Whine and Dime #0009

Whine

£0.12 for a single domestic text message is outrageous. Given that there is effectively zero cost involved in sending them, any price, let alone £0.12 (and £0.39 for international!), is a modern form of highway robbery. Coming from Australia, where text messages are generally just included as part of the monthly bill, getting whacked for 12p per message here in the UK is really hard to take. There's a lot to like about the UK, but the cost of mobile phones is not one of them.

Shine

Abel & Cole make the best mince pies.

Industry News

There is a lot going with blockchain technologies this week. There are now 25 banks working with distributed ledger startup R3.

International remittance is one area that appears to hold promise for blockchain technology, and there are a few startups looking into it. 27 according to this list. Visa Europe thinks there is merit in the idea too, partnering with Epiphyte.

A common misconception with international remittance is that it's the payment rails that make it expensive. This isn't really the case as much of the costs that customers end up paying come from hidden uplift fees and atrocious currency exchange spreads. Swift fees are modest in comparison. Identifying payers and beneficiaries is also a big component of the costs. 

Microsoft is also getting into blockchain tech releasing a cloud-based platform to help customers experiment. A smart move, even if it is just to get organisations familiar with the concepts.

The head of the IMF also recently gave support to join the blockchain bandwagon.

Banks should prepare for the Internet of Things, says TechCrunch. New data sources to assist credit scores is one thing, but the potential to use blockchain technology for tracking physical collateral items is really interesting. Everledger is doing just that with diamonds.

In non-blockchain news, there are signs that banks are starting to notice alternative lending firms.

Despite the almost unparseable headline of "Government payday cheques out big time for BPAY", this article makes the point that BPAY stands to pick an enormous amount of new payments volume with the NPP "Initial Convenience Service" to go ahead in 2016.

The phrase "Uber for X" is now a cliche. Here it is applied to banking by the WSJ.

What about AirDrop for Payments? Apple is apparently in talks with banks on a mobile person-to-person payment service ($). Here's some more from 9to5mac (un-paywalled, this time): Apple in talks to launch person-to-person Apple Pay mobile payments system in 2016. The impact of a simple, easy-to-use, and potentially free person-to-person payments mechanism will cast a long shadow over other in-flight, domestic immediate payments initiatives around the world. NPP, for example. Apple doesn't need to make money from the system because it's just another piece of capability that makes the rest of the ecosystem attractive to consumers. This will make it really difficult for other P2P networks that need to clip the ticket somehow.

The Financial Times thinks that banking is under attack on all sides. Maybe it's not "turmoil and decline", but just another case of software the eating world.

Blog Posts

Worth Following

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Whine and Dime #0008

Whine

BPAY looks like it will be the first institution to offer instant payments on the Australian banks' New Payments Platform (NPP). NPP has a real opportunity to shake up the banking landscape in Australia, as long as the Big4 banks participate. As the article says (my emphasis):

The move echoes the plans of the failed MAMBO (Me At My Bank Online) project run by the big four banks and BPAY that had a similar plan but collapsed after NAB and ANZ pulled out over fears some banks would get a competitive advantage because they were better prepared for the change.

What should have happened with the NPP rollout was for the RBA to regulate that by a particular date, all banks in Australia with a retail banking license were mandated to receive an incoming NPP payment from any participating institution. There would be no need to mandate that a bank originate payments, only that they receive them. If for commercial reasons, a bank chose not to offer the ability for their customers to create NPP payments, so be it. However, they would be obliged to receive them.

This would have ensured a minimum level of service for all customers of all banks to receive payments. It would have meant that all accounts could be addressed with an immediate payment. It would have bedded down the basic infrastructure, and it would have allowed for a slow and steady roll-out. Importantly, it would give an opportunity to progressive banks to roll-out payment origination capability and draw customers away from any less-progressive institution that might be lagging behind. This approach is similar to what happened with the rollout of Faster Payments in the UK. It would be a clear win for consumers, and a clear win for competition.

Australia could be at risk of getting the worst of all possible outcomes. The industry is spending a shedload of money, the less technically competent banks are already lagging behind where they need to be for roll-out, and there are questions about what functionality will be available for customers at release. It could end up right where M@MBO left off: in a pile on the floor.

