvious retailer action going on. But I guess the superficial reader would not read so closely and see the articles as a sign that something is rotten in the state of retailers. Let's see if this credit-card banging will also be the main retailer item tomorrow at a conference on SEPA in The Hague. Or will they use the conference to refuel the Maestro interchange debate?
Monday, December 04, 2006
MasterCard Europe Announces Maestro SEPA Interchange Rates
MasterCard Europe has today announced SEPA fall-back interchange rates for Maestro® point-of-sale (POS) transactions intended to be effective from 1 January 2008. The Maestro SEPA fall-back rates per transaction type are as follows:
Maestro, Chip & PIN, EUR 0.05 + 0.20%
Secure e&m-commerce, EUR 0.05 + 0.25%
Baseline transaction,EUR 0.05 + 0.30%
Large Merchants, EUR 0.03 + 0.12%
Mastercard states that for cross-border Maestro POS transactions, the fall-back interchange rates are significantly reduced versus current intra-EEA cross-border rates. For a typical transaction of 50 euros, the new Maestro SEPA interchange rates will be between 9 and 20 euro cents – as compared with the current Maestro intra-EEA interchange rates of 25 to 59 euro cents.
It will be interesting to see the response of Commission and ECB to this publication. Undoubtedly they won't be satisfied (a satisfied regulator/overseer being one if the inherent impossibilities of life)....
Maestro, Chip & PIN, EUR 0.05 + 0.20%
Secure e&m-commerce, EUR 0.05 + 0.25%
Baseline transaction,EUR 0.05 + 0.30%
Large Merchants, EUR 0.03 + 0.12%
Mastercard states that for cross-border Maestro POS transactions, the fall-back interchange rates are significantly reduced versus current intra-EEA cross-border rates. For a typical transaction of 50 euros, the new Maestro SEPA interchange rates will be between 9 and 20 euro cents – as compared with the current Maestro intra-EEA interchange rates of 25 to 59 euro cents.
It will be interesting to see the response of Commission and ECB to this publication. Undoubtedly they won't be satisfied (a satisfied regulator/overseer being one if the inherent impossibilities of life)....
Sunday, December 03, 2006
Citadel Commerce authorised as an e-Money Issuer in UK
ESI Entertainment Systems Inc, a provider of products and services to the international gaming industry, announced that its wholly-owned London, England based subsidiary Citadel Commerce UK Limited (CCUK) has received authorization from the UK
Financial Services Authority (FSA) to operate as a regulated e-money issuer.
Financial Services Authority (FSA) to operate as a regulated e-money issuer.
Friday, December 01, 2006
Third progress report on Target2: on track
EBC's 3r progress report on Target2 shows that it is on time (of course we have to keep in mind that this is a delayed schedule... in the orginal planning Target2 should have been delivered all over Europe by now). It finally includes the pricing scheme for ancilliary systems.
Tuesday, November 28, 2006
FATF attempts to grasp modern payment technologies
FATF published this report on new payment mechanisms. It would be a nice try for a second year student, trying to come to grips with reality in modern payments. But if one considers this effort to be the result of heavily government funded research by public servants paid out of our tax money the result is astonishing, notably in the lack of capability to grasp what is really happening in todays markets.
Take for example the use of premium services via the telephone as a mechanisms of transferring money. The fact that 0900 services are being phoned over 2 billion times each year in the netherlands: not mentioned. A feeble attempt at stating that mobile phones may be used for payments. But not a mention of market reality. As planet multimedia outlines today: revenue for data services in sms/mms in 2006 in the Netherlands will be 1 billion euro (on total revenues of 6 billion euro). Quite a solid channel to smurf some money away to other venues.
The issuers of such phone-based payment mechanisms do not comply with FATF-special recommendation VI (all alternative payment mechanisms should be brought under a license regime) and local governments apparently do not (want to?) know of their existence. So the only main conclusion of FATF is not to look inside their own markets for unregulated alternative payment channels but to fear off-shore providers of payment/bank services. As if we're still in the 1995 point in time when people tried to come to terms with the internet and its consequences.
If this quality of analysis also underlies the rest of the FATF-work, we may well reconsider the relevance/efficiency of all FATF-measures. Then again, it may not be the counter-measure itself that is effective, but the threat of it. Thus, paradoxically, the FATF-efforts may work, even if they miss the target. And by that same paradox, we could also consider this to be a good report.
