Will HCE revive NFC mobile payments? No.

As of late there has been a lot of press coverage regarding HCE (Host Card Emulation), which in a nutshell allows devices to make NFC based mobile payments without needing the mobile operators secure element on the device. Both VISA and MasterCard are backing this new approach, in the hope that finally, they can kick start mobile payment offering with NFC, effectively locking merchants back into the card schemes for mobile. Google is also heavily behind HCE, because they need a way of getting their Wallet distributed on actual devices and networks. Google has already had a rocky time with NFC, supporting it, then ditching it, only to now attempt to bring it back to their offering through HCE.

There are many companies pinning their hopes to HCE, touting their solutions and the promise of mobile payments. But is HCE really the saviour of NFC based mobile payments, or is it simply the same old issues dressed up in a new party frock?

 

Secure NFC in the cloud

Effectively HCE allows secure details to be stored in the cloud. This makes a lot of sense if you want to bypass the mobile operators and effectively quash their mobile payment offerings (ISIS in the USA and WEAVE here in the UK). But does it actually add any value for the consumer or for the merchant? Is there actually any real difference? The answer is pretty much no.

If you are using the solution in its pure form, then your phone (no matter how it gets details, from the cloud or a secure element on the device) will broadcast card scheme data to the merchant’s terminal. No matter what that data is, it is being broadcast and is data that is used to complete the payment. This is actually very powerful if you are looking for mass distribution, potentially. I say potentially because though there are businesses accepting NFC contactless payments, they are still small in their numbers. In addition, the merchant still has to opt into accepting contactless payments – and it is worth noting that contactless payments in pure card form are not the same as contactless payments using your mobile phone. In many cases the “handshake” is different requiring businesses to invest yet again in contactless for mobile phone. Do we really think SME owners will continue to invest in technology for zero benefit to their business?

So does HCE make any difference here? No…

 

Availability

HCE and NFC are only available on Android based devices (and not all of them). Though Windows Phone 8 supports NFC, it is locked very much into the Secure Elements, so no HCE support there. If we then look at the most successful mobile smartphone out there (iPhone), we should note no NFC or HCE support (and it doesn’t look like there ever will be). So with this in mind, you are only available to customers on 1 of the top 3 mobile platforms. Though many will say that Android has the lion share in the mobile world, it’s worth noting that they are a distant third in their share regarding mobile web being used. This indicates that the majority of Android users are not embracing all the features on their smartphone, and as such, these probably are the same users that will not look to be early adopters of any form of mobile payment.

Essentially, the consumer base that could potentially look to HCE and NFC payments is quite limited.

 

The customer experience

Many articles will talk about adding value into the mobile phone payment option, but when we do this, any distribution advantages you may have due to card schemes and contactless being accepted vanishes. You may ask why, but the fact is that the acquiring banks (the people who actually operate those contactless card devices) will not be accepting data regarding a discount, or loyalty scheme. To be blunt, they simply can’t accept that data as it’s meaningless to VISA, MasterCard, the Acquiring bank and the customers bank. So in order to accept that data, the mobile payment provider needs to sign the merchant up to their particular version of mobile payments, in order for them to enjoy any added value. Therefore the argument for NFC as an open loop environment using card scheme rails doesn’t fly.

So what does HCE bring my customers in terms of experience over what they have currently with a card. The answer is nothing, unless I buy into a particular vision of HCE by a particular company, and if I am going to do that, I may as well look at alternative payment solutions, that save my business money.

 

Payment processing costs

Do these decrease with HCE? Nope, the poor old merchant is still paying full wack for their card processing, and maybe in some situations more. They will be paying for more expensive NFC based infrastructure on a monthly basis too, so mobile is now costing businesses more to accept. That’s simply not good news for any business owner.

 

HCE a game changer? Nope…

To make mobile attractive to businesses it must be cheaper for businesses to run, maintain and it must bring some added value to their business. It also needs to be available to the vast majority of my customers, so that means available to the top 3 mobile operating systems (Android, iOS, Windows Phone). HCE simply doesn’t stack up on any of these basic business needs. It’s more expensive and provides no added value.