Shine

The customer service from @TheTileApp was fantastic this week after I received a post-delivery bill from the courier for UK VAT. There were multiple problems with this process. Firstly, the VAT was, for some reason, calculated on a USD price of $70, when the delivered items were only USD$48. But on top of that, the courier company charged a GBP£12 processing fee! Tile refunded the difference after an email to support. Thanks, and well played @TheTileApp. Much appreciated.

Industry News

More traditional FIs take the bitcoin plunge, with the likes of MasterCard, Bain Capital Ventures, and New York Life investing in bitcoin Digital Currency Group. DCG is setting itself up as "the nexus of blockchain technology and finance", a bold claim, but potentially profitable if the stars line up.

Last week, The Economist thought that the technology behind bitcoin could transform how the economy works by describing it "a machine for creating trust." It's more like a machine that allows parties to collaborate without the need for trust, but the general point is well made. If blockchain technology really takes off, then there are whole swathes of the financial services business that will be obviated.

This week the Economist digs into the technology behind bitcoin in "The great chain of being sure about things". Unlike last week's article that seemed to miss the point on trust versus trustless transactions on the blockchain, this one gets underneath the way that the tech behind bitcoin lets people "who do not know or trust each other build a dependable ledger". That's the real key: trustless transactions. It's a huge innovation with profound implications.

Heartland CEO thinks that blockchain could power trillions in bank transactions, mostly through the elimination of middlemen. A lot of banking is little more than trusted mediation, so the potential for change is huge.

As the bitcoin price hits USD$400 this week, it is worth asking what a 'fair price' for BTC should be. If, as Startup L Jackson suggested about a year ago, that the long term value is around the USD$60 mark, then $400 seems a bit overpriced.

And maybe even $60 is overpriced if you believe Jamie Dimon from JPMorgan who says "Bitcoin will not survice":

"This is my personal opinion, there will be no real, non-controlled currency in the world. There is no government that's going to put up with it for long ... there will be no currency that gets around government controls."

Of course someone vested in the establishment money system would take that position. But fiat currency is such a powerful tool of the nation state, it seems unlikely central governments will ever give up control of it without a fight. What would Murray Rothbard have thought about bitcoin?

Motley Fool is reporting that "JPMorgan Chase is crushing it in payments". The advantage stems from a long-term agreement to use the Visa network, in combination with some savvy data products that it provides to merchants. Full-service payments is such a scale play that when the really big players like this get involved, you wonder what the future looks like for regional processors. Even those that might be relatively large within a region today.

In what will undoubtedly be a fillip for uptake in a number of international markets, American Express will bring Apple Pay to card members during late 2015 for Canada and Australia, and for Singapore, Spain and Hong Kong in 2016.

If an Australian bank had eliminated foreign transaction fees for small business cards like Wells Fargo plans to do, it would have saved me a fortune in banks charges over the last couple of months.

Visa is going to be buy Visa. That's US-based Visa to buy Visa Europe. For USD$21b. Given that so many mega-mergers fail to deliver consumer value, it will be interesting to see how this plays out given the 16 billion transactions worth of sales that the EU cards processing operation will add to the business.

According to Trustev (a company that helps retailers and banks prevent online fraud), not that many people are actually using Apple Pay even though they have it on their phones. The problem with this article, however, is that it conflates "having Apple Pay activated on a phone" and "being able to pay at an NFC/contactless terminal". These two things are not the same. So whilst the data may be correct about usage, the authors need to synthesise the two data sets of "users who have Apple Pay enabled" and "NFC/contactless enabled POS terminals" and ask the question "how many users with Apple Pay enabled on their phone have used Apple Pay at an NFC/contactless terminal?" That would be a far more interesting analysis.

Maybe this Mitek service offering instant, assured driver license authentication on mobile devices could help some UK banks get over the obsession with the horrible UX that is Verified by Visa?

"How Venmo won in one of the most crowded spaces in tech" tells a great story of excellent execution. Precisely the kind of thing that Jason and I didn't quite manage to do with Tillless. It's a laundry list of salient lessons for next time around.

Blog Posts

Worth Following

  • @DCGCo - combining blockchain technologies and finance
  • @activateinc - strategy consulting responsible for the epic slide deck above
  • @arampell - SV VC GP @a16z

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Whine and Dime #0007

Whine

I recently instructed an Oz bank to move a sizeable (for me, at least!) chunk of money from AUD held in Australia to a UK-hosted AUD foreign currency account. This should have been a relatively straightforward AUD-to-AUD international transfer, but because of the size, I was paranoid about getting it right. I went to special effort to validate the form details with the sending and receiving parties. Both of whom told me that it checked out and was good to go.