Take for example the use of premium services via the telephone as a mechanisms of transferring money. The fact that 0900 services are being phoned over 2 billion times each year in the netherlands: not mentioned. A feeble attempt at stating that mobile phones may be used for payments. But not a mention of market reality. As planet multimedia outlines today: revenue for data services in sms/mms in 2006 in the Netherlands will be 1 billion euro (on total revenues of 6 billion euro). Quite a solid channel to smurf some money away to other venues.
The issuers of such phone-based payment mechanisms do not comply with FATF-special recommendation VI (all alternative payment mechanisms should be brought under a license regime) and local governments apparently do not (want to?) know of their existence. So the only main conclusion of FATF is not to look inside their own markets for unregulated alternative payment channels but to fear off-shore providers of payment/bank services. As if we're still in the 1995 point in time when people tried to come to terms with the internet and its consequences.
If this quality of analysis also underlies the rest of the FATF-work, we may well reconsider the relevance/efficiency of all FATF-measures. Then again, it may not be the counter-measure itself that is effective, but the threat of it. Thus, paradoxically, the FATF-efforts may work, even if they miss the target. And by that same paradox, we could also consider this to be a good report.
Inspirational commercial about paying cash...
Aneace noticed a nice Visa Commercial featuring speed of transaction of card based payments versus cash. Stuff like that is what we can use in the Netherlands to improve awareness.
Saturday, November 25, 2006
Interchange under fire at Eu hearing
Last week there was a hearing at the EU on interchange fees. Reuters reported on that:
* The Commission conducted the hearing to let MasterCard reply to allegations that it restricts competition by setting minimum prices retailers must pay. The EU executive is considering abolishing the controversial and complex interbank fees charged by MasterCard, which can differ card by card.
* EU countries, shops and representatives of the airline and petroleum industries sharply criticised MasterCard's fees. A representative of Ikea, the Swedish furniture chain, said it could lower costs on many items, even amid high energy prices, but could not negotiate the fees imposed by MasterCard.
* MasterCard drew a rebuke at a closed European Commission antitrust hearing last week after claiming incorrectly that Britain had dropped an investigation into its fees, people who were present said. Mastercard made the statement near the start of the two-day hearing on Commission allegations that it sets excessive charges on shops and others that accept its credit and debit cards, they said.
This remains an interesting debate. There are quite some cheap shots thrown at Mastercard, but yet again, they are no saints either. Specifically the honour all cards rule could indeed be kicked out. But it remains painful to see grown up people still confuse interbank interchange fees with acquirer merchant service charges. That does'nt help the debate.
My guess? This banging on interchange fee in Europe may result in some changes that in the end hurt the retailers/governments more than they now realize. They're now all in for the card-scheme interchange fee banging experience without realizing the strategic effects of their behaviour. Specifically in terms of increased complexity and higher cost of decision making in the future.
It's a bit like the Netherlands. Retailers kept on nagging for years about POS-service charges (lowest in the world), which in the end lead to a restructuring of the industry so that scheme, processing and acquiring would all be different things. The central coordination concept was exchanged for a market forces dynamic, which means that it is harder to coordinate developments in the terminal market, telco-infrastructure etcetera. Both merchants, telco's and terminal builders have no single point of communication/entry for a debate on POS-issues. And what happens then: here come the retailers again, complaining that banks make life too complex/complicated as a result of the split of processing/acquiring/branding.
Well, you can't have it both ways. If you're really in for market forces rather than the simple life, you have got to buy in to increased complexity and coordination/information costs as well.
* The Commission conducted the hearing to let MasterCard reply to allegations that it restricts competition by setting minimum prices retailers must pay. The EU executive is considering abolishing the controversial and complex interbank fees charged by MasterCard, which can differ card by card.
* EU countries, shops and representatives of the airline and petroleum industries sharply criticised MasterCard's fees. A representative of Ikea, the Swedish furniture chain, said it could lower costs on many items, even amid high energy prices, but could not negotiate the fees imposed by MasterCard.
* MasterCard drew a rebuke at a closed European Commission antitrust hearing last week after claiming incorrectly that Britain had dropped an investigation into its fees, people who were present said. Mastercard made the statement near the start of the two-day hearing on Commission allegations that it sets excessive charges on shops and others that accept its credit and debit cards, they said.
This remains an interesting debate. There are quite some cheap shots thrown at Mastercard, but yet again, they are no saints either. Specifically the honour all cards rule could indeed be kicked out. But it remains painful to see grown up people still confuse interbank interchange fees with acquirer merchant service charges. That does'nt help the debate.
