The cost of plastic

We live in a digital age, and yet all our online and over the phone payments are carried out based on a very non-digital technology – payment cards. Essentially cards are protected by you needing to know a few numbers off the face of the card, and 3 additional security numbers on the back. If you aren’t the only one who knows those numbers, then you aren’t the only one limited to spending on that card.  Yes, there are many new security measures online, such as 3d secure and verified by blah, and yes, there are endless reams of PCI compliancy rules that businesses should follow. But at the end of the day, a bunch of numbers is hardly the easiest thing to secure.

 

The end of cards?

Cards have served us well for a long time now. But the cost of issuing a piece of plastic with some numbers on, isn’t cheap (on such a large scale). The costs of trying to protect those numbers for banks and mainly businesses are always on the increase, and this always results on businesses being charged more to accept a card based payment. What’s worse is, that when that card isn’t physically present, such as online or over the phone (especially when online sales are increasing) the poor old merchant is charged even more for the pleasure of accepting their customer’s payment.

What we must remember is that fraud doesn’t cost your issuing bank much at all. Rather it is the merchant who sold the goods that loses out financially, and they will lose out on the value of whatever they sold. For small businesses that’s quite a risk, especially when they branch out onto the web. I have known many small businesses to be stung like this, loosing thousands in revenue and of course lost product (a double hit for them).

Now we have a number of alternative payment systems and services starting to become available, some in the form of virtual currencies, mobile payments, different payment schemes and processes online (ala PayPal) and these are starting to become quite disruptive to the traditional card schemes and banking business. With alternative payment options growing in popularity, could this possible be the beginning of the end of the card? I say the beginning, as cards are heavily entrenched in our daily lives, and to date, only Starbucks IMHO has shown that consumers and businesses are starting to really make a choice when making a payment – and opting for something other than their card.

 

Digital payments for a digital age

I am a strong believer that when the technology landscape changes drastically, you need to embrace it fully. When cards were first becoming popular, there was no internet, no over the phone payments nor over the phone banking. But the internet is here, and cards haven’t changed at all. The infrastructure hasn’t changed, all that has changed is that software developers let us type in our card details so that the card can be identified. Not much evolution or embracing of the new digital age there.

Payment schemes need to be designed with their current landscape in mind, payments need to be designed for the digital world, which with mobile devices now blends seamlessly at times into the real world. This is what we have done at CloudZync. We have designed a payment scheme for the digital world that can be used online and out there in the real world, day to day via your personal mobile device.

For me, this is just the beginning of looking at how we transact, how commerce takes place, how customer relationships are forged in the real and digital worlds, and it’s an exciting time to be in this space. CloudZync is pushing the boundaries of what we expect from financial products, commerce, customer relationships and in terms of technology making our lives easier. Technology making my life easier and safer as a consumer, and the same applies to businesses. Technology making sales, transactions, experiences and relationships easier to manage and more profitable. To achieve these goals, we must always challenge what has gone before and that includes cards and banks…

PayPal trails ‘pay with face’ tech in London

You may have read similar articles on this these past few days, however, as ever I am going to look at this from a different stand point, and not just re-iterate the PayPal marketing….

PayPal, paying with your face and not using a PIN? hmmm

 

First things first, the title and “pay with face tech” really conjures up images and thoughts of something really futuristic. When I first heard of PayPal paying with your face tech (a few months ago now) I instantly had visions of walking into a store, and just like in the Minority Report (film), being recognised by the store. When it came to paying, I just needed to have my goods scanned, added to the shopping cart then simply walk out. The reality though is nothing like this at all.

What’s really going on?

So what is really going on with PayPal and their “pay with face tech” claim? Well, if you are a PayPal customer, and you’ve attached your profile picture to your account, and you have an app on your mobile phone, and you walk into a store that supports “pay with face”, and you then remember to “check-in” from your PayPal app into that store, then you are ready to try it out. Phew….

When you get to that magic moment when you are asked to pay, the poor sales agent then scrolls through pictures of people who have opted to use the PayPal service. They spot you based on your profile picture, and then charge you by clicking a “charge” button next to your face. The customer then gets an alert to confirm they have paid and the amount.

