Online Fraud Rates Approaching Fraud Rates at Card-Present Retail According to 5th Annual Survey by Merchant Risk Council

See the ress release here:
The Merchant Risk Council (MRC), the retail industry's premier association for preventing online fraud, released today the results of its fifth annual survey of merchants. Two significant trends emerged from this study. Online fraud rates for merchants surveyed are now similar to the fraud rates of brick-and-mortar stores, and fraud spikes and fraudsters' use of increasingly sophisticated schemes keep retailers on alert.

Intel invests 5 billion yen in Tokyo e-money firm

MSN-Mainichi Daily News reports:
U.S. chip giant Intel Corp. said it has invested 5 billion yen in Tokyo-based Bitwallet Inc., which provides the 'Edy' electronic money service.
The companies will cooperate to make it easier and safer to make PC-based electronic money settlements, which are seen to increase amid growing popularity of Internet sales of music, movie and other digital content as well as goods. In fiscal 2005, 110 million transactions were settled via the Edy services, of which 2-3 pct were PC-based transactions."

DSB shakes up payments market....?

At the end of last year the DSB consortium (specialising in loans to consumers) received a bank license from the Dutch supervisor. And today it's penetration strategy for the banking sector was all over the news, including the NOS National news.

DSB president Scheringa gave an interview to the Financieele Dagblad to explain that it's strategy as of this summer would be to offer payment accounts to the public with the following features:
- interest rate of 3 % on the funds on the account,
- no fees for payment instruments,
- expansion of the bank branch network to ensure one branch within 15 kilometer of each citizen.

The main Dutch banks all react similar. This is not a sustainable business case for payments in itself; it is a penetration strategy funded by the extra income that will most likely be generated from additonal loans or mortgages provided to the new customers. So the customers will in the end somehow pay the price.

Of course this can be viewed as the standard reaction of any incumbents to competition. But even for the regular observer it is quite difficult to imagine how this business proposition (of which details are unknown) will be sustainable in itself.

The academic approach would be to combine the 3% interest with transaction fees that are based on cost price of the instrument. In doing so each customers pays for the price/cost of its own payments. Those who do a lot of (cheap) internet banking have some money left after one year. And those who use expensive payment instruments need to pay extra. Which makes for transparent business case as well as a transparent user experience (where users can decide themselves if they care about paying efficiently).

My take is that in the end (in 30 years time) we will have arrived at the academic ideal in all EU-countries. In the meantime we will see all kinds of models: package models, invisible pricing, the DSB-model and what have you. But as we slowly get used to paying for inefficient ways of doing business, we will eventually end up at the academic ideal.

Report on evaluation of the e-money directive

can be downloaded here, to find out:
Almost all interviewed stakeholders deem that there is an urgent need for clarification and to develop a clear understanding of which institutions, schemes and business models fall within the scope of the EMD, and those which do not. The most controversial issue in this context is the question of the EMD’s applicability to mobile network operators. Almost all Member States have de facto exempted these from the application of the EMD for the time being, but the justifications for this vary. A majority of Member States, as well as industry players, emphasised there is a need for further guidance on this issue. The national authorities in certain Member States also hold somewhat diverging views regarding the classification of a number of other products and schemes (pre-funded personalised online payment schemes, electronic service vouchers, and smartcards for public transport).

What's interesting is that it says that most member states have de facto exempted a group of players in the market. Isn't that a bit odd?

I may have missed some legal tutorials now and then, but I always thought it was the prerogative of parliament to determine the rules and exemption regimes and the duty for member states to stick to implementing the text as is. But apparently we now allow member states to not only implement but also de facto change the rules...

Phishers go for Rabobank

This article on Planet Internet describes that phishers attacked the Rabobank this weekend. The customers were re-directed to a site in Chicago; that site has been taken off-line immediately.

Edgar Dunn report on mobile payments...

See the report here. No estimates or data but qualitative conclusions:
- mobile payments will become a reality
- killer apps are micropayments, music, ticketing, vending, tolls, adult content etc...

Retailers continue demand for lower price

In the slipstream of the EU Commission, Dutch retailer Dirk van der Broek desires (in the Financieele Dagblad) that fees for credit-card payments should be halved in the Netherlands. This is quite a cheap publicity stunt. In the Netherlands we only have 50 million credit-card statements, mostly in sectors that deal with tourists (compared to 1,3 billion debit-card pos-payments).

If any merchant wishes to pass on the high-cost of credit-card payment to the consumer, he or she is free to do so (it is now 10 years since the non-discrimination rule was abolished). Besides, we are now heading for a Dutch future in which the cost of a payment is reflected more and more in its price. So there's no harm done if consumers are confronted with the price of the credit-card payment. This has the benefit that the user chooses payment instruments on the basis of a transparent insight in cost/price.

But Mr van der Broek apparently wishes to apply the Australian model: regulators diminish the merchant fees for credit-cards, retailers thus earn money, but do not pass it on to consumers. I find that a bit too much of a short-sighted approach. Then again, with the retailer wars that are now going on, it is an understandable retailr reaction.

Orange (pot) considers lawsuit against free market agents (kettle) that redeem Orange's e-money (black)!