I even fielded a phone call from my Oz bank at about 10pm London time on the day that the transfer was supposed to happen to validate that everything was Ok. I reiterated with them that because of the size of the transaction I was keen for it to be checked. 'All good', they said. Sadly, I wake up next morning to find an email telling me that the transfer was not made because the form was not filled out correctly.

Now I am sad. I take a quick peek at the exchange rate (which is never a good idea because it's like googling your latest malady) and it has dropped by about £0.07. This doesn't seem like a lot, until you work out what the difference equates to in terms of GBP in my bank account here in the UK. :(

I understand how international money transfers work, and I understand that dealing with one bank in one country can be tricky enough, and I know that the problems just pile up when you have to talk to multiple banks in multiple countries. I get that. I really do. This is not what I am complaining about. Where it all goes wrong for Oz Bank is in their response to a polite email that I sent them about the real £ cost of the delay. I wasn't asking for anything, just querying where the process had gone wrong given the diligence that I thought had been applied.

A chirpy representative of Oz Bank now has an opportunity to atone for their stuff-up, but lets the chance spill out of their hands. I would not have been so upset if they had simply come back with something along the lines of:

“Gee, we’re really sorry there was a delay, and you’re right, it was our fault. International transfers can be tricky, and there’s always the risk of a delay while we make sure that all the data is correct. We'd prefer to do that, then send the money to the wrong place where it can be incredibly difficult to get back. And as you know, rates can move up and down.”

At least that would have demonstrated a modest understanding of what is going on in an international transfer. But no. The reply I got to my question was this:

"In regards to the exchange rate, my understanding is that the lower the rate the more funds you will get on the other side ..."

Really.

There are multiple things wrong with this incident. First of all, how is it possible that someone working for a Tier-1 Australian retail bank does not understand international currency transfer? In fact, it's worse than not understanding it: this person has the mechanics backwards. And secondly, when you have clearly screwed up and it has cost a customer real money, do you a) take the chance to understand the customer's position and help them out, or b) tell them they've got it wrong. This chirpy representative from Oz Bank chose option b).

The lesson for me from this process is if you are moving a sizeable chunk of AUD from to the UK, it pays to move the AUD into a UK-based AUD foreign currency account first, and then execute the transfer into GBP inside the UK. That has the advantage that the movement of value from Oz to Uk happens in AUD with no exposure to an Australian-priced AUD:GBP spread. Then the subsequent AUD:GBP currency exchange can happen in the UK, where it appears that people actually understand how currency exchange works.

Shine

Note: a 'shine' is something new to balance the whine, calling out a bank for doing something noteworthy.

To balance this week's whine, here's a shining example of a bank who understands that the confluence of security and user experience should produce more than an epic fail. Capital One will now let customers ditch security questions for a phone swipe. Hopefully, UK banks can replace their abominable "nth character" login screens with something as easy as this.

Industry News

A new Apple Pay patent has corporate credit cards in its sights, according to Patently Apple. This looks like a mechanism that would allow TouchId to be used to control authorisation of tasks, as well as allow for "profiles" which give guest users (potentially identified by their fingerprint) access to a subset of the functions on a device. From PatentlyApple:

For example, a guest user A may be allowed to send text messages and access the web to view websites, while a guest user B can access the web to view websites and make purchases on online stores, make telephone calls (when the electronic device is a smart telephone), and take photos. The ability to view photos, change Wi-Fi connections, activate airplane mode, set the alarm clock, and read texts and emails can be denied to one or both guest users through respective user profiles.

The ebook "Day 1 EMV in the US: Current State and What's Next" provides some good background on EMV cards and terminals in the US. The rollout of EMV terminals there will be a big factor in how quickly Apple Pay, and other smartphone-based payments technologies take off. After moving to the UK recently, it is interesting to note that penetration of contactless terminals in Australia is almost ubiquitous, whereas it is quite sparse in the US. The UK sits somewhere in the middle, with far fewer NFC terminals than I would have expected.

