If They Can Do It, So Can Banks

March 31, 2009

fring2The other day my brother called me from his cell phone. Of course receiving his call from a cell phone is not really a big event. It happens all the time. Fifteen years ago it might have been a big deal. He probably would have been calling me to say “Dude, I’m calling you from a cell phone.” It would have been a big event because airtime was fairly expensive 15 years ago and mobile phones were mostly reserved for people driving BMW’s.

Today, a cellular call from my brother is about as exciting as watching the traffic crawl along outside of my office window. But this wasn’t a typical cellular call. This call was transmitted from an iphone to my computer via Google talk.  Among other things, Fring allows you to use your iphone to make calls to your instant messaging friends using an instant messager like Google Talk. Your data connection transports your voice over the internet.  Thus, Fring allows you to talk all day long without using minutes from your call plan.  Skype offers a similar service for Windows mobile devices.   Fifteen years from now, I might think a VOIP conversation that originates on a mobile phone is mundane.  Today, I am intrigued by the success of Fring despite a business model that competes with the mobile carriers that supply the bandwidth that on which Fring depends.

oystercardIf a startup like Fring can deploy its service without a partnership with mobile carriers, why can’t  banks do the same?  Do banks really need carrier cooperation to roll out mobile NFC payments?  As I mentioned in a previous posting, smart phones, cheap data plans, and mobile market places are enablers that make it much easier to offer mobile services without carrier cooperation. Fring is a terrific example of  those enablers in action.

Banks may not even need device manufacturer support.  A Hong Kong company is set to produce an NFC device (e.g. a sticker), that communicates with the handset via bluetooth.  Thus, users can turn their phones into a smart electronic ticket, rewards card, or payment device without buying a new phone or waiting for manufacturers to include NFC support in their next handset.

So it seems the chicken and egg problem has been solved.  We have some eggs. Now it is up to financial institutions to start making them hatch.


Broadcast Your Payments on Twitter

March 11, 2009

twitpay_logo_mediumI am a believer in the potential payment opportunities afforded by Social Networks. That’s why when I read about Twitpay,  I immediately went out and signed up for an account.  Signing up for Twitpay was fairly simple. I followed Twitpay on Twitter, and then claimed my account on the Twitpay.me site. Twitpay sent me a direct message with my Twitpay pin. I was then able to login to Twitpay using my Twitter username and my newly assigned Twitpay pin.

Sending a payment promise to one of my Twitter friends is also fairly trivial.  For example, if I wanted to send my brother a payment for lunch I would tweet something like this: @soninlaw twitpay $5 for lunch. I can track who I owe and who owes me from the visually appealing Twitpay website.

Actually settling your payment obligations is a little more complicated.  Selecting “Settle Up” from the Twitpay site takes you to the Amazon payments site and prompts you to login using your Amazon credentials. Like most people who would use Twitpay, I already have an Amazon account. However, I had never linked my checking account to Amazon, and you have to link a bank account to Amazon in order to settle your Twitpay obligations.  I also had to settle twice: once with Twitpay (they charge .05 cents per payment) and once with the recipient of the funds.

The recipient of funds must also sign up for Twitpay and Amazon. Once I send the recipient a payment through Amazon, they must accept the payment (I believe this is an Amazon requirement). If they don’t accept the payment with in 24 hours, I have to go back into Twitpay and settle up again. Amazon takes a cut of the final amount delivered to the recipient.

ap-hlogo-215x35Although Twitpay shows promise, it is not yet ready for prime time.  The Twitpay site is a bit buggy. Both Firefox and Internet Explorer had problems with some of their pages and at times the site just wouldn’t load at all.  In addition, I’m not convinced that managing payments via Twitter warrants the inconvenience of three sets of logins (one for Twitter, one for Twitpay, and one for Amazon) and an additional fee (Twitpay takes 5 cents for every payment).  I am also not  thrilled about broadcasting all of payments to anyone who cares to read them. For Twitpay to work, I have to leave all of my updates available for public consumption.

If Twitpay is to live up to its potential, it will need to provide a good reason for me to use them instead of PayPal and Amazon.  As it stands today, Twitpay makes it easy to tell people I will pay them, while using PayPal, or going directly through Amazon, makes it easier to actually get people their money.


RFID: Share Your Personal Data with the World!

February 24, 2009

compass_card_fareboxA few weeks ago I wrote that contactless payments will help drive mobile banking adoption. What I didn’t say is that you can also use RFID to broadcast your personal information to the world.  Yes, RFID enabled passports can double as your personal radio station that keeps playing your same personal info over and over again.  The good news is it has never been more affordable to have your own radio broadcast.  The bad news is, it is apparently pretty easy to put together the equipment that will tune into your channel.