As some of you may now, the e-money debate in Europe is not one of the best examples of proper policy thinking. While payments via pre-paid funds of mobile operators reach staggering heights (24 billion euro in 2004) the Commission still feels that the rules as to e-money should not be applied. The consequence is that no single user of a pre-paid phone can convert the pre-paid value into cash or money again. And this is in clear violation of the e-money directive.

Now, some free agents in the market fill this gap and use premium service lines to give the user its pre-paid funds back. In doing so they demonstrate that pre-paid funds of mobile operators can be used for payment to third parties (thereby fulfilling the definition of e-money of te e-money directive) and that these funds can be redeemed (a process which operators explain would be too costly to perform....).

Whilst these free market players demonstrate the illegality of the mobile operator policy not to redeem the e-money of their customers, Planet Multimedia reports that Orange Netherlands now even considers lawsuits against these companies. That's quite a bit like the pot calling the kettle black.

Commission sector inquiry highlights competition concerns in payment cards industry

As I mentioned before on this blog the Commission has now formally announced its interim results on the study of the cards market. See this Press Releases and discover how the Commission appears to seek a war on cards. Or, in EC-speak: we do a 'consultation' and will then make up our minds.....

Well, before engaging in this war, I sincerely hope that the Commission will also study the effects of regulatory intervention in Australia (see the posting here). Big chance that this messing with the fundamentals of business models leads to postponing investments and continued fragmentation rather than a speedy harmonisation across Europe.

Report on retail payment innovations

has been published by ECB and can be downloadedhere. With the conclusion that there may be European harmonisation but national borders will still exist:
The answers to the last two questions showed a slightly controversial view regarding the integration of services across borders within and beyond SEPA. The statement that the majority of e-payment services will be offered cross-border by 2010 got an average ranking of 2.46 and the statement that national borders will still matter in 2010 got an average of 2.34. Standard e-payments like credit card payments on a virtual platform are mentioned by the providers as a niche for cross-border services that is already stable. It was commented by some providers that although no technological (internet and mobile telephones) barriers exist for cross-border services, there are national obstacles due to different frameworks (tax systems, legislation and national habits). Thus, it is not expected that the majority of e-products will be offered cross-border by 2010.

Phishers tricks and scams: surveys and little old ladies

VNUNet.com have a number of articles on latest scams:
- old lady asks for help on eBay as she is buying a wheelchair, but the Good Samaritan that uses the redirect in her mail loses login details
- here is a bank survey that will earn you 20 dollar if you respond quickly (which means losing your id-details)
- in order to verify some account details please phone our free 0800-service to ensure continued use of your credit-card
......

We will not be able to trust anyone anymore or take things at face value. So secure e-id from government is what we are heading for. And all the rest needs to be ignored.

Here we see how we lose humanity and human treats such as the good value of trust (which builds by giving it first and getting it back later) due to ubiquitous technology. I don't know if anyone ever predicted or foresaw this technology effect.

Central bank director goes commercial...?

In a move which highly contrasts the good old central banker conduct, newly appointed DNB-director Klopper did not spend any time on regulatory or fundamental constitutional deliberations that we are so used from central bankers. Rather he gave this motivational (?) speech on 'Payment Innovation beyond SEPA'.

Do note the high frequency of the terms mobile (13) and contactless (9) in this speech. And do note as well that he seriously dislikes the product Chipknip (whereas his predecessors were keen to point out that Chipknip was by far the cheapest of all non-cash point of sale payments).

There is no mention of the need to make pricing of payments more transparent for costs in society to become as low as possible.... and no sign of the consideration that this means that essentially also cash should be priced rather than subsidized.

We may thus conclude that in this brave new (SEPA) world even central bankers are no longer central bankers. In this realm where the force of logic and analysis used to reign, the only concern now seems to be that the public will not like the conclusion of the analysis: direct pricing of payment instruments.

And if the above is a reflection of a general trend within central banks, it will not be the new payment instruments that will make central banks redundant in the far future (see Mervyn Kings prediction of some years ago). Rather this will be the result of annoyed politicians and citizens who are fed up with highly paid central bankers that acts as politicians while pretending to be central bankers.

Oyster roll out delayed

See this article:
"Computing has also learnt that Transport for London (TfL) has delayed trials of its Oyster e-money project while it works with the financial services industry and the smartcard operating consortium Transys to define the scheme's requirements.

TfL had planned to appoint a technology partner for the e-money project by the end of last year and commence trials in late 2005 or early 2006 (Computing, 28 July 2005).
Oyster e-money will allow commuters to use the smartcard to pay for low-value goods and services at newsagents, fast-food outlets, supermarkets and parking machines.

A TfL spokesman told Computing work is still ongoing and no major announcements are due.
"Our main focus is on finding the right way forward rather than hitting the timescale announced last year, he said."

OFT: Current credit card default charges unfair

See the press release and guidance:

Credit card default charges have generally been set at a significantly higher level than is legally fair, said the OFT today. The OFT estimates that across the industry this has led to unlawful penalty charges currently in excess of £300 million a year.