My guess? This banging on interchange fee in Europe may result in some changes that in the end hurt the retailers/governments more than they now realize. They're now all in for the card-scheme interchange fee banging experience without realizing the strategic effects of their behaviour. Specifically in terms of increased complexity and higher cost of decision making in the future.
It's a bit like the Netherlands. Retailers kept on nagging for years about POS-service charges (lowest in the world), which in the end lead to a restructuring of the industry so that scheme, processing and acquiring would all be different things. The central coordination concept was exchanged for a market forces dynamic, which means that it is harder to coordinate developments in the terminal market, telco-infrastructure etcetera. Both merchants, telco's and terminal builders have no single point of communication/entry for a debate on POS-issues. And what happens then: here come the retailers again, complaining that banks make life too complex/complicated as a result of the split of processing/acquiring/branding.
Well, you can't have it both ways. If you're really in for market forces rather than the simple life, you have got to buy in to increased complexity and coordination/information costs as well.
New payment data for 2005 from the BIS
can be found here (summarizing tables). But please all you scientists, be aware that these contain quite a condensened and in some sense arbitrary classification as to the nature of instruments. Don't bet your grandma on it.
Tuesday, November 21, 2006
The Eurosystem's view of a SEPA for cards
Quite interesting. The world of cards is already a worldwide business since quite some years. And here we have a bunch of central banks in euro-countries focusing on a suboptimization issue: how to allow similar types of payments in euro-countries with cards. See the Eurosystems view on SEPA for Cards. One might wonder: have they been sleeping all the time when banks were developing cross-border usage of debit-cards?
And another question: why suddenly the concern with consolidation. First the eurosystem insisted on one card-one terminal and harmonisation of features in the cards-world. Then suddenly as this materializes, there is the fear that it may not be a good thing to increase standardisation and allow for consolidation.
And a final remark. This is another annoying example of institutional drift. We set up the Eurosystem to do just one thing: determine monetary policy and operate a gross-settlement system used as a mechanism for executing money market policies. Over time, as any good institution apparently wishes, the eurosystem seeked to grab more territory by making statements, policy reports and implying that it retail payments are also within its remit. But I resent that drift. Retail payments are mere peanuts that will not shock the monetary engine whatsoever. So why bother about retail and card payments as the Eurosystem?
Isn't it more relevant to European efficiency in payments that cash payments be properly priced and kicked out as a very dirty, costly payment mechanism? That we get rid of the physical euro as soon as possible? That would be a more important issue that falls within the eurosystem remit. But alas, that would also be too impopular a statement and would not be good for the image of central banks. So rather the Eurosystem chooses to make cheap and easy statements on the neighbours grass than weed its own.
An opportunity missed...
And another question: why suddenly the concern with consolidation. First the eurosystem insisted on one card-one terminal and harmonisation of features in the cards-world. Then suddenly as this materializes, there is the fear that it may not be a good thing to increase standardisation and allow for consolidation.
And a final remark. This is another annoying example of institutional drift. We set up the Eurosystem to do just one thing: determine monetary policy and operate a gross-settlement system used as a mechanism for executing money market policies. Over time, as any good institution apparently wishes, the eurosystem seeked to grab more territory by making statements, policy reports and implying that it retail payments are also within its remit. But I resent that drift. Retail payments are mere peanuts that will not shock the monetary engine whatsoever. So why bother about retail and card payments as the Eurosystem?
Isn't it more relevant to European efficiency in payments that cash payments be properly priced and kicked out as a very dirty, costly payment mechanism? That we get rid of the physical euro as soon as possible? That would be a more important issue that falls within the eurosystem remit. But alas, that would also be too impopular a statement and would not be good for the image of central banks. So rather the Eurosystem chooses to make cheap and easy statements on the neighbours grass than weed its own.
An opportunity missed...
First V-pay transaction in Europe
See the Visa press release and read:
The first V PAY transaction in Austria took place on November 15, 2006 at Denkstein in Salzburg's Getreidegasse with the attendance of Annika Karlsson Hill, Vice-President Visa Europe, Jutta Müller-Liefeld, Country Manager Austria, Visa Europe and Hubert Neumayr, CEO hobex AG.
Just one tiny hickup; V-Pay is always PIN - always Chip. So its potential penetration is dependant on the rate with which retailers move to EMV. As opposed to the Maestro brand that allows stripe-PIN transactions and thus may be a better bet for customers/banks/retailers that focus on smooth transitions.
