The Bankwatch

Dave links to a report that highlights usage of cell phones as a digital wallet in Japan. Great statistic here … almost 16% use their phone for this purpose.

Digital Money Forum: We should have such problems

Only a sixth of mobile phone subscribers use their handsets as contactless wallets! ONLY A SIXTH!! Well, here in the U.K. it’s about 0.001% so I’m quite jealous. Not just of Japan, but of lots of other places.

Aneace summarises the last presentation suggesting that cash is under-priced hence smart cards, and electronic purses / prepaid cards are not as successful as they could be.

Aneace’s Blog: A solution to the interchange dilemma

the only solution to the interchange problem is to raise the price of cash to match its cost, for example through an ATM charge

Aneace is right that this is a political and bank non-starter, because the secondary revolt would out-weigh the benefit.

Prepaid cards acceptance, and cash reduction, can only succeed, once someone figures out a better mousetrap.

In a survey that probably understates the matter, Brits are using the same password for multiple cards.

Finextra: Brits struggling with PINs - survey

Around a quarter of cardholders in the UK are putting their money at risk by using the same PIN number for all their credit and debit cards, according to research commissioned by price comparison Web site Moneysupermarket.

This is no surprise, and rather than being seen as a problem, should be seen as an opportunity by the industry to consider additional assistance for people. Biometrics spring to mind, such that cards can only be used by the owner.

Interesting review of the customer view while trying to use the Barclaycard OnePulse card.  Dave makes the point that the merchant benefits are clear, but the benefit to the consumer at the point of purchase is confusing, and in this case slower than cash.

Digital Money Forum: Slow penetration

When I waved my card at the reader, nothing happened. The woman serving me asked if I really wanted to use the “terminal”. I said yes. She said: “It will be an extra five pence”.

Whether it’s the lack of suitable terminals for the kinds of merchants,
miscommunication between acquirers and merchants about benefits, simple
unfamiliarity or whatever, I hope someone on the business side has a
handle on this.

This first transaction brings Canada closer to being in line with Asian and European countries with chip and pin protection for debit and credit transactions.  [hat tip to Payments news]

Interac Association - Media > Press Releases

Toronto, Ontario, September 12, 2007– As part of its commitment to providing the safest and most secure payment network, Interac Association today announced the completion of Canada’s first INTERAC debit card transaction at the point-of-sale terminal using chip technology. The transaction was processed today by TD Merchant Services using a BMO Bank of Montreal chip debit card at Mercato Giovanni’s Fresh Food located in downtown Toronto. The chip debit card transaction was conducted in preparation for the Kitchener-Waterloo, Ontario market trial of chip technology which will begin in fall 2007.

This post amazed me, and when I followed some of the suggestions, I was successful.

It is essential that Banks, and credit card companies follow through with enhancements such as “Verified by Visa “.

But more so, this article points to the need for online vigilance for card numbers that are available online. This will result in the usual, ‘is it Visa’s job our [the Bank's] job’, but the need is so clear, surely that can be sorted out.

It would be simple for companies like Visa, MasterCard, and Discover to take a list of the most common 8-digit prefixes, query for them every day on Google, and de-activate any new credit card numbers that were found that way. (American Express cards are apparently not vulnerable to this trick, because when their 15-digit card numbers are written with spaces, they are usually written in the format “3xxx xxxxxx xxxxx”, and Googling for the first 10 digits as “3xxx xxxxxx” didn’t yield anything in my random test of ten AmEx numbers. But this is still their problem too, since the searches that turn up “treasure troves” of card numbers usually include AmEx numbers as well.) A Perl programmer could write a script in one afternoon that could run through all the known 8-digit prefixes, parse the search results, and pick out any URLs that weren’t listed as matches the day before. From there, the search results would have to be reviewed by a human, in order to spot any situations where one credit card number was exposed at one URL, and a slight variation on the same URL (such as varying an order ID number) would expose other credit card numbers as well, which was the case with several of the hits that I found.

