What is financial inclusion and why is it important

"Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low income segments of society" is the way that Wikipedia describes this. (Read here). The estimate of the number of people that do not have access to digital financial services usually runs into the billions and many organisations are working diligently to provide some infrastructure to make this happen.

Many motivations for progressing towards a cashless society exists. Some people are talking about the elimination of poverty through financial inclusion. Much is being said and being written about how this will be achieved, but success are limited and usually comes at a big cost. Many organisations and companies sees this drive as an opportunity to profit - to get access to a much bigger market, and this drives many of the initiatives.

But why is financial inclusion really important? And why should we care? Is it worth the effort and the investment? If we are not clear about this, our efforts will be wasted.

I believe that the answer lies in a honest assessment of the real needs of the people that we are trying to "help". If we cannot put ourselves in their position and truly understand what will be a better world for them, we will not succeed.

Mobile payments could make EMV obsolete

It seems as if the EMV wave is about to break over the US. The ultimate technology to protect against the cloning of plastic cards has been tested in many markets and enough evidence exist to show a dramatic reduction in fraud (especially based on card cloning). (Read here). A perceived growth in card fraud in the US may necessitate a major drive to deploy this technology. The massive potential cost of retail infrastructure is of course the biggest stumbling block.

It seems as if there are a perception that a move to EMV is required in order to effectively implement mobile payments. (Read here). While this may be the case (to some degree) in preparation for retail NFC, this is of course not true at all. Mobile payments could successfully be deployed without any EMV infrastructure available. The best evidence of this is to look at the dramatic growth of mobile payments in emerging markets where no EMV infrastructure is available.

To the contrary, a clever deployment of mobile payments, may actually lead to making plastic cards redundant and thus eliminating the need to protect against cloning... making EMV obsolete.

How crypto is being used in banking

Traditional banking security is dependent on well-designed cryptographic equipment. These devices are hosted in ATM's, Pinpad in branches and retail infrastructure. The crypto codes generated on these devices during transactions are evaluated within the host systems by tamper-proof hardware security modules. The whole banking system was designed and built on robust cryptography (almost impossible to breach).

That was the case until online banking arrived. Consumers now interact with banking systems via the Internet with no cryptographic devices involved. The cost of these devices, the integration with online systems, lack of standards and complexity in the distribution are barriers to making this a standard component in online banking. Some of these barriers are aggressively being attacked and some progress has been seen lately:

HSBC use a on-time password for business users to secure online transacting. This crypto security device is available to customers in all countries. (Read here).
Bank of America offer a device to their customers producing one time passwords, called Safepass. (Read here).
This technology was released by Visa recently with the brand name Codesure. (Read here). The question is how readily will it be distributed and could this lead to more secure online banking.

It is also important to think of the implications for mobile banking.

Two divergent views on mobile banking security

Two very similar articles were published on the 10th of October. Both discusses the security of mobile banking, yet they get to totally different conclusions:

The first argues that mobile devices are much less sophisticated in defending against malicious attacks, it does not come with firewalls and subscribers are more likely to download bad applications on their mobile phones. Mobile banking are therefore much more vulnerable than online banking.

The second article reckons that many of the hacking tools that exist for PC's are not available for mobile platforms. With so many variants of operating systems and hardware it is difficult to find common access mechanisms to launch malicious attacks. In addition, because mobile banking can be implemented with transactional security, utilising various additional techniques it is much more difficult to penetrate. The writer then concludes that mobile banking are much more secure than online banking.

Both articles published on the same day, yet with different conclusions. Which one is right?

Bank Simple Thoughts

Someone once said:"Banks are dead, banking not". We all talk about how inadequate banking is and how our needs are not met. However, few initiatives ever succeed in replacing the old brands and we keep on banking with them. Who will forget the waves that Egg made in the UK and Twenty20 in South Africa. Both these initiatives had limited success and ultimately got eaten by the establishment. Yet, we would still like to dream.

That is why it is so refreshing to see initiatives like BankSimple that recently raised a further Ten million (Read here). A bunch of entrepreneurs working on a new banking model that plans to bring retail banking wrapped in a new presentation. As is to be expected, part of the offering is to bring the service on mobile phones, But the complexity of new systems, regulatory conformance and integration into the payment systems have delayed the launch of this bank.

Let's hope that this company can steer through the hurdles successfully and that they achieve success. We need renewal in the banking industry.

Importance of trust in brand to conduct mobile payments

There is a lot of trust involved in performing a payment transaction. It is probably the most important ingredient in making sure that consumers complete payments. While it is relatively easy for first mover people to try out new payment schemes, this is not the case for the majority of people.

In an online survey performed by Ogilvy & Mather, 500 Americans were asked which brand they would trust most in mobile payments. (Read here). (The graph can be found here). The results (while predictable) were quite interesting. Visa (and Mastercard, American Express etc.) carried the most trust, while companies like eBay and Facebook had a much lower score. This means that even in the online world, a brand carries a lot of weight when it comes to payments.

Some questions:

• How to ensure that criminals don't masquerade as a trusted brand.
• How will consumers recognise a brand in a mobile world - especially when space to display brands are limited.
• How to build products that carries the brand promise.