Google is going to add loyalty and rewards to Android Pay in an effort to ramp up its promotional push. Contrast this with the recent Whole Foods / Apple Pay loyalty announcement, and it seems like the payments disruptors are looking for ways to add value to payments that go beyond just clipping the ticket on the transaction.

Western Union is trying to make international payments social with a new service that allows cross-border payments to be made from third-party platforms. So far, details on exactly which platforms will be working with "WU Connect" have not been released.

"Fifty billion points of commerce" is the MasterCard vision for payments across the Internet of Things. MasterCard hopes that technology that can turn any consumer gadget, wearable or accessory into a payment device will help them achieve that vision.

Beyond payments, the Economist thinks the the grip banks have over their customers is weakening. Meanwhile, TechCrunch asks "Are Banks Destined To Become The Next 'Dumb Pipes'?". "Yes" is almost certainly the answer unless they can speed up their innovation abilities on the boundaries of their core ledger and payments systems.

In what can only be described as a brave move, RBS is to connect all staff to Facebook at Work. What could possibly go wrong?

In a clever piece of vertical integration, several US Banks have united to form a secure, real-time payments network that will combine the clearXchange payments network with the Early Warning real-time fraud, risk and authentication system.

Showing just how hard it is to keep fraud out of the payments network, an Omaha, US company was responsible for a whopping $5.7m of Square's fraud losses. This single loss accounted for nearly 23% of the company's total fraud losses, which certainly raises some questions about the company's ability to prevent fraud at scale.

"Hey, how about we add QR-codes to payments?", says Chase. Again. Are there any good examples of QR-codes adding anything to payments? Or is it just more roller-skating horses?

Mobile payments are about to take off in South East Asia mainly because mobile is the main mechanism by which people in that part of the world access the Internet, and mobile is huge in Asia, and growing.

Blog Posts

Worth Following

  • @jonas - CTO at
  • @tuo2 - Another Oz security professional with a lot of good things to say

Nerding Out

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Whine and Dime #0006

Whine

This week's whine is short. To you, the person that keeps placing non-removable paper stickers onto every product I buy, that peel off badly leaving behind a sticky mess, I have three words for you: Ice. Moon. Prison.

Industry News

More cryptocurrency activity from Tier-1 banks, looks set to see RBS pilot a product based on blockchain technology in 2016. This would make RBS one of first major UK banks to offer a product based on the emerging technology that many predict will radically disrupt the way the banking sector operates.

The UK Government is highlighting the benefits of blockchain technology, with a pledge to inject £10m into "research addressing the opportunities and challenges of digital currencies and their underlying technology as part of its larger pledge to innovation in FinTech." Exciting times for cryptocurrencies, if not for quotable sentences from Government departments.

Looking to the future, here are 10 predictions for bitcoin in 2016. It is refreshing to see someone making falsifiable predictions, even though some of the predictions (eg #3, #4) are far from profound. Missing entirely from the list is the interplay between bitcoin and Ripple over 2016 and beyond.

Are biometrics the future of security? They may be, but there are also some challenges, such as befell this poor dude: Malaysia car thieves steal finger. Ouch. That's the law of unintended consequences at work. Hat tip @caelyxsec.

Maybe the fact that the UK had 2.5 million incidences of cyber crime in the last year explains why everything to do with making payments here is so hard. It would be good to know exactly what the crooks are doing, because it's hard enough to do the right thing and get a payment through. This is contrast to Australia, where only 2% of small businesses are bother about online security. That seems to tell a story about the very different security profile facing organisations in the two jurisdictions.

MasterCard is going to tokenize MasterPass for online and in-app shopping.

Mobile payments awareness is high, but mobile payments usage is low. At least according to Accenture.

Eftpos Australia is trying to remain relevant, but might struggle against the international card schemes. One really interesting tidbit:

"Eftpos has lost market share to Visa and MasterCard. In the two years to June 30, 2014, it carried 2.4 billion debit transactions worth $139 billion, but this represented a 60 per cent share, down from 80 per cent. Eftpos' share of all card payments fell by 10 percentage points to 40 per cent in the same period. Much of this was due to tap-and-go payments, which are now about 70 per cent of all Visa and MasterCard in-person transactions in Australia, as well as more people buying online."

Times change.