Simple, but time-consuming with so many different 8-digit prefixes — but every minute of effort expended on tracking down and canceling leaked credit card numbers, would save time and grief later by preventing the numbers from being used by criminals. If it would save them time in the long run and help prevent fraud, then why don’t they do this?

The opening sentence in this quote sums up the weakest link approach that criminals follow. Nonetheless, it appears that chip and pin is reducing card fraud in the UK so far.

But rather than reducing fraud in total, identity fraudsters have simply shifted their activity to areas that Chip and PIN does not protect.

The first signs came in the cheque fraud figures which showed a rise of 50% in the first six months of 2004, compared with the same period in the previous year. But the cost of cheque fraud is dwarfed by continuing card fraud. “It would be nice if they could pack up their bags and go home, but they are unlikely to and, unfortunately, they will go to another area that is vulnerable,” said Sandra Quinn, an Apacs spokesman. She correctly forecast that card fraud would reach £500m in 2004 (actual figure £504.8M). “We are hoping for containment,” said Ms Quinn. And in 2005, overall card fraud fell back to just under £440M, an early success for the Chip and PIN rollout.

Source: The Retail Bulletin - The complete retail news resource

 Nice touch from Barclays with a ‘green’, environmentally friendly debit card.

Barclays customers are set to go green with the launch of the UK’s first carbon neutral debit card. This new card, which is entirely blue including the edge, is being rolled out to the bank’s 11 million debit card users as their current ones expire.

Barclays has worked closely with Axalto, its card manufacturer on this innovative card. Axalto, advised by The Carbon Neutral Company, has undertaken to finance projects that work to reduce carbon emissions in the developing world, effectively balancing out the harmful emissions of the card’s manufacturing process by preventing the release of the same amount of greenhouse gases somewhere else.

Source: Barclays launches ‘carbon netural’ card - AllPayNews: Payment and fraud news, blog, jobs and discussions

For all the push to contactless cards, this release from Visa, noted by Aneace,  confirms the viability of small payments with no signature is not dependent on contactless.

Last week, Visa reported that its volume on purchases less than $25 in small ticket segments totaled $27.3 billion in the first six months of the year, an increase of 17 percent over the same period in 2005. Those transactions were performed almost entirely using traditional magnetic stripe cards, not contactless cards.

Source: Aneace’s Blog: Visa’s No Signature Required program is working … how will contactless compete?

This service is apparently particularly relevant for 18- 25 year olds, or GenY (not sure where Gen P as noted comes from)

Visa’s survey results also revealed that Generation “P” or Plastic, referring to consumers ages 18-25, is leading the trend of increased use of payment cards for everyday purchases. Sixty percent of Generation “P” prefers payment cards for purchases less than $25, particularly in new and emerging segments such as digital content, vending machines, public transportation, parking and newspapers.

As Banks move to chip, adding on contactless makes more sense in that its faster than chip, and easier for the consumer.  However in the US where there is no chip strategy, the relevance of contactless is certainly lessened considering the costs involved.

tags: chip+cards+contactless, visa+no+signature, MasterCard+qps

 Dave makes a good case here for Banks to lever their investment in chip to support new revenue. 

“So if the bank sends me a simple USB smart card reader so that I can log on with my chip and PIN card, that’s convenient.

But the bank could then store either more key pairs, or more certificates, on the smart card and charge other organisation’s (e.g., the government, retailers) for using them. This makes solving the phishing and fraud problem a line of business rather than a cost and, surely, that’s a way to get something done.   

…  the bank might be able to sell several certificates to the same person and it might also be able to sell chip and PIN cards to people for them to use purely for log on and not for payment at all.

Now that’s what I call a disruptive technology!”

Source: “Digital Identity: That whole trust thing - Mozilla Firefox (Build 2006072814)”

The challenge would be in the software management, which isn’t Bank’s core competence.  If that aspect could be outsourced, there might just be a model here.

tags: chip+cards, business+models