2007 in review: Corporate needs and Mobile Payments

From
a technology perspective, I think 2007 has seen the biggest changes in
the payments world.  From mobile and contactless payments proving
themselves to come of age, to new currencies in the form of Linden dollars and Chinese QQ,
to corporates demanding change, to new infrastructures and the
introduction of SEPA, to banks moving from silo structures to
integrated payments factories with global hub and spoke operations,
this year has been incredibly fluid and dynamic.  

A good example were two reports I produced earlier in the year.  The first, on new retail forms of payment,
concluded with the idea of sticking chips inside people for payments
and immigration and identity purposes.   I actually ended up thinking
this through further to realise that you can actually stick a chip anywhere.  Now there’s a thought for Christmas.

The other paper was on PayPal.  The PayPal story is particularly interesting in that they have moved from being an 8-year old upstart, to being an 8-month old bank
and a mobile payments processor.   Maybe that is why one of my most
popular blogs this year was the one that discussed how banks are
forcing their customers to move revolving debits onto PayPal, thanks to
the bank’s anti-fraud
measures.  This is something that will need to be addressed I guess,
and authentication and identity will be an area of long discussion
through the rest of this decade I believe.

We
also need to watch PayPal as an example of best-of-breed payments
innovation, especially as they’ve written a chapter for my new book on the Single Euro Payments Area (SEPA)
with the emphasis on PayPal being able to already provide a SEPA.  In
fact, they provide a global capability to transact in almost any
currency, and have a user base that has expanded from just over 100
million accounts a year ago to over 170 million today.  Now that’s what
I call success, and that’s we all really want today isn’t it?

That is not to say that PayPal has no competition, as others are moving into this space including Google and Amazon.

Another
payments area that has taken off this year is prepaid.  Prepaid cards
provide a real alternative to cash for the first time, as they can be
used truly anonymously.  In other words, I can transact electronically
for the first time with a prepaid card without anyone being able to
track my identity.  No wonder it’s popular amongst young males and hence why the Sun newspaper launched one.

Meanwhile,
the real success area of 2007 must be mobile payments , with hundreds
of announcements and trials in this space.  For example, in the last
month, Finextra has covered twelve stories on this very subject:

• 10/12/07  Cyphermint chairman Kuznetsov to lead Russian m-payments task force
• 04/12/07  Indian m-payments outfit PayMate eyes North American remittance market
• 30/11/07  Western Union and Bharti Airtel to pilot mobile remittance system
• 28/11/07  Barclaycard to launch public mobile payments trial
• 23/11/07  PayPal launches mobile checkout service in Australia
• 23/11/07  RBS trials mobile debit payments technology
• 23/11/07  Mobile payments gather momentum
• 22/11/07  DnB Nor, MasterCard and Telenor in mobile payments trial
• 15/11/07  Tyfone and i-flex form m-banking partnership; sign West Coast Bank
• 14/11/07  Mobile banking start-up Firethorn acquired by Qualcomm
• 14/11/07  Mobile operators to trial NFC payment services
• 13/11/07  MasterCard to launch mobile phone payments in Japan

Mind you, when you add onto this the fifteen stories covered on mobile banking:

• 20/12/07  Mobile operators look for value in m-banking and payments
• 13/12/07  Nacha forms mobile banking work group
• 29/11/07  Gemalto reports mobile banking implementation in Colombia
• 28/11/07  Bank of America clocks up 500,000 m-banking customers
• 27/11/07  Monitise launches mobile financial services offering in US
• 21/11/07  FirstBank introduces mobile banking services
• 15/11/07  KeyPoint CU introduces account access via Facebook
• 15/11/07  Tyfone and i-flex form m-banking partnership; sign West Coast Bank
• 15/11/07  Diebold showcases mobile banking technology
• 15/11/07  Microsoft trumpets smartphone operating system for m-banking
• 14/11/07  Jack Henry releases mobile application
• 14/11/07  Mobile banking start-up Firethorn acquired by Qualcomm
• 14/11/07  USAA implements Firethorn's mobile banking application
• 14/11/07  CheckFree outlines mobile banking strategy
• 14/11/07  US m-banking numbers to soar - TowerGroup

You can see why mobile in 2007 is hot, hot, hot, as Bruno Tonioli of Strictly Come Dancing fame might say.

Note here that mobile payments is separate to mobile banking and, as mentioned yesterday, I thought I’d cover this point here. 

Mobile
payments – whether by SMS or ‘wave and pay’ NFC and RFID contactless
chips – is a convenience service and has proven to be worthy.  That’s
why there are so many examples of mobile payments in action from PayPal
Mobile, to the NTT DoCoMo Edy wallet, to the trials this year of mobile
in New York and London. 

Mobile banking is more about transactional checks on balances and electronic self-service. 

The
difference is that the former is easier to secure than the latter,
which has far-reaching implications over and above a simple tap-and-go
payments device.  For example, paying by mobile can be easily managed
as the telephone chip, SIM card and number are all identifiers of the
user.  As a result, a lost mobile is just the same as a lost wallet.
If you lose your wallet you call and cancel your cards, and you do the
same with a lost mobile telephone.  You just call and suspend the
account. 

Mobile banking however, may be surfing your banking
service using a smartphone internet-based access.  This means you might
store account numbers and passwords on the phone.  These could
obviously be used regardless of SIM card and account numbers if someone
finds such information.  Therefore, concerns over security in mobile
banking are greater than for mobile payments amongst many, and why
increased security needs to be placed onto the telephone for mobile
banking. 

I also wonder whether banks and others really understand the mobile world, when all it will become is VOIP which goes back to the IP-enabled debate.   Maybe that is why some bankers debate whether mobile banking is worth it at all. 

The result is that some would say things like Barclaycard's OnePulse are this year's best payments innovation but, at the end of it, the partnership between Citi and Vodafone
gets my vote.  It's in play, it's proven, it has a clear business logic
and it's going to win them business.  That's why this won the Banker’s Award for Technology Innovation of the Year.

There's
an awful lot more we could talk about in this space: real-time
services, supply chain, payments factories and so on and so forth.  But
it's Christmas and therefore I'll leave these until next year's blog
starts.  However, before leaving the world of payments, we do need to
briefly mention the infrastructures.

First, SWIFT.  SWIFT
struggled with their corporate community at SIBOS.  The whole low-down
on the SIBOS Boston Tea Party can be found through the blog of that
week, and this one summarises the event well.  Nevertheless, SWIFT are demonstrating a clear increase in take up, alongside a clear commitment and growing acceptance within the corporate world.   

Secondly,
TARGET2 which is now live, and TARGET2 for Securities (T2S) which is to
come, are all well and good.  However, until the European Commission
solve Europe’s clearing and settlement barriers, which DG for the Internal Markets Commissioner David Wright claims they will in 2008,
Europe will be challenged to be competitive with the rest of the world.
Therefore, although the Payment Services Directive was agreed  back in March and the Single Euro Payments Area (SEPA) is almost here, the overall cost benefit of SEPA and the Europlan is still proving elusive.   

This is something that you can read a lot more about in March when the book, The Future of Finance after SEPA,
comes out and will be a continuing source of focus as 28th January 2008
starts the SEPA process, with the launch of SCT's, the SEPA Credit
Transfer.

After all that range of chat and
infrastructure and change, you may want to get away from payments.
Funnily enough, you can, as there are many ways to pay for things
without the banking system.  For example, by using community currencies. 

Maybe that’s what SEPA is all about at the end of the day: a European Community currency.