RFID  (Radio Frequency Identification) is not a new technology. The origins of RFID trace back to WWII and the first RFID related patent was issued in 1973. From supply chain management to toll tags, RFID is certainly useful in a variety of applications.  Still, RFID is not inherently secure.  The potential problems are apparent in the latest RFID enabled US passports. The US includes a metal sleeve and Basic Access Code with new passports to try and keep thieves from stealing your personal information as you walk by.

NFC technology extends the RFID specification. NFC enabled devices must be in very close proximity in order to communicate.  Thus, proponents assert that NFC is inherently more secure than plain old RFID.  Still, not everyone is ready to start replacing cash with wireless payment systems.  Despite an improved security profile, NFC enabled devices are vulnerable to a variety of attacks.

fastrak_transponderWhy does all this matter to financial institutions?  More now than ever, financial instituions must prove that they are safe.  The general perception of a bank’s commitment to cyber security can change very rapidly.

I believe NFC enabled payment devices will eventually become very popular. There is a signficant amount of utility in a phone that will consolidate my rapid transit passes, affinity and rewards cards, coupons, and payment cards.  However, this will only happen if mobile payments and the devices that make them possible are perceived to be secure.  A recent survey found that security concerns is the number one deterent to mobile banking adoption.

Most of the mobile payment news I read focuses on convenience and new delivery technologies. Mobile technology companies mention security but they certainly don’t focus on it.

So to complete my answer to the question above, mobile payments represent a significant opportunity for financial institutions.  However, unless the industry begins to promote security with technology improvements and additional marketing, it might be a while before NFC payments move past the focus group stage.  Even worse, the big event that finally introduces NFC payments to masses might be news of a major NFC related fraud rather than a human interest story on NPR about how mobile banking is spurring commerce in Africa.


Delicious MoneyMashup: Walmart, Nationalization, Craig Newmark…

February 19, 2009
  1. The transformation to a bottom-up culture needs help from the top – organization leaders need to enthusiastically embrace web2.0 applications to encourage bottom up participation;
  2. The best uses come from users—but they require help to scale – Web2.0 applications often end up being more useful in areas that fall outside the original goal of the application;
  3. What’s in the workflow is what gets used – web2.0 programs have the highest likelihood of success when they are incorporated into everyday activities;
  4. Appeal to the participants’ egos and needs—not just their wallets – creatively reward participation;
  5. The right solution comes from the right participants – target an audience to champion the program;
  6. Balance the top-down and self-management of risk – don’t overly regulate, but don’t let anarchy rule either;
Another interesting point made is that web2.0 implementation could have far more impact than ERP and CRM programs implemented in the 90’s.
  • Analyst: “Nationalization” of Citi and BofA possible in ’09
    Chris Whalen of Institutional Risk Analytics says that Receivership (he does not think Nationalization is the best way to describe it), similar to what the FDIC did with WaMu, is something that should happen to Citi and BofA.  He acknowledges issues around bond holder losses, but argues that the bigger risk is surprise insolvencies. If we lay out clear plans, systematic risk will be minimized.  The losses in these banks are so big, that there is no alternative other than bond holders loosing money.  The loss to CITI bond holders could be almost 100%.  One big problem with that is that the majority of bank bond holders is other banks.  However, Whalen believes the market has already accounted for the nationalization scenarios and would not be overly surprised by it.
  • Melbourne NFC trial successful
    Visa, mobile phone provider Telstra, and National Australia bank conducted A contactless mobile payment trial. The response was overwhelmingly positive and most participants indicated that they would like to continue using the service.
  • Walmart MoneyCard lowers purchase price to $3
    It seems like Walmart is really marketing this card to those who do not already have a checking account, and might not have any credit. Loading your payroll or government check on to the MoneyCard is free (after you pay the check cashing fee). There is a $3.00 monthly fee, and a $2.00 ATM withdrawal fee. The advantage, for those without a checking account, is that it is a Visa card. So it is safer than carrying cash, and you can use it to purchase products on the Internet and rent cars. It also supports deposits from Green Dot locations.
  • Gist
    Contact management application that pulls in all relevant information about all your contacts. This includes attachments and blogs. It integrates with various contact sources such as gmail, outlook, and Facebook.
  • Turn Your Business Card Collection into a Valuable Online Database
    CloudContacts lets you send them your business cards. They scans them, and then let you access them via an online downloadable database. They also allow you send one card at a time by taking a picture of it with you camera phone.
  • Mobile Banking Safe…at least for now
    A CNET author claims that 30 million people use mobile banking, but many potential users are reticent to adopt mobile banking out of security fears.
  • The True Cost of Credit | What does your card cost?
    Type in the BIN number on your credit card (first six digits) and get a breakdown of how much merchants are charged for your various purchases. This is an excellent site. It makes interchange pretty easy to understand, and it tells you how the interchange associated with your card stack up against other types of cards.
  • Customers Want Help, Feel Banks Don’t Get it
    18 Months ago, 67.89 percent of survey participants rated their trust in their financial institution as a 6 out of 10. Today, 41 percent of those customers say their trust has weakened. 39.2 Percent of respondents do not believe rhat their financial institution looks out for their best interests. Matt Wolfrom, head of corporate practice at Cohn & Wolfe, suggests that banks be transparent and engage their customers.
  • Glenbrook Partners – Glenbrook Payments Glossary
    Payments glossary that provides definitions for common payment and banking terms.
  • Will Coupons Kickstart Mobile Revenue?
    Although mobile banking usage is on the rise, Banks are still not sure how they will turn the mobile channel into a profit center. One idea might be found in the partnership between Chase, Visa, and Clairmail. Clairmail texts coupons to Chase/Visa customers. When a corresponding purchase is made, Clairmail recognizes it as a “Coupon” purchase, and the coupon value is credited to the Visa balance. This could be promising, especially in today’s economic environment.
  • The Alternative Online Payment and Shopping Cart Platform for Merchants
    TrialPay is an online payment option that lets shoppers purchase their product completing one advertising offer. The premise is that consumers are more willing to pay for physical products than digital products. So, instead of paying for clicks, advertisers actually pay (or help pay) for  product purchases. For example, WinZip currently asks customers to pay $29.95 at its online store to download one of its file readers. But those who balk at paying can get the software for free by using TrialPay’s system to chose from over 150 alternative transactions from a range of companies. They might, for instance, spend $50 on clothes at Gap.com, or sign up for an American Express credit card.
  • ViVOtech Awarded Key Patent for Over the Air Provisioning of Payment Cards to NFC Mobile Phones
    ViVOtech, provider for Contactless and Near Field Communication (NFC) mobile payments and promotions, announced today that it has an NFC related patent. The patent covers real time provisioning of credit, debit, prepaid, loyalty and other payment or non-payment cards into NFC mobiles.
  • Intuit: Creating an Online Financial Institution Hub for Small Businesses

