A world where push payments rule

Airplanes have a very specific characteristic. They can only fly forward. It is impossible for aircraft to fly in reverse. The aerodynamics and principle of flight dictate that flying should be in a forward motion - this is just the way that it is. The problem with the payment world is that it is running in reverse. The fact that the payee initiate the payment process and not the payer is the wrong way round. In the world of check payments, of debit orders and credit card payments, the guy receiving the money must start the electronic process. Also referred to as a pull payment. This is akin to allowing some-one else to take cash out of your wallet, rather than you taking the cash out and handing it over.

The danger of this approach is that fraudulent transactions are much easier, controls and audits are much more complex and a transaction takes a long time to complete completely. (because one must allow the payer to dispute the transaction and then to be able to reverse or refund the transaction). This became evident to me recently when I read about the conflict between Blippy and Amazon (read here). The concerns that Amazon has about another system getting access to card payment information is real, because this information can then possibly be used to pull money (fraudulently) from another credit card.

Payments should be a push affair. The payer should start the payment process and money should drop in the payee's account with a real-time confirmation. This approach is easily deployed by means of mobile payments and millions and millions of push payment transactions occur daily in emerging economies where mobile wallets take-up is more dramatic than spectacular. It would have been great if payments in first world countries could have been architected in the right direction (rather push than pull). I am sure that new innovations (like Blippy) would then have taken off much faster and with less risk.

Mobile banking is not needed in Canada

It would be great for Canadian banking executives to visit South Africa. The FIFA world cup is being hosted in South Africa during June/July and two of the main sponsors are VISA and FNB. Both these companies have made major inroads into providing innovative and popular mobile banking solutions. FNB specifically, have shown that they can deploy mobile banking solutions currently being used by more than twice as many clients than use their Internet online banking. They achieved this by delivering mobile services specifically geared towards the mobile device. Their clients can do more with a mobile phone than they can do online.

It is my opinion that if Canadian banking executives were deploying mobile banking solutions in this way, their clients would be more positive towards mobile banking. In a recent survey conducted by Forrester research (Read here), Canadians indicated that they fail to see a compelling reason to use mobile banking. Forrester recommends that Canadian banks focus on smart phones as 90% of existing mobile banking users use smart phones. Maybe this is where the disconnect is. Should banks not develop solutions for clients that do not use mobile banking at this stage?

What was ANZ bank thinking when they suspended mobile banking?

I could not believe it when I read it. If you do not own a iPhone, ANZ bank in Australia would suspend their existing mobile banking, because, wait for it: "..most of what they use M-Banking for can be accessed from TXT or Internet Banking". (Read here and here).

Immediately, twitter was full of comments from ANZ customers:
" ANZ is shutting down it's Mobile Banking service so now I have to SMS or phone them. WTF? Wrong direction ppl!"
"ANZ is killing off its mobile banking site. Why? It was good! I used it! Bah."
"So annoying, I use the ANZ java app on my BlackBerry :("
"stupid ANZ killing mobile banking, I use it all the time"

According to the announcement a very small percentage of ANZ clients use the service anyhow, so the impact would not be that big. It would be interesting to understand why such a small percentage use the mobile banking feature. Is it because it does not work? or is the registration process complex? Could it be that mobile banking was not marketed successfully, or is it just true that Australians do not want mobile banking? The obvious approach to all of this, would have been to fix the problem and to keep the service running as it would (at a minimum) serve as a basis for learning.

Maybe this announcement is part of a bigger plan, to possibly change suppliers or structure the service in anther way. How many times have we seen the technology department taking "architectural" decisions and then not inform marketing or not packaging it in such a way that it is plausible for their customers. I have a feeling that ANZ have decided to take a new direction in offering mobile banking to their customers, but have not told us yet.

Anybody with some insights?

A new mobile payment dispensation at VISA

One often underestimate the importance of leaders. Leaders influence behaviour and set directions. It is leaders that create an environment, style and culture. People that know, would also agree that the leaders created through the banking industry look at life in a pre-defined way. The way that banking executives approach risk is significantly different to executives in ... for instance the telecommunication industry.

Visa has been involved with many mobile banking and payment initiatives in the past. These range from multiple NFC trials, special phones, remittance projects and alerting services. Many of these projects culminated in some production successes, but none had any spectacular uptake. In many regions, banks are looking at Visa to guide decisions and suppliers ready themselves to build new phones, POS and ATM's that will conform to new VISA specs. Unfortunately, the direction of VISA was often taken from a banking executive mindset (the majority of VISA executives are ex-bankers).

This is why it is so exciting and fresh to see the announcement of the appointment of Bill Gajda to head VISA's mobile business. (Read here). Bill joins VISA from the GSMA where he was responsible for (amongst others) the GSMA's mobile money initiatives. Prior to this, he worked primarily in the telecommunications industry (including Ericsson). What will the new leadership do to the culture, style and direction of VISA?

Identity theft and the opening of mobile banking accounts

This blog entry was triggered by a research report produced by Javelin on financial fraud in the US (read here). What caught my eye was that a measurable number of fraudulent transactions could be attributed to opening fraudulent mobile banking accounts.

I suppose this is a new hole where a fraudster can use a phone to connect a phone login to an existing bank account and in this way get access to the funds in the bank account. Mobile banking is at its most vulnerable at the point of registration. It is important to ensure that the very high security available on mobile phones not be compromised by a weak registration process.