So what do you think? Is that really paying with your face?

 

My picture = paying with my face?

I personally don’t see any “tech” on show at all with this solution. The face picture is basically there so the sales agent can spot you quickly(ish) from their app. So I would never say you are paying with your face at all, rather you are being identified by your face, by a user, no revolutionary technology there.

The process does sound quite coolish, and I am sure the promo videos will look great.  Even seeing a real live demo will look pretty good, but if there is any form of mass adoption of this, it will be a nightmare for the store and more importantly for the sales agent. Let’s think, if there were 50 customers checked into the store, how long would it take the sales agent to find you in their app based on your face. I have a vision of sales agents swiping up and down frantically trying to find you, and that’s if you still look like your profile pic. What about if you are just like my sister-in-law and change your hair colour every other week? That will be pretty tricky to find her in a heap of pictures….

 

Using your face though is nice…

I will say one positive thing here, and that is authenticating that the person standing in front of you is indeed the account holder, based on their profile picture is very useful. It provides a very accurate way of adding security to any process. After all, as a business, why would you carry on with a payment if the account holder picture isn’t matching the person in-front of you?

Because of this, I really like providing merchants with a facial picture for them to confirm before completing a payment. It adds a manual and highly accurate security check, that after all doesn’t take long to implement and can only add confidence in the payment system.

This is exactly what we do with Zync Wallet (http://www.cloudzync.me). When the consumer is checking out, the merchant gets to authenticate them based on some basic information and a profile picture. It also helps the consumer secure their account and transactions. So, it’s a win win…The difference here is that there is no need to “check in” when you walk into the store as a consumer, and the poor old merchant doesn’t have to search for the customers profile picture, rather it is sent to them at the point of checkout.

 

Final thoughts…

PayPal appears to have a number of mobile / payment options they are pushing. We have options that are dongle based allowing merchants to process card payments on their mobile device (think they have two options here), they launched a payment solution using a barcode and now this particular option. Unfortunately I feel like PayPal are trying lots of different options and seeing what seems to grab some form of traction (or at worse, they keep releasing different products so that their name is constantly in the media regarding mobile payments). PayPal aren’t the only company that seem to just be trying things, as opposed to really sitting down and thinking about the needs and requirements of businesses and consumers, equally….

Payments do not make a wallet

There are many “wallet” offerings becoming available each month, only in the past few days, we’ve seen announcements from MasterCard, ISIS (USA only), VISA, Zapp and a few others. But how many of them can actually claim to be a real wallet?

Mobile Wallets need to do everything our wallet does, and more…

 

The fact is that mobile wallets almost all focus purely on making a payment, and that payment is made against either a consumers debit or credit card. While they all get a lot of press it seems, I still don’t understand why no one has looked at how these product offerings can be classed as digital wallets.

 

I choose what I have in my wallet

My first issue with almost all digital wallets is that they force me to spend my hard earned money using a particular debit / credit card. That on its own is quite frustrating, but it can get a lot worse in the world of mobile payments. In some cases I am forced to have a particular card and card scheme to be able to use the wallet, that isn’t that flexible at all. Does MasterCard for example really expect me to ditch my banks VISA card in favour of their card scheme just so I can complete a transaction on my phone? Hold on though, things can get worse than this still. Not only could I be forced to use a particular card scheme, with a particular card with a particular wallet, I may also be forced to have a particular SIM from my mobile network and the final nail in the coffin is have to have a particular device (which rules out the iPhone by the way).

Not sure I like all these things dictating me what my wallet is, the fact it holds nothing else but a payment card and how I can spend using my wallet. I personally like having the choice to put easily any number of different payment cards in my own wallet, including loyalty cards which double up as payment cards in certain stores (ala Starbucks).

 

My wallet holds more than payments

When looking at not just my wallet, almost anyone’s wallet the first thing I notice is that actually, debit / credit cards take up very little space. Do this right now, and see if you get a similar result. As I type this, I’m opening up my wallet to count no less than 9 card locations. That’s quite a lot. But how many of these actually hold a debit or credit card….The answer, 3 in my case.