    Intuit has combined its small business financial software with the Digital Insight online banking platform to provide an application that appeals to a wider range of small businesses. It won the Barlow Research Inc. Monarch Innovation award for the most innovated business banking solution
  • NACHA Reports US 4Q08 ACH Volume Up 4.5%
    Internet initiated ACH payments (also known as “WEB” entries) experienced the highest rate of growth. WEB entry ACH payments increased 16.5% in the fourth quarter. This seems to coincide with an abundance of alternative payment options that utilize the ACH network. I expect this number to continue to climb.
  • Proposal: Virtual Currency API – OpenSocial and Gadgets Specification Discussion | Google Groups
    Google is proposing a platform for developers that facilitates the exchange of virtual money. Users purchase virtual money via a container and exchange the virtual money for virtual purchases, vip status, or advanced features.
  • Consumers turn to online banking for increased control on personal finances
    More consumers are turning to online banking applications to help them manage their finances. A survey indicates that 71% of respondents are monitoring their finances more closely than they were a year ago. 75% say they use online banking to ensure they are spending within their budget.
  • Craig Newmark’s Keynote Unlocks the Secrets to Building a Community – ReadWriteWeb
    Craig Newmark of Craigs List discusses secrets to building an online community. He highlights three points: Recognize the Importance of a Feedback Loop, Get Out of the Way, Understand we Live in a Culture of Participation. The next step in Online Banking is transforming the online banking experience into a community experience. This doesn’t necessarily mean that every bank needs their own facebook site, but it does mean that banks should use their Online Banking platform to garner more feedback, get out of the way (let the users interact with eachother), and encourage participation that helps improve the site.
  • Internet Banking high among online youth segment
    80 percent of active internet using adults adults aged 18 and over use online banking. The number one impediment to adoption remains security. The adoption rate climbs to 89 percent if you limit the age range to 18 to 34 year olds. 71% of internet users over 55 use online banking.
  • Do We Need a New Internet? – (John Markoff/New York Times)
    Researchers compare the current internet to Pearl Harbor with the Japenese fleet sailing towards it. They claim the Internet is ripe for attack and assert that the only way to fix it is to start over. The current internet was originally constructed as a communication platform and little thought was given to security. The “New Internet” would be built with security in mind.
  • Looks Like Facebook Just Took The Top Spot Among Social Media Sites
    Facebook overtakes MySpace for total site visits. This is not saying that Facebook has the most unique visitors, they don’t. In fact, they probably will not overtake Myspace for unique monthly visitors until 2010. However, Facebook must be receiving more frequent visitors to get the total traffic numbers above Myspace numbers.