Mobile will no doubt be a game changer in the payments world, but it will not be changed by solutions that look to the same old rails dressed up in a pretty new mobile dress. It will be companies that offer real added value through mobile services, and companies that deliver savings back to businesses with large reductions in payment processing fees.

So if you are a small business, look to see what alternative payment solutions out there provide you with the added value and services you want to move your company forward, helping you increase sales and increase your profitability? It’s an exciting time, and a chance for businesses to break away from the old and embrace the new more productive world.

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…

Tech looking for a business problem to solve

There are some wonderful new technologies coming to the market at an alarming pace it seems, some technology really helps a particular market, perhaps speeding up processes, changing our experiences, even having quite an impact on our lives. Then we have numerous technology that seems to be made, simply because it can be.

Just in 2014 alone (already and it’s the start of February) I’ve been exposed to a number of new technologies that are technically impressive, but they don’t have a problem to solve. They don’t have a real way of impacting our lives as consumers, or as businesses. Technology for technology sake is a phrase that I find myself uttering quite often, and none more so than when I look at the world of mobile and of-course, mobile payments.

 

My friend, NFC

NFC is a technology that has been around for years now. I remember it in an early Nokia phone (dumb phone not a smartphone) and it’s never really delivered anything in terms of impact on my life. I will be honest, most phones I have owned have supported NFC, and yet I have never used the technology for anything more than showing that it works.

Don’t get me wrong, there are some wonderful applications of NFC, but it’s a technology that doesn’t really solve any real issue, no matter what it is used for. Sure, it’s great for sharing data quickly, perhaps triggering music from my phone to play on a set of speakers when I rest my phone on them, great, but has that changed much compared to playing via Bluetooth? No, not really, if anything, NFC is more limiting than my Bluetooth pairing of speakers to my phone.

When we look at mobile payments, I still can’t shake the feeling that it’s a great technology trying to fit into this space, even though it doesn’t quite fit.

At the end of the day, NFC feels like a great technology, but for the sake of technology. NFC doesn’t change the game.

 

Bluetooth beacons

The latest mobile and mobile payment tech to raise its head is beacons. Apple launch their iBeacon and PayPal have released information on their own Beacon project coming in 2015 (possibly). Both are quite neat, and pretty cool technology, they demonstrate well, and when you read about them you do think “wow – that could be cool”. However, the actual use of the technology again doesn’t solve anything, or remove anything from a process (deals or payments).

Even if a Beacon checks me into the store, I still need to have my mobile phone app (maybe even open), I still need to pay at the till using a payment account (maybe PayPal which isn’t exactly cheap or merchant friendly) and I still need an additional way of assigning that transaction to me the customer. With that in mind, is it worth me having Bluetooth switched on and having my phone pinging off beacons?

Even if PayPal manage all this, has it changed my life as a consumer? Probably not. Because there is no added value. All I have done is identify myself to a PayPal system that I am in that store, and at the expense of battery life. There is no added value to the merchant nor to the customer, only a technology that demonstrates well. We must remember too the practicality of all this for the consumer, even if all stores supported beacons, how long before I need to charge my phone? Having my phone constantly pinging beacons via Bluetooth is not good for my battery life, or my sense of security as a consumer. So much so, that most people have Bluetooth disabled on their devices by default, rendering the whole proposition pointless.

Apple beacon is a different approach, it’s not focused on payments and you have to open the app as the consumer, giving you a little more control. However again the concept of only providing deals or information through the beacon app or iPhone won’t stop businesses having to show deals visually in the store or online. Has this made life easier for the business, or actually made it harder? After all, a business won’t want to lose those customers who aren’t on the Apple iPhone platform. What about the majority of smartphone users who are on Android? That growing number on Windows Phone? What about the number of people who don’t even have a smartphone? Do we really expect a store to not provide all those offers exclusively to their iPhone customers? No, so life isn’t easier for the merchant, it’s more complex. No matter the merits of beacons, it still isn’t a game changer for businesses or consumers.