An ongoing problem at all levels of banking is the lack of quality, technical depth. Chris Skinner agrees, speaking in Madrid at Innomoney he said "A good indication that change is needed can be found just by booking at the majority of bank executives, in particular CEOs, who tackle financial tasks such as risk management and regulations based on accounting backgrounds; but they have no grasp of, or training in, technology". This gap will become an increasingly serious problem as more and more banking and financial services becomes a technology pure-play.

Citi looks to set up a unit to design a mobile banking solution for consumers.

Sony is going to have a crack at mobile payments with a view to supporting its Asian expansion plans. However, as Square and others have seen, making money in the payments business can be tough, which has forced them to consider other business opportunities beyond payments.

Wrapped in red tape, Aussie banks and other companies lack digital readiness, says PwC. Comments here about 'lack of competition' and 'small local market' certainly ring true.

In the hopes of addressing some of the issues of innovation in the Financial Services industry (and red tape, too), the Australian Government released its response to the Financial System Inquiry. Under new leadership, the Government seems a lot more interested in technology and innovation, and this response has a whole chapter dedicated to innovation in financial services. Of particular note are changes to allow for crowd-sourced equity funding, and reductions in excessive credit card surcharging. Perhaps most interesting is the proposal for a national digital identity. I can hear the old arguments from the mid 1980s against the Australia Card being reheated as we speak.

One of the biggest changes in the Australian banking industry over the next couple of years is the New Payments Platform. Canstar is of the view that NPP is on track for release in 2017, whilst the Australian thinks that new payment systems point to a cashless society. If the banks can sort out their NPP implementations, then both of things could end up being true. If they can't, then this will end up just like M@MBO.

On reading that Microsoft is making another attempt at payments in Windows 10, one could be forgiven for thinking that they have "no chance". Props for trying, tho.

Blog Posts

Worth Following

  • @mattheath is doing great things with golang at Mondo
  • @caelyxsec is one of the smartest thinkers in security in Australia
  • @openbazaar has some really fascinating ideas about distributed reputation
  • @CoinCorner is doing some interesting things to make bitcoin simpler

Nerding Out

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Whine and Dime #0005

Whine

Continuing last week's theme of security theatre, a UK bank asked me this week to set a PIN for online banking. One of the rules they have for the PIN format is "no pairs of repeating numbers", amongst a few others. The result of this policy is not that PINs are any more secure, but rather that the search space of possible PINs has been reduced, making it marginally easier for a hacker to guess a PIN.

This misguided security strategy then gets even worse. When logging in to online banking, instead of asking for the PIN as a 4-digit number, they ask for a random 3 digits out of the four. And if that wasn't enough, to make the user experience even more diabolical, they then ask for a random 3 digits for the login password as well.

As a diligent online banking user with a complex, site-specific password managed via 1Password, I am now forced to look up my password on each login and determine the nth, kth and jth letters to type in. This approach is no more secure than simply entering my full password because any attacker with my password can also just work out the nth, kth and jth letters.

These strategies end up having the opposite effect of what was intended. Because this login process is such a UX nightmare, it encourages users to have simpler passwords from which they can easily remember the nth characters, or worse, forces them to write their password down.

This is the same misguided thinking that has organisations come up with increasingly baroque password policies. Forcing a difficult to remember password onto people encourages them to use some kind of generative approach like including the date, or worse, to write the password down or store it in a file on their computer somewhere. Both outcomes end up reducing security rather than improving it.

The best approach for any service beyond specifying a minimum password length (and not a maximum!) is to proactively try to crack every customer's password offline. If a customer password is ever cracked, the system automatically resets the password, informs the customer that their password was not secure, and forces them to choose a new one. This approach will weed out passwords of the "password1234" and "p455w05d" variety, and over time, create a very robust set of passwords reinforced against common dictionary attacks. It also allows people to select cryptographically complex passwords that are easy to remember, but also high in entropy, such as three or four word phrases separated by spaces.

Bonus whine: porting mobile phone numbers here in the UK is also slow and error prone. In Australia, the ports happen straight away, give or take an hour. That will probably be the first time an Australian telco gets a rap from me for service.

Industry News

Here are some thoughts on what law firms can do with the blockchain. The cross-over between the Law and programming is an interesting one. Computer programming languages are about telling computer hardware what to do, and the Law is (loosely) about telling people what to do, or at the very least, facilitating judgements about behavior when it does not meet community expectations. Can blockchain technologies, (particularly 'smart contracts') have an impact on the way laws work? For example, if you can algorithmically specify the terms of an agreement and encode it into the blockchain in advance, then will we end up with a situation where programmers replace lawyers?