The best way to ensure that a bank account is not compromised is to only allow "over-the-counter" registration. Only if a bank-employee has verified ID documents is it possible to register a client for mobile banking. This is of course an expensive process and complex from a client's perspective. Another mechanism is to use the ATM-network to perform mobile banking registrations. This is a secure way, as the registration would require a card present and the PIN selection can be transmitted in a very secure way.

Yet, many banks cannot deploy these mechanisms and often allow clients to register on-line. This means that the registration process is much weaker (because of the limitations of the Internet). This is the weak link in connecting a phone to a bank account. If the need to allow mobile banking registration on the Internet, fraudulent registrations will occur.

What about China and banking the unbanked?

Often when banking the unbanked is being spoken about, we talk of the billions of people that have a cellphone and no bank account. As a matter of fact, "banking the next billion" has become a battle cry from Silicon Valley to Bangalore. Fact of the matter is that a big part of this billion live in China.

In a recent article in Finextra (read here), it was reported that card companies (Visa, Mastercard, etc.) approached the WTO because they are being blocked in issuing their cards and building acceptance networks. This made me think about this vast market in relation to mobile banking (especially banking the unbanked). I pride myself in knowing about mobile banking initiatives: what is being launched, by who, how they conform to regulations, what the commercial models are like. I know the people and I know the tactics. But when it gets to China, I know almost nothing.

So this is the question: if things are happening in China, why don't we know about it? Why does the Chinese experts not share with us what they are doing, or why don't they come and learn what others are doing? Why can't I find any (or very little) information on the Internet or in analysts reports? Maybe banking the unbanked is not high on the agenda in China...

The Mobile Money IP infringement claim

A recent IP infringement claim (Read here), made it into the news channels and I had many enquiries because MTN and Standard Bank (both Fundamo clients) was mentioned in the stories. Based on the articles in the media that I have read, the claims refer to a feature that enables a customer to activate and de-activate a credit card by means of an associated mobile phone.

I do not want to comment on the merits of the claim as I have not seen any of the actual documents, but would like to make the following observations:

• It is important that the law protects intellectual property ownership. Proper mechanisms exist to ensure that this is possible. The law ensures that conflicting parties can defend themselves adequately (ultimately in court). One should allow this process to take its proper flow until conclusion.
• It is a pity if parties resort to the media (early in the process) to place unfair pressure on other parties. While this is done often, and the media definitely has a role to play, utilisation of the media at the start of litigation should be questioned. Maybe this is a sign of some desperation.
  
• IP litigation is a complex and a specialised sector of the law. One usually finds that specific firms and specialists in the area are retained to build and argue a case. I have found it interesting to see that 3MFuture Africa (the claimant in this case) retained the services of retired judge Heath to represent them. Judge Heath has an accomplished career in South Africa and is well-known and respected, but definitely not as an IP expert.
• The fact that more and more IP claims are being contemplated (also read a previous post), is a further indication that the industry is growing and has reached a certain level of maturity.
  

The business model of Eko in India

I read a recent article on Eko (Read here) and then looked at the blog archive, because I was sure that I wrote something about them, but then found nothing. I could not believe it. I have the biggest respect for Anupam and his partners as I know a little bit of what they do and how difficult it has been. It is not easy to deploy solutions that people criticize and do not take serious, but the team remained focused and have made big progress.

Eko is a Delhi-based company that have developed and is busy deploying a banking solution for low income people in India. The functions available on the product is specifically geared towards people at the bottom of the pyramid and is distributed through informal retail outlets. Customers can access the service with cheap phones (making use of USSD when I last checked) and perform the transactions that they typically need.

What I like about Eko is that the approach is geared towards the problem space. Cost of delivery is of course critical and the service is designed to support this. The use of outlets is critical and the business model allows for these important elements of the eco-system to participate profitably. While it is important for entrepreneurs to keep value-creation in mind, I also realised that the team at Eko also have the real interests of their target client in mind, and that is the real reason for their success.

A coordinated regulatory dispensation between telecommunications and banking

Financial and telecommunication regulators are very different. Both in their objective as well as how they go about doing it. Financial regulators are in essence concerned about the systemic risks associated with a complex money system. Their approach is to ensure that all players conform to certain rules so as to ensure that the financial system do not collapse. They develop and enforce detailed rules to ensure that they can monitor and protect the inter-connected money-world.

Telecommunication regulators, on the other hand, are concerned about the fair allocation and usage of scarce resources. It is a fact that we only have so much spectrum or sixteen digit numbers available. The challenge is to ensure that all players in the telecommunication system get access to this limited supply. They are (of course) also worried about the integrity of the telecommunication system, but it is my contention that this is not their primary driver.

I have always been of the opinion that mobile banking and payment solutions should be governed by the financial regulator because mobile banking have the potential (if not properly managed) to destabilise the financial system and the impact of this will just be very bad for all. Much of the regulatory discourse has been to discuss financial regulation topics: KYC, money supply etc. However, the industry should also develop mechanisms to ensure fair access to limited resources. One could for instance argue that MNO's should allow any bank access to their SIM cards (as it is impossible for banks to distribute their own), and this is where the Telecommunication regulator do have a role to play.

This is why I was impressed with the recent announcement out of Pakistan (Read here), where both regulators announced that they would work together to develop a new generation of framework for mobile banking. Is this a first in the world?