 

Wrapping up someone else’s tech

This is a particular bug bear of mine. There are lots of technologies now out there, and proposed solutions (especially in the mobile payments space) that don’t actually deliver anything at all. Rather, they wrap up someone else’s tech / app, and all they do is pass information to it to semi streamline a process. Now I don’t have anything wrong with streamlining processes in this way, after all, I spent 14 years as a TA doing this for corporates. But does that make my own technology massively valuable? No, it really doesn’t….I don’t want to point fingers at all, but if you again, look at the mobile payment space you will see a fair few of these examples.

 

Payments, tech first, solve a problem second

Unfortunately most technology companies at the moment seem to rush to get a technology together, then try to shoe horn it into some business problem or experience that either it doesn’t fit in, or simply doesn’t work for. The mobile payments industry is rife with this, with a multitude of different approaches to payments, all based around technology first, user experience second and practicality for the business and others a distant last.

 

Look at a problem, and then solve it with technology

I must be “old school” when it comes to creating technology. I still like to have a problem to solve, either in terms of a real business need / driver, or an experience we need to get to before I start designing and creating solutions and new technologies. I still maintain that if you want your technology to work it needs to exhibit all of the following 3 points:

1. Make life easier for you and or your customer
2. Add value to your current process
3. Reduce your costs

If your solution doesn’t do all of these potentially for the majority of your customers, then it’s not worth investing in or using.

Shameless plug here, but when you look at mobile payments, Zwallet is the only mobile solution that ticks all three of these points off, and that’s because it’s a technology and solution that looked at real problems, needs, drivers and experiences first.

Zapp mobile payments, great concept or dead idea?

Zapp has been getting a lot of press coverage these past few days, no doubt to help bolster their fund raising efforts. (Read an article here at Finextra and have a look through the comments made too, very insightful) The company that hopes to deliver mobile payments for UK banks is trying to raise £100m on-top of the £16m funding it has already received to date. But what is Zapp? What will it deliver?

Zapp, great concept or dead end idea?

We must start with the cold fact that Zapp has not got an actual solution for mobile payments. Zapp has to date delivered nothing in terms or architecture and physical code. With that in mind, everything we read from Zapp is vision based, it’s fluffy and isn’t backed by something tangible like an actual real live working environment. So we must take their comments on what they can deliver with a little pinch of salt, as no one as yet has tried to deliver what they are claiming.

 

The proposition

So let’s now look at the proposition in the wake of Zapp announcing a number of major banks signing up to their solution. When you first read articles or headlines regarding Zapp, you may believe that Zapp has access to your bank account, and that means they can complete payments directly from your bank account for you. The fact is, this is wrong. Zapp does not have direct access to any consumer’s bank account, not ever consumers of those banks that have signed up to the Zapp vision. In addition, Zapp doesn’t have access to faster payments either, again something that many believe they do have. So what do they have that warrants the headlines coming from Zapp….

Well, what they have is an understanding with the signed up banks to be able to send information from their Zapp wallet app to the banks mobile banking app. This information is pretty basic, essentially it’s a reference, an amount and a destination bank account. So in the world of Zapp, you use your Zapp wallet to get a transaction under way, however, in order to actually pay, you are then pushed from your Zapp mobile app into your banks mobile banking application. There you input your PIN for your banks mobile app and then confirm the faster payments transaction that Zapp has set up for you. Complete it in your banks mobile banking app, and then back to the Zapp app you go. It’s also this integration that lets Zapp show you your bank balances in the Zapp app (no direct access to your bank account at all, rather a copy of functionality from Microsoft’s Wallet and Apples Passbook, reading data from other apps).

 

Great concept or dead end idea?