Apple Pay Will Soon Work at Starbucks, KFC and Chili’s (Video). Unlike Australia where contactless/NFC terminals are almost ubiquitous, rollout in the UK and US is somewhat slower. Putting them in big name chain venues like Starbucks will have an increasingly large impact on uptake.

Interledger is Ripple's new spin for integrating traditional (private) and emerging (distributed, blockchain) ledgers. It's a bid to offer Ripple's enterprise customers a solution that they argue maintains customer privacy, allowing users to keep aggregate transaction data off the public blockchain by using a connector to move funds between private versions of the Ripple network. Early days, but it sounds interesting.

SWIFT is looking to deliver a 57% price reduction by the end of 2015http://www.swift.com/about_swift/shownews?param_dcr=news.data/en/swift_com/2015/PR_sibos_pricing.xml. This is unlikely to be because of any actual disruption to the international payments business by cryptocurrencies, but it could well be because of a fear of what is coming next. Curiously, the big costs to the end-customer from international payments are not because of the wholesale costs of making a SWIFT payment, but rather because of all of the kick-back and uplift fees that banks pay each other on top of the underlying SWIFT payment.

"Big banks are far too complicated.", says Anne Boden of Starling Bank. Yep.

The US's $40 trillion (with a 't') ACH payments system is 40 years old an starting to creak under the weight of payments innovation. HBR asks why the way Americans pay for things is so woefully out of date. Perhaps the author of the article (Jordan Lampe, Director of Policy at Dwolla) has a solution to the problem?

And finally, if this week's whine has you worried about security, then JCB is about to pilot palm vein payments in Japan. What could possibly go wrong? There's got to be a pun in there somewhere about 'armed bandits'.

Blog Posts

Worth Following

Nerding Out

Whine and Dime #0004

Whine

As I whined last week, getting a bank account in the UK proved to be incredibly difficult. Now that I have managed to get one, it is worth reflecting on what happened. Whilst I'm all for security, privacy, and risk management, what drives me crazy is security theatre that just moves the problem up or downstream without actually improving security, reducing risk, or maintaining privacy.

As an ex-pat moving to the UK, I (obviously!) did not have a local address, which made "proof of address" a challenge. The list of documents that UK banks accept for proof of address is relatively short and quite prescriptive.

Banks rely on specific address documents in the list, and will not entertain any common sense variation. This is understandable, as their banking licenses rely on compliance. The problem is that the source documents have weaker original identification processes than the banks who rely on them. For example, getting a land-tax bill from the local council is considered enough to prove an address, but a signed and executed residential tenancy agreement is not. But, a signed and executed residential tenancy agreement is acceptable to the local council in order to get a council tax bill. And the council tax bill can then be used as proof of address. Which is an obvious hole.

I don't know what the solution to this problem could be, and as an ex-pat moving to the UK, I imagine that I make up a very small part of the population. And the UK government has other things to worry about.

On a positive note, the wife and I managed to assemble 450kg of IKEA flat-pack furniture this week. I never want to see an IKEA bolt again. Ever.

Industry News

On the back of the recent announcement that nine of the world’s biggest banks have formed a blockchain partnership, Santander InnoVentures has invested $4 million in Ripple. Cryptocurrencies and the blockchain have an awful long way to play out, but the pattern appears similar to the early days of the web - a lot of cowboys with a very cavalier attitude towards risk, but hidden within are the seeds of something transformative.

Sadly, it appears that some Australian banks are being less than friendly to cryptocurrencies. Australia does have recent form tilting at windmills, with ex-PM Abbott's 2014 claim that "coal is good for humanity". Lets hope that the Australian Bank's antipathy towards cryptocurrencies does not end up being a "they're-not-going-to-just-walk-in" moment.

MIT Technology Review makes the claim that Apple Pay’s slow start doesn’t mean it’s a failure. This argument is curious given Apple's propensity for playing a long game. The reason that uptake might be slow right now has more to do with the upgrade cycle of POS terminals in the US than it does with any inherent problem with Apple Pay. Any argument about uptake sluggishness could equally be levelled at contactless or chip and PIN. And once capable terminals are in place over the next 18-24 months, uptake should follow. As a counterpoint, eMarketer suggests that Apple Pay is making inroads for everyday purchases. Go figure.