I have my own personal debit card used for my day to day spending, my company Credit Card, and a joint Credit Card I have with my wife for weekly spending on shopping for example. Don’t miss understand me, the remaining card slots are all filled. I’ve an Oyster card (used for transport around London if you aren’t familiar with this), and the other slots are all made up with membership cards, oh and 2 loyalty cards being forced to share a slot.

I would also like to point out, that just like Sheldon Cooper in the Big Bang Theory (if you ever watch that TV show) I’ve had to abandon many a loyalty scheme or membership card from my wallet, simply due to the lack of space.

But let’s continue, what else makes up the contents of my wallet. Well, cash makes up a little part of it, numerous deals and vouchers (a lot from Sainsbury it seems), travel tickets, VAT receipts for petrol and a number of other receipts. I also have a key code dongle thing for entry to the office and a few bits of paper with notes on particular deliveries I am expecting.

So with my wallet content in mind, why do digital wallet companies claim to deliver a wallet when they essentially force me just to carry a single payment method and nothing else??? I’m sorry, but that is never going to replace my real wallet.

 

Intelligence

While I’m moaning about my wallet contents not being made available, I should also have a moan at the fact that these mobile wallets also don’t add any real intelligence. At most it seems I can check my balance, that’s not that intelligent is it. Why can I not see my receipts, my spending habits, my loyalty points, how long I have to go to be able to redeem loyalty points, when a particular voucher expires etc… I expect a smartphone to be smart, and any wallet on my smartphone to also be smarter than my actual physical wallet, and yet the vast majority of wallet offerings simply aren’t smart.

All in all, when I look at the mobile payments landscape I am not surprised that no one method rules the world or that any have really gained traction (with the exception of the Starbucks loyalty app).

 

Zync Wallet?

Those of you who read my blog or know me will already know that obviously I have an interested in mobile payments and digital wallets, after all my own company has designed and built the Zync wallet app. But my issues and comments in this post are spot on. They are also in many ways the issues that have driven Zync Wallet in the direction it has taken.

We firmly believe that if a mobile wallet is to really work, then it needs to replace everything that I can carry in my wallet today (with the exception of those items that really do need to be physically on you….I’m sure you can think of a few). Our Zync Wallet is all about flexibility, security and intelligence.

Zync Wallet is flexible enough for you to top it up using any bank account, we even provide you with the option to hook in access to your bank account directly into the wallet. We also won’t limit you to one payment method, rather we have many others coming online in the wallet very soon. We also won’t limit you to what you can store in the wallet, we provide support for membership cards, discount schemes, loyalty cards and schemes, deals, vouchers and a lot more.

But I would say our biggest thing is intelligence and relationships. Our wallet is about making the wallet intelligent, so it can help serve you better. That means it lets you know easily how many loyalty points you have, what deals you have, where you can find the best deals, how many points you need to gain before you can redeem them. It even helps you build relationships with your favourite stores while helping them provide you with better customer service.

 

Conclusion, if there is one…

Is that payments alone do not, and will not ever deliver a great digital wallet. Mobile can deliver so much more, and yet the majority of offerings to date all seem to scrabble over market share of card payments, rather than focus on real consumer and business needs, and what can be achieved with mobile…As the title says, payments do not make a wallet…

The cost of taking our money

As consumers we don’t really think about the costs involved with doing business, all we care about are the products or services we are looking for, and getting them at the lowest possible price. Oh, and to be fair, there is nothing wrong with that. All consumers know there are costs involved in running a business, but some costs, like a business paying to take our money, we often forget about…

This is something that even the EU is now trying to look into, proposing a cap on the “interchange fee” charged by your bank back to the merchant for taking your money from your debit / credit card. The problem here though, is that those fees will probably move elsewhere, meaning it will be pushed onto the consumer – more than likely in the form of us having to pay annually for the privilege of having a debit / credit card (something many EU banks already do).