So, is this a winning mobile solution? Should companies like PayPal, Visa, MasterCard, CloudZync be worried. Well the short answer is no. Zapp isn’t offering anything that hasn’t been shown before. Zapp isn’t providing me as a consumer with any incentive to use the app, nor are they providing any incentive to a business to accept Zapp mobile payments. The experience isn’t even one that sounds “cool” for a consumer. Moving between two apps to manually authorise a bank payment is not exactly smooth. But, you can see why the banks they have on board are interested, these are all banks that have no form of P2P transaction apps, nor any foot in the door of the mobile payments industry. Of course they are going to sign up to Zapp, after all the promise is Zapp delivers mobile payments through their own current banking apps. The real proof that Zapp offers nothing new or an experience that consumers will opt for can be seen by looking at Barclays position. Barclays have NOT signed up to Zapp, and you can see why. Why would they, when Zapp is simply a very clunky vision of Barclays own Pingit/buyit app, of which isn’t pie in the sky, is an actual app already out there in the wild with millions of downloads and one that works a lot smoother than the Zapp proposition.

Mobile payments will not take off if we view them as simply an evolution of card payments onto mobile, and this is where Zapp is standing. There is no point for consumers or businesses to invest time and money in an evolution that delivers no improvement for either party. Mobile payments will only succeed when there is incentive and added value to a transaction, and that is why companies like CloudZync and their Zwallet mobile app are light years ahead of the competition. Wrapping other peoples technology to try and make something a little smoother (such as inputting payment information for a faster payments transaction) isn’t visionary and its hardly innovative. When we look at mobile and digital wallets, they need to be innovative, they need to provide real tangible and easily measurable incentives to businesses and consumers to make a conscious effort to use mobile phone as opposed to cards and cash. That’s exactly what Zwallet delivers…

Zapp future

I have no idea what’s ahead for Zapp. I am sure they can deliver the technology to wrap a banks mobile app, it’s hardly rocket science and they aren’t attempting to solve anything that hasn’t been solved already. The question really regarding Zapp is why do they need that size of investment? Do they have anything else planned or is it all marketing, marketing and more marketing money? Who knows.

What I do know is that Zapp is already behind the competition, and has a lot of thinking outside of the box to do if it wants to deliver experiences that get close to its competitors…

Payment Security. Has it been forgotten?

People may think I’m not being serious with this post title, but I really am. These past few weeks yet more examples of security not being taken seriously in the payments market have emerged. It started with an article I read on Finextra regarding Google bypassing the secure element on an Android phone for NFC based transactions. It’s the launch of HCE (Host Card Emulation).

 

HCE and NFC

I’m not going to go into too many details and technicalities about it, but my own take on the whole situation with HCE, NFC and Google is that Google and the card schemes are changing the rules in which payments are supposed to be made. They are doing this to better fit with their own solutions, and to potentially lock out ventures like ISIS in the US and WEAVE here in the UK and at the risk of security.

There are strict reasons behind PCI compliance and the use of EMV (secured chip and pin to most of us) and it seems that these are now causing issues for Google and others, so instead of looking for real solutions they change the rules. A great take on this can be found on finextra here

 

QR/Barcodes in transactions

These are the choice of many payment solutions out there, including my own companies CloudZync with Zwallet. However, QR and Barcodes are easy to create, especially static ones, so using these for passing payment information has to be taken into consideration, and I would never allow an authorisation of a payment to be made just because a valid code has been scanned. Yet I have witnessed many solutions out there now that do this…

With Zwallet we always make sure the consumer is involved in the authorisation process fully, so we keep intelligence in the process at the cost of 1 second in the transaction process. For me, 1 extra second making a payment is well worth it to aid in security. (I would like to point out that Zwallet transactions are still dramatically quicker than typical card based transactions, even with the added 1 second for security).

 

Security underlying cause for concern?

So what is the underlying cause of security concerns with payments? What really causes so much effort to go into technology a trying to patch security issues or catch fraud post a transaction? The answer is the actual card scheme itself and the infrastructure behind it.