Perhaps the answer to making money in payments is to find something other than clipping the payment to make money from. A lot of smart people like Bigcommerce and Square think that data is where it's at.

Blog Posts

Worth Following

Nerding Out

Whine and Dime #0003

Whine

Opening a bank account in the UK is difficult. Really, really difficult. But difficult in a perplexingly complex way. It is easier for an ex-bankrupt, an ex-prisoner, or a homeless person to get a bank account in the UK than it is for an Australian expat. You have to demonstrate both proof of address and proof of identity, which is reasonable, but the trick is that you cannot use the same document for both purposes. And the documents that the banks will accept for proof of address can be very difficult to come by if you have just landed in the UK.

The banks we spoke to will accept a utility bill with your address on it. However, in order to get a utility bill, you need to have a current account from which a direct debit can be made because no utilities will allow for post-payment or credit card payments for utility bills. They would not even accept a residential tenancy agreement, even though it was a signed and executed legal document, nor would they accept a formal letter on council letterhead indicating that we were registered for council tax. They told us that they would only accept a bill for council tax, which is something that won't arrive for three months. 

20 GOTO 10

What is perhaps more surprising about opening a UK account than the documentation requirements is that you have to make an "appointment". There is no way to even start the process online (for the big high street banks). And making an appointment is not just a simple matter of walking into a branch.

The first bank we spoke to couldn't find an appointment slot for several weeks, the second one had a spot in "about a week", and the third one was prepared to find a spot on a Saturday morning when we told them of our plight, and the fact that we had a "private banking" sum of cash to move from Australia. Sadly, several hours after confirming the appointment the bank called us back to let us know that the Saturday appointment was cancelled because the staff member had called in sick. 

20 GOTO 10

One bank did tell us that they would accept details of a UK National Insurance Number, so we called the questionably named "National Insurance Hotline" in an attempt to get registered. As new residents we were foiled again. The first person we spoke to could not find a time for an appointment. And this was not "could not find a time for an appointment today" but simply "could not find any time for an appointment". When pressed, she indicated that we might be able to get one in November. At least this was November 2015. 

It ended up being easier for me, an Australian citizen with a UK ancestry visa, to start the process. In 7-10 days from our call, the National Insurance folks will send me a letter (by post, of course) telling me that the process has started. From this, I can then arrange a time to come in and be interviewed. They didn't say if I needed to travel by horse and cart to the meeting, or if travel by internal combustion engine vehicle would be appropriate. Luckily, I can work for up to 3 months without a National Insurance number. We are still none the wiser about how to go about getting a National Insurance number for my wife, who holds dual Australian / UK passports. 

20 GOTO 10

After a bit of online research, we found a tip from a fellow Australian expat. If you can, change the address for one of your Australian bank accounts to your new UK address before you leave for the UK. Then organise for a statement to be sent to that address.

UK bank staff will tell you that "Internet printouts" are not accepted. This adds another difficulty as most Australian banks have online statements, and have had for some time, so there is no difference whatsoever between a statement sent in the post and a PDF of the statement downloaded from the Internet. We will see how this works out for us next week. If we can get an appointment. 

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Something else that might be useful, depending on your circumstances, are "offshore banking" or "passport bank accounts". However, most of the offshore banking accounts require a balance that pushes you into the banks' private banking category, which is not always easy to achieve. 

CORRECTION: HSBC offers an online account opening process for "passport accounts". You can start that process here.

Additionally, here are few links that might be of use to anyone thinking of relocating to the UK, and wanting to set up a bank account:

Industry News 

Not much this week as most of the time has been taken up trying to open a bank account. 

According to the SMH, Eftpos is getting its tap and go, online act togetherGlenbrook consulting argues that the interdependence of e-government and government e-payments is another payment chicken and egg challenge. And the World Economic Forum thinks that we need a common standard for moving e-money

Also, just in case anyone has forgotten about the depths of the global financial crisis (or "GFC" as we like to call it in Australia), the Guardian thinks that the banks have ignored the lessons of the crash

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A short edition this week due to holiday travel, relocation to London, and house hunting. 