Delicious Money Mashup: Enterprise web2.0, Tree.com + Thrive…

February 7, 2009
  • MoBank © The wherever you go bank
    MoBank is a mobile focused bank in the UK. It will be interesting to see how this works. I imagine that they will rely primarily on interchange and premium services that they sell on top of their regular services. I think in the US this concept would work on college campuses. Community banks, and especially credit unions should consider similar initiatives.  Financial institutions could create mobile brands the same way many of them have created online only brands.
  • NACHA Group Close to Proposals for Mobile Payments on the ACH
    It looks like NACHA will be formalizing something that has already been happening anyway: Mobile ACH transfers. PayPal allows you to send P2P payments via your mobile device (text messages or mobile app/site). If you do not have stored funds with PayPal, they pull money from your bank account via ACH. It seems like there is an opportunity for banks to take advantage of any new NACHA guidelines for mobile ACH. It will be interesting to see what NACHA comes up with. Given the wide reach of NACHA and the the participation level of banks, the potential is huge.
  • Security experts warn of online banking Trojan
    These types of threats are still present even with the mandated implementation of dual factor authentication. It seems this is a version of a man-in-the middle attack that intercepts information on its way to or from your computer. This could allow the criminal to take over your session and conduct some transactions on your behalf. This is a problem for Online Banking sites because it is difficult to stop these types of intrusions since they are result of something on the client’s computer and not the Online Banking site. One way banks could help with this would be to offer virus detection software or even hardware (i.e. USB keys) that runs the browser session from a “vault” that is walled off from the operating system.
  • Web 2.0 and the Enterprise: A Symbiotic Relationship
    This presentation lists five reasons why the relationship between the enterprise and web2.0 sites is symbiotic. 1. “The Facebook Affect” Work and personal lives continue to blur. 2. People share with each other if they trust each other. Obviously the workplace fosters that trust and is conducive to sharing ideas online. 3. Big ideas and little ideas matter. It is much easier to gather and manage little ideas via social networking. 4. Social graphs serve as a bridge. Social graphs allow you to combine and aspects of social sites. Linkedin can be used in the enterprise, and I can share these delicious posts on Facebook. 5. The enterprise is changing. Some companies are letting their engineers comment in forums. A broader group of employees is engaging with customers via social tools such as blogging, twitter, and forums.  Although my five reasons would probably be a little different than the author, I agree that social collaboration tools could greatly improve productivity in the workplace.  How many times have you worked for weeks on a project only to find out that someone else in the organization is doing something very similar and much of your work overlaps?  Web2.0 could solve those types of problems and it could create an environment where new ideas are shared more freely and efficiently.
  • Tree.com Acquires Thrive
    Thrive is a financial transaction aggregator in the form of Mint and Wesabe. Tree.com owns several real estate and lending related sites including LendingTree.com. It will be interesting to see how the combine the services of their different sites. Particularly how they combine the services of LendingTree with Thrive. As I mentioned in a previous post adding lending, account opening, bill payment, and transfer services is probably the next step for sites like Mint and Wesabe.

Delicious Money Mashup: iPhone in at BofA, Amazon Payments go Live…

February 6, 2009
  • IOU Central: P2P Lender
    IOU is a new p2p lender set to open in the spring of this year. Despite regulatory scrutiny from the SEC, it seems new p2p lenders are determined to open. It will be interesting to see how IOU differs from other p2p lenders already making loans.
  • Amazon Payments Account Management
    Amazon competes directly with PayPal with this p2p mobile offering. It allows you to send money to others using text messages. It links to your Amazon profile and will use your credit card to fund transfers to other consumers. You can send funds to email addresses, aliases, or mobile phone numbers. If you do not connect a bank account to your profile, then it will pull money from your credit card as a cash advance.
  • Hunkering Down: Strategies for the Financial Crisis
    What should your alternative channel strategy be in a year of financial turmoil? The author suggests puttig mobile on hold, conversing with customers via, email, blogs and podcasts, and adjusting your online marketing strategies. I am not sure I agree with the mobile on hold suggestion. If you are looking to expand your deposit base, there is evidence that a good mobile initiative will help.
  • Mobile Banking Stats: 40% of Bank of America’s 2 million Mobile Bankers Use iPhone or iPod Touch
    Bank of America believes that their iPhone offering may be driving new business. In other words, people are opening accounts at Bank of America just because they want to use the iPhone app.
  • High-Yield Reward Checking News – Growing Popularity
    Rates on high yield rewards checking accounts remain quite high; even higher than those of savings and accounts and CD’s. High rate checking accounts reward customers for using their account in ways that makes the financial institution money – via interchange – and saves them money – by subscribing to eStatements, using Internet Banking, and other electronically delivered services.
  • Fiserv, Jack Henry Upbeat About Core Client Spending
    Most of Fiserv’s and Jack Henry’s revenue comes from small and midsize banks and credit unions. Those midsize clients seem to be doing better than their larger counterparts, and may even raise their spending in some areas this year.