Let’s be real. Cards are amazing. For the last 40 years they have steadily dominated the way in which most of us pay for goods and services. But, has security increased much in that time? A little is the answer. There is a lot more technology backed behind it, but fraud is back on the rise again, so we must ask ourselves why. And the answer is simple, cards were never designed for the digital economy. Everything that we do to utilise the card infrastructure is a cludge, a patch/hack in tech terms. All this technology and security to try and secure something that is very insecure, 16 digits on a card, mixed with two dates and 3 digits on the back.  If we lose control of those details then a fraudster can do whatever they want with our cards, and that’s why so much is invested in fraud detection post a transaction and so much is invested in risk management.

My fear is, while card based transactions using Chip and Pin remain ok, the way we use cards digitally isn’t so secure. Throw into the mix mobile payments and companies actively trying to utilise card details in their solutions to make payments, and holes start to appear. In essence, trying to use technology to secure something that by its nature is not secure causes all sorts of issues. And though great lengths to make things much more secure are possible, the costs behind these rack up.

No matter how you try to secure card details, or to what lengths you go, the fact remains that the infrastructure for cards requires those simple card details, and fraudsters are becoming increasingly intelligent, innovative and capable of getting their hands on those details and using them.

 

The security solution

The only real secure option is to start with a blank sheet of paper for payments and wake up and realise that the digital economy requires payments to be carried out on an infrastructure that is designed for digital transactions from the ground up. It also MUST include more human elements in the process and not just require everything to be automated.

Real intelligence still remains with the consumer and the business. By removing them from the process more and more, we may make the payment process a little quicker, but we increasingly make it less secure. After all, the process of me having to know my PIN to make a payment is far more secure if I have lost my card, compared to just waving my card in front of a reader and making a payment.

These are the reasons behind the security approaches we have at CloudZync, the reasons why we make sure the consumer has to actively be involved in the purchase process and actively have to authorise each and every payment. If we remove them too much, then there are more gaps for fraudsters to exploit.

I’m not saying everything can be 100% secure, it simply can’t, and intelligent innovative fraudsters will always find a way to exploit processes and technology, but we must actively make it as hard as possible, and currently, in the race to stamp authority on possibly the payments method of the future, security seems to be being overlooked…That is a great concern of mine, and should be a great concern for each and every consumer out there and business owner…

Mag-strip to EMV chip and pin

I’ve seen few articles on countries now looking to finally move away from mag-strip debit and credit cards, ditching signatures and opting for EMV chip and pin cards. This is the most recent I’ve read, “Bank of Israel sets deadline for EMV switch”. But what makes me chuckle a little is that EMV is really old hat now, so to start moving to EMV in the next 3 years seems a little out dated already.

In a recent article on Finextra, Bank of Israel sets a deadline for moving from mag-strip to EMV, banks and card schemes have been given 3 and half years to make that switch. In that time, surely many more of us smart phone users will be looking to mobile transactions, so the move seems just like the move from CD to MiniDisc – one with a very short lifespan and rather large investment…(Keep in mind the numbers of smart phone users as opposed to dumb phone users is increasing daily)

 

Card schemes are big

Yes, most of us have a card and therefore card schemes will be with us for a very, very long time. But moving forward, the role cards play in our lives will only get smaller and smaller. With this in mind, is it worth making the investments to move to EMV? Why not now at this late stage stick with what you have and await a mobile revolution?

 

Go mobile

If I were the head of a large bank in this situation I obviously would be looking at migrating to EMV because I am being forced to. If I wasn’t being forced to, I think I would be tempted to leave things as they are. After all the switch will not be cheap, it will also involve lots of customer relations with businesses and no doubt (just like in the UK) waves of consumers complaining about using a PIN (though we seem to love Chip and Pin now).

But my main focus I believe would be looking at pure mobile schemes, looking at what’s out there and how my customers will want to access and spend funds via their mobile devices. (Obviously I would be looking at CloudZync’s infrastructure and technology 😉 but maybe I am very biased on this)…

 

CD to mini-disc to MP3

Currently updating a card scheme, be it to EMV or containing LCD displays in a card, or pairing cards to Bluetooth apps on phones seems, well, very pointless. Many of us believe the physical card will play a smaller role in our future lives, so why keep investing in it? After all, would you as an IT company keep developing and spending money on solutions that had a shelf life of only a few years? Or would you be looking at a longer game plan?