Industry News 

Starting off with some crypto is news that Bank of America has filed a patent for a cryptocurrency wire transfer system. Perhaps this will be the start of a whole bunch of "because blockchain" nuisance patents that just add cryptocurrency to an already established mode of operation. 

Is news that Visa is shelving its mobile payment venture in India an indication that Telcos are going to start throwing their weight around in payments? A bigger question is: will they succeed? Even startup unicorns like Stripe and Square are diversifying their businesses because making money in payments is really, really hard. Just take a look at what happened to Card.

In line with Jim Barksdale's proclamation that "... there’s only two ways I know of to make money: bundling and unbundling", we are starting to see significant unbundling of banking and financial services. SAP thinks that the bank you know today will disappear within "10 or even 20 years". Perhaps that will be sooner, given the state of the UK fintech startup scene

And lastly, the imperative to move to faster payments is gathering pace in the US. Moving to immediate payments will be a massive improvement over the very outdated ACH payments system currently in place. Alternatively, why not just scale up Dwolla?

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Nerding Out 

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Industry News 

In blockchain and cryptocurrency news, nine of the world’s biggest banks form a blockchain partnership and join forces with New York-based financial tech firm R3 to create a framework for using blockchain technology in the financial markets. The parties call out 'eliminating friction and transaction costs' as their main focus. Especially interesting for the Australian market is that CBA is in the mix. See also Global Investment Banks Back Blockchain Initiative. As an aside, it's worth unpacking where these 'transaction costs and friction' come from: mostly legacy infrastructure, servicing, and sclerotic processes. It will be fascinating to see how (or if) this initiative addresses legacy, which is where the real problems lie.

There is a lot of talk in payments, and fintech more generally, about what APIs are, and how they can help organisations expose their capabilities both to internal consumers, and externally to third parties. "Full Stack Banking: How Fintech Will Fuel API-Based Competition" talks to how unfavourable economics end up being one of the primary challenges facing partial stack fintech firms. See also Chris Dixon's views on what makes a full stack startup.

Can banks be programmable? Here's some thoughts on how APIs can help.

According to this LexisNexis 'True Cost of Fraud' study, retailers are losing 1.32% of revenue to fraud, which is up 94% from 2014, where the number was closer to 0.68%. That seems like a big increase, mostly arising in international and mobile commerce transactions. 

Two billion is a very big number. Particularly when it's counting the number of lines of code in a software system. Apparently, Google has 2,000,000,000 lines of code across all of its services, which is a simply staggering number. For comparison, Windows is about 50 million lines of code, which is approximately 40 times *smaller* than the Google codebase. Given the problems that financial services organisations have with legacy systems significantly smaller than this, perhaps this is further evidence that the real problem with banking is management, and not technology.

Bain & Company have some thoughts on navigating turbulence in the payments ecosystem. The report asks the question: can payments organisations make the shift from financial utility to a technology-focussed partner. Sadly, the realisation that banking is bits is lost on a lot of old-school bankers. 

Canada is the latest country to take a look at how the payments landscape is changing. The CPA is taking an holistic approach, which appears to mean that they are going to take advice from industry experts, inspect some research, and have a look at what the rest of the world is doing. Sounds eminently sensible. 

Just because you have an online channel doesn't give you the right call it digital banking. Or so says Frank Schwab from FinTech Forum. The article reiterates how customer-first, straight-through processing, and agility drive towards digital banking. There's not a great deal of new stuff here, but the '8 dimension framework' is a handy way to think about the differences between 'online' and 'digital banking'. 

Blog Posts

Worth Following 

Nerding Out 

The RESTful API Modelling Language (RAML) is a simple and succinct way of describing APIs. It's not the first of these to come along, but it does have a user-centric approach that makes it worth a look. 

If you are down in the weeds writing code to provide the backing implementation of an API, then the this article on building APIs with NAPA gives a few good insights into using the Napa gem.

And finally, here's some notes on using rails-api to build an authenticated JSON API with Warden.

Welcome! This is Whine and Dime.

Whine and Dime is a (semi) regular newsletter talking about happenings in mobile and digital payments in financial services, and beyond.

In addition to skimming across the world of #fintech and #payments, Whine and Dime will occasionally have a whinge about why payments in financial services is so difficult, why banking legacy is holding everyone back, and hopefully suggest a few ideas about what can be done about it.

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