So in this post I want to quickly look at costs businesses have to pay in order to take our money…

Someone has to pay, every time we use these

 

The average costs

When a business accepts debit / credit cards, they pay for being able to provide that option to us, the consumer. Now you may think that it’s a cost based purely on the transaction process itself, but you would be wrong. Typically, in order to take card payments, a business has to register for merchant services (SMEs and independents usually go through high street banks – though the actual merchant service is usually sub-contracted out). The business pays a monthly fee for this, and the cost of that will depend on the business, amount of transactions they process and their value. But many small businesses, start-ups etc pay around £30 per month per terminal. On top of that, there is a standard flat fee per transaction that goes through the machine, again this will vary in price. For debit cards though, a start-up maybe looking at loosing 20p per transaction, while credit cards may also have a fixed fee associated with them, but will include a fee based on a percentage value of the transaction value. To give you an idea here, this fee could be anything from 1% right up to 4% of the value of the transaction, again depends on your business, your provider etc etc.

Now these fees may seem small, but remember these fees per terminal are per month, and that every single transaction is subject to these fees. When you look at tight operating costs and small profit margins, you all of a sudden see why providing card facilities isn’t always an option for a business.

Here are some facts and figures. The average cost of a credit card transaction (remember average) to a business is 36.2p. This cost drops to 9.6p for debit cards, while handling cash is 1.5p. If you were to calculate your shop sold 100 items in a day – that would mean you have spent £36.20 in handling those transactions (if credit card). Now multiple that by 300 working days (just for simple maths) and you see you have £10,860 lost in credit card charges (not including the monthly fees). Now, for many SMEs, independents, start-ups, actually any business, this is a large chunk of money lost.  Obviously these are just some figures to illustrate my point, and that point is that actually, processing cards is not cheap.

So with these sorts of costs, is it any wonder that businesses want a cheaper alternative, and are actively looking for alternatives.

 

Will Mobile drive down costs?

Mobile payments are the most obvious alternative to typical card transactions. But there are 3 different form factors of mobile payments at the moment:

1. Typical card processing, but using a mobile phone as a card terminal
2. Using NFC technology for contactless payments
3. Use real mobile payments, originating from mobile devices and no need for cards at all

 

So, option 1: Companies like Square, iZettle, Sumup etc provide a dongle that allows any business to turn their smart phone device into a device that allows them to process card transactions. This proposition brings down the monthly cost to the independent and SME business – they no longer need to pay for their merchant accounts with high street banks etc. But these solutions are still expensive for the merchant. Typical fees are at least 3.75% per transaction! That’s very high and ultimately expensive for the merchant. You must remember that these are still card transactions, so in our example earlier, the £30 per month fee may have been removed (saving the company £360 over the year), but their fees have gone up, so still looking at £10,000+ in card charges.

Option 2: Use contactless technology…Well you still need merchant accounts here, so you are still paying your £30 per month (if not more if your bank charges etc for NFC enabled technology). However, your card processing fees will drop a little – and this is because at the moment the interchange fees on an NFC transaction are lower than those associated with Chip and Pin transactions, signatures, and card not present. But this is making only a small dent in the overall fees paid, and again the merchant in our example is shelling out £10,000+

 

Option 3: Real mobile transactions offer real options to merchants. Since they aren’t dependent on card schemes such as VISA, MasterCard, there are less companies involved in the transaction handling process. This means savings can be made in every step of the process, and these savings are passed onto the merchant. Companies like CloudZync and their Zync Wallet product provide drastic savings to businesses. Take our merchant example, with CloudZync the merchant pays no monthly fees, and since they are processing 100 transactions per day, are simply charged 1p per transaction. That means their daily processing fee has dropped from £36.20, down to £1. So the business annual handling fee drops from in excess of £10,000, down to just £300 for the year.

 

Cost of business, and cost of not adding value

What we must remember with mobile though, is the potential here to add value to the merchant – consumer experience and relationship. While cards, cheque and cash provide payment methods, mobile has a lot more to give (just as it does with our emails, social connections, organisers etc). Mobile transactions can be the gateway to greater consumer merchant engagement, better shopping experiences and ultimately, provide a potential tool to ensure business growth.