The OFT now expects all credit card issuers to recalculate their default charges in line with the principles set out in a statement published today and to take urgent action where needed to reduce the level of credit card default fees. The industry has until 31 May to respond to the statement. These principles also apply to default charges in other consumer contracts such as those for bank overdrafts, store cards and mortgages.

See the download: Calculating fair default charges in credit card contracts.

PayPal Launches Mobile Payments

This press release speaks for itself. See also https://www.paypal.com/mobile.

Wall Mart into banking; a plan not everyone banks on

Retailers become banks. Mobiles become banks. Paypal goes mobile.
What happens if boundaries of banking are at stake.
Read the viewpoints in this article in Kansas City Star.

Remittances: An opportunity for growth - the Albanian

And here is another remittance link in a long hype-like chain of events.

Obopay Mobile Payments - A First Look

See this posting on Payments News which goes to show that the mobile phone will become what the payment card was. The one device to be used if you need to pay something.

From the sheer number of articles, white papers etc. is should by now be quite clear that in the future the (mobile) phone will be used either to pay using:
- the phone bill (pre-paid or postpaid)
- Paypal-accounts,
- Mastercard or Visa debit-cards
- Mastercard or Visa credit-cards
- regular bank accounts.

Too bad that, although we are now 5 years busy discussing whether payments via mobile phone may or may not constitute e-money, the European Commission still appears to be the opinion, that m-payments won't happen; as a result of which m-payments need not be regulated when operated by a mobile operator (nonetheless regulated if applied by anyone else in the market).

Not an April 1 prank: Australian parliament to probe role of RBA in regulating the payment system

The visible and leading role of the RBA on the discussion of interchange fees is known among payment specialists all over the world. And it is taken as an example by many a regulator (among which the EU Commission) to model its own behaviour.

In this respect it is quite relevant to observe that parliament in Australia may fee that the RBA has gone too far. This article informs us that a powerful parliamentary committee that oversees the Reserve Bank of Australia is planning a two-day hearing in May dedicated entirely to the central bank's controversial deregulation of the nation's $60 billion payments system.

The decision by the standing committee on economics, finance and public administration to focus on one element of the RBA's operations is regarded as unusual. It comes amid suggestions from parts of the banking industry - which has lost substantial fee income from the RBA's reforms to the payments system - that consumers have not benefited and that the Australian Competition and Consumer Commission should be reinstated as regulator.

...

Australian Bankers Association boss David Bell said yesterday that merchants had been the main beneficiaries of the credit card reforms. But there was "little evidence" of merchants passing on their $500 million bonanza to consumers.



So, for those who model their behaviour on the RBA, it would pay to take aboard this development as well.

McKinsey calculates that Dutch banks lose € 100 m yearly on payments business

Today, the Financieele Dagblad reported that McKinsey presented a report to the European Commission, indicating that Dutch and Polish banks lose on their payments business. The Polish lose 700 million yearly because their cost of cash is too high. The Dutch are quite efficient, but lose money as they are for historic reasons unable to price their consumers the real price for the payment instruments.

Still, major Dutch banks make billions of euros profit on other business (mostly outside of the Netherlands). And the average consumer is unable and unwilling to make a difference. So the perception will remain to be for some time, that Dutch banks do make huge profits on payments.

First parliament discussion of draft bill Crone to re-institute the bank branch

Yesterday Dutch parliament started the discussions on a draft bill of a social MP, Mr Crone. Essentially it obliges banks to have reasonable fees, security etc for all payment and savings products. Furthermore, if the number of bank branches is too low in a certain area (3 kilometers, 5000 people) it allows the Ministry of Finance the role to hold a tenderprocedure so that banks put a bank branch back in place.

Not only is the draft bill trying to reverse a global trend of bank branches getting a different role in the distribution mix (see Cap Gemini posting), it is also not to the liking of many local municipalities. One of their spokesman, himself a mayor of a small town, was very clear in an article in the Financieel Dagblad this week. No more rules please; give us, small communities, the flexibility to design taylor-made local solutions.

Generally speaking, two major parties CDA and VVD, were opposed to the bill, with smaller parties wondering if the draft bill is not too heavy a canon to kill a musquito. So this bill is unlikely to fly.

World Retail Banking Report 2006 clouds the issue of direct pricing

The new World Retail Banking Report 2006 can be downloaded now from CapGemini's site. Whereas previous versions just listed average prices for payment packages in all countries, the consultants have now anonymized their information.

So we used to be able to see that the Netherlands was cheapest in offering payment services with an average price of about € 31. But now, the consultants have made a bunch of categories to prevent such lists from being the summary of the report. Apparently their customers in Italy (which were highest on the list of average payment cost) didn't appreciate these explicit rankings.

Still the Financieele Dagblad figured out that effectively the new Dutch figure for average payment package costs is € 33. And instead of cheering at the fact that this was still the lowest in Europe and, the newspaper brought the news as a considerable increase (4,5% in their calculation) of payment costs.

It's also interesting to note that the second part of the report did not get much attention. It demonstrates the shift from bank branch banking towards multi-channel distribution of financial services. So there also are nice figures of bank branches becoming less important as a delivery channel. See also the posting on Crone.