Maybe I’m being harsh on “mini-disc” here, at least Sony were not that aware of the pending doom just a few years down the line with MP3 players (especially the iPod). They were taken by surprise the uptake and demand in MP3 and as such, mini-disc (though a great invention) died a quick death. Here with cards, it seems we have already foreseen their death, and yet we simply ignore it and plough on forward….curious….

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…

iPhone 5: What Apple got right

September 12^th was the big day and Apple finally showed us their new iPhone 5. However there wasn’t anything there that many of us didn’t know about already, such was the extent of leaks leading up to this event.  So far the reaction to the event is one of underwhelming acceptance…It seems that Apple hasn’t been an innovative company for some time now, rather everything they do is playing catch-up with other people’s ideas and innovations while attempting to maximise and squeeze yet more revenue from their current customers. This, Apple does exceptionally well at…

iPhone 5, it got no NFC right at least: Picture from engadget

Catch up on the iPhone 5 launch event here at engadget

So while there are many blogs, articles, reviews out there that show what’s wrong with the iPhone 5, and there is quite a list, I am going to focus on something they did get right, and that flies in the face of all the technology journalists, who on this subject often show they know nothing about technology and or business combined…Apple got it right when they opted NOT to include NFC in their device.

 

No NFC for the iPhone

While many reviewers are saying this is dangerous omission I have to say it’s highly sensible. If you believe what tech journalists are saying, then we should all be making NFC enabled mobile payments pretty much now, and they have based this belief not on fact, rather on marketing gumph from a few companies out there, VISA, Google and a bunch of phone networks. What they all fail to take into account is that customer experience is being put ahead of practicality, security and cost. In the real world, this means most businesses will not be using it.

The payments industry is pretty much in a mess, there is nothing wrong with the customer experience of using cash or cards, yet there is a common belief amongst businesses and customers that they should be able to make payments with their mobile device. This has lead to endless different approaches to mobile payments, almost all of which centre around NFC capabilities. However, let’s just think for a moment. Cards are not secure things; we know this by how easy it is to make fraudulent transactions, especially in a digital age. NFC is not a secure form of communication, VISA even state this in their own Patent applications. So put the two together and you get…A great demonstration of how we can use mobiles to make contactless payments, but ultimately a nightmare for merchants with endless costs and charge backs, essentially fraudsters saying “don’t mind if I do”. No wonder most merchants say “no thank you”….

Other phone manufacturers may have embraced NFC in their devices, but even then, each manufacturer and device OS uses it in different ways. Just because your device supports NFC doesn’t mean it supports contactless payments. We see this mess with Googles own Wallet only being able to support the one bank card, its own pre-paid card having to be pulled and you not being able to use your Google Wallet at a typical contactless payment point. Throw in the fact that the phone carriers want a bit of the NFC action and you can quickly see how messy this environment is. Sure it’s competitive, but it’s competitive because no one is doing the same thing and everyone is arguing over who owns what part of an NFC based transaction. Even Microsoft’s Windows 8 phones support NFC based transactions, but you need to get yourself a secured NFC SIM with your card details on it. Not exactly lending itself to you simply adding all your payment cards to the device. But this is because the phone carriers want some of the payment transaction action, and it’s a way to stay friends (at the detriment of practicality, customer experience and security).

I haven’t even spoke about costs of supporting NFC for the merchant, which essentially means new hardware, firmware, support and maintenance for that hardware and perhaps updates to their POS if they want to distinguish between a chip and pin card transaction, signature, card not present, or contactless payment, even mobile contactless payment.

So while so many seem to be singing the praises of NFC and perhaps mentioning concerns that the iPhone 5 doesn’t have NFC, I would say no NFC for Apple is a wise move. Apple usually only embrace a technology once it really has proved itself, so not to deter from the customer experience of using their devices. NFC is no different….As a reviewer of the iPhone 5 there are many areas of concern, lack of NFC is for sure not one of them…