The first V PAY transaction in Austria took place on November 15, 2006 at Denkstein in Salzburg's Getreidegasse with the attendance of Annika Karlsson Hill, Vice-President Visa Europe, Jutta Müller-Liefeld, Country Manager Austria, Visa Europe and Hubert Neumayr, CEO hobex AG.
Just one tiny hickup; V-Pay is always PIN - always Chip. So its potential penetration is dependant on the rate with which retailers move to EMV. As opposed to the Maestro brand that allows stripe-PIN transactions and thus may be a better bet for customers/banks/retailers that focus on smooth transitions.
UK Government changes governance for payment schemes
See the website of the OFT to find out that:
...following a recommendation from the Chairman of the Office of Fair Trading, the Chancellor of the Exchequer has agreed to the establishment of a new governance body for payment systems, the Payments Industry Association. In addition, the Payment Systems Task Force, which is chaired by the OFT, has also announced that agreement has been reached on a number of improvements to the cheque clearing process that will benefit both consumers and businesses.
The Payments Industry Association will be the new strategic governance body for the payments industry in the UK, and will concentrate on access, innovation and governance issues. It will provide a lasting governance solution to the issues raised in the Cruickshank Report. The Payments Industry Association Board will consist of independent directors and directors from the payments industry with an independent Chairman, Brian Pomeroy. The OFT will review the outputs and achievements of the Association against its objectives after two years. The Chancellor has agreed that the majority of the outstanding work of the Payments Systems Task Force can be transferred to the Payments Industry Association. The Task Force will meet for the last time in December.
I think this may be a model that may become the norm internationally. In the Netherlands, we do it a bit different, but not too different altogether. The scheme-owner Currence has a board of Commissioners with independent members. And its work is closely monitored by the Competition Authority. Meanwhile, the policy issues are discussed in the National Platform for Payments. And we also maintain a Bankers Association that does payment things.
It will be interesting to see which countries follow suit.
...following a recommendation from the Chairman of the Office of Fair Trading, the Chancellor of the Exchequer has agreed to the establishment of a new governance body for payment systems, the Payments Industry Association. In addition, the Payment Systems Task Force, which is chaired by the OFT, has also announced that agreement has been reached on a number of improvements to the cheque clearing process that will benefit both consumers and businesses.
The Payments Industry Association will be the new strategic governance body for the payments industry in the UK, and will concentrate on access, innovation and governance issues. It will provide a lasting governance solution to the issues raised in the Cruickshank Report. The Payments Industry Association Board will consist of independent directors and directors from the payments industry with an independent Chairman, Brian Pomeroy. The OFT will review the outputs and achievements of the Association against its objectives after two years. The Chancellor has agreed that the majority of the outstanding work of the Payments Systems Task Force can be transferred to the Payments Industry Association. The Task Force will meet for the last time in December.
I think this may be a model that may become the norm internationally. In the Netherlands, we do it a bit different, but not too different altogether. The scheme-owner Currence has a board of Commissioners with independent members. And its work is closely monitored by the Competition Authority. Meanwhile, the policy issues are discussed in the National Platform for Payments. And we also maintain a Bankers Association that does payment things.
It will be interesting to see which countries follow suit.
The unbearable lightness of hyping and PIN-cracking
Of course it is big fun to mess about with PIN-code systems and devising a way to attack them. That's what the security game is all about. But it is another thing to devise an insider attack and imply/suggest that such an attack is so easy to pull off that all banks worldwide should retroactively compensate so-called phantom-withdrawals (which as the camera tells us is often a family-member withdrawal).
So three cheers and one hurray for the authors of The unbearable lightness of PIN cracking but also a pat on the hand for hyping their research a bit too much.
So three cheers and one hurray for the authors of The unbearable lightness of PIN cracking but also a pat on the hand for hyping their research a bit too much.
Thursday, November 16, 2006
Usage data for Messenger balance information of ABN AMRO
ABN AMRO informs us that its Windows Live Messenger service to provide balance information to its users now has 16.500 users, which grows with 500-1000 users a week (on a total of 2.6 million Internetbanking users). Half of the users is aged between 18 and 25 jaar, 36% belongs to the 26-40 years categorie.
Wednesday, November 15, 2006
There's more than just a 'card-payment'
Scientists and policy makers often make the misstake of simplifying reality to fit their preconceived assumptions on how markets work. As a part of their reality check they might actually benefit of the Mastercard overview on interchange rates for different types of cards.
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