So while this post really is focussed on the cost of doing business, and potentially doing business with mobile devices, we should also remember the cost of potentially not doing business with mobile devices….Can a business afford to not make processing savings and not increase customer engagement and retention? I don’t know any that can afford to miss out on both…

SCRUM way to go…

SCRUM

This is a slightly different type of blog post, focusing not so much on technology rather on a way of doing things, and in this case, the best way at developing a complex and large solution. First off, let’s give you a little background. The reason of this post is because my own company is currently finishing off our first release of our Zync Wallet digital wallet product, which in old school IT terms, is a complex project to say the least…So, when undertaking this “project” it was highly important to me to ensure we use the right methodology for delivery, and delivery is the key word here. Actually, “methodology” probably isn’t the right word, what we needed was a “framework” for delivery, and that’s where SCRUM comes in.

We have been very lucky in being able to aquire the right talent for our project, and when I say the right talent, sure I mean the right developers, people with the right skills, but also people who understand SCRUM, people who work well in a team, people who communicate well and at the end of the day, people that know how to deliver product.

As a stakeholder, it’s important that the product that is delivered by our development teams is exactly what our vision of that product is (vision as a company), that the features, functions etc are just as how we see them to be. SCRUM gives us a framework to ensure that the product delivered is as we expect it and want it to be…

I’m not going to say it’s been plain sailing or simple, especially as my own role as CTO has been split across other requirements, meaning that my own input into the vision of our product has sometimes not been available to the development team.

 

What is SCRUM

Most of my readers I’m sure know of SCRUM, but if you are new to it, essentially SCRUM is an iterative and incremental agile framework, typically, used for Software Development, but I would never limit it just to software development. I would argue that SCRUM can be used for anything as long as it has an objective that is a measurable deliverable. SCRUM is ideal for solutions that are complex, where it’s hard to know up front your actual requirements or implementation. In such cases, feedback loops make up the core management technique, and that’s ideal in ensuring you deliver actual products. In SCRUM your deliverable is not a project rather project is a dirty word, everything is about delivering product. As a stakeholder, that’s perfect as you get to see your “product” grow, provide feedback and ensure at the end of the day that the product you have in front of you is actually what you want.

Not only do we use SCRUM for our development efforts, but we are now starting to apply SCRUM to other areas of our business, areas that include things like marketing campaigns, sales, even customer management!

 

Sprint to success

We are using the SCRUM framework for all our software development here at CloudZync. SCRUM puts emphasis back on the professionals who do the actual work, who actually deliver the end product, in this case our software solutions. Splitting up the whole solution into smaller manageable chunks (known as Sprints) ensures that all work carried out is actually usable and contributes to the overall final product. At the end of each sprint the stakeholder (me in our case) gets to review the product results of that sprint. What’s great here is that I get to see our product grow and “play” with the deliverables. By actually having something to use it makes it much easier to identify anything that’s missing, new requirements etc. These can be feedback and taken on board.

 

Mocking things out

One of the reasons why SCRUM is so viable to development work, like our own, is that development technology has moved on. “Mocking” allows us to effectively pretend that components that are key to another function actually exist and are available for use. By “Mocking” these components it allows multiple development teams to move forward without waiting on another team to complete their own work. In terms of our sprints it means a sprint can consist of multiple development teams, none of which will be held up by components that are to be delivered in a later sprint.

 

Quick conclusion

If you are about to embark on a complex solution, to deliver an IT product or something else, then SCRUM is an ideal framework to ensure you actually deliver what you set out to do. There are numerous examples on-line that illustrate the power of SCRUM, the most obvious being an old one, and that’s a case study with the FBI.

From my own experience, SCRUM allows you to deliver usable products that can be reviewed at the end of each sprint, it allows us as stakeholders to guide the product correctly and to actually ensure product is delivered at the end of the day. All too often IT projects fail because of lack of information up front, or because change management becomes too complex in complex solutions. When in this state, IT projects spend so much time in documentation, change management, requirement re-focussing etc again that actual tangible product simply never gets delivered. If you want to deliver product, then SCRUM is the way to go…