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QR Codes: Scanning for Loyalty and Payment

December 10, 2012 in Uncategorized | Comments (0)

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A few weeks ago, I posted about the recent Square round of funding and how there’s a battle going on over control of the point-of-sale (POS)—and it’s not only about payment. I believe it’s about loyalty, and leveraging the power of mobile to create a direct relationship with customers.

There are a number of solutions available that incorporate quick-response (QR) codes into purchase transactions. They all work like a virtual punch card, where customers spend a certain amount of money, and get some freebie or discount as a reward. They measure loyalty better than Facebook or foursquare “check ins” because customers actually have to buy something to get access to the QR code. Some solutions print the code at the bottom of each sales receipt (RewardLoop, Punchd), or allow customers to scan a code at the register (Perx, Belly).

The biggest bonus for retailers is that the QR code can contain information about the purchase: what was sold, date, time, location and payment method. Using this data, companies can get to know their customers buying habits and tailor their marketing based on that. The setup is lightweight, integrating with existing POS systems via an add-on device or software plug-in.

The quick scan also makes it easy for customers to enroll—and having your mobile replace the stack of paper cards in your wallet (or forgotten in your kitchen drawer) is a bonus too. You simply scan a code again each time you make a purchase, and the loyalty information is stored in the cloud. I myself have used a Subway iPhone application for the last few months, which follows this exact process.

Paying via QR code is gaining some traction as well, as we have seen with PayPal conducting some interesting pilots this year in Singapore on the walls in the MTR (the Singapore subway). It allows you to buy products directly from advertisements by scanning a QR code and entering your payment information. The QR code presumably captures the place and time you scanned, providing valuable information to retailers, as well as a direct connection to your mobile device.

At the same time, we’re continuing to see many banks start to incorporate QR codes into their mobile banking application for bill payment and also P2P payment. Start-up Paydiant, a white-label mobile payments API, recently received $12 million in funding. Pioneering restaurants, hotels and bars can use it to print QR codes on receipts, allowing customers to pay and leave when they want—and now Bank of America is testing the technology.

I’m not convinced QR code payments are the next killer app, but they are one more way to enable mobile payments without NFC. They’ll certainly play a role going forward in mobile CRM and payments. After all, Starbucks with its 2D barcode technology has already generated over $40 million USD in payment transactions as reported at the end of the first quarter this year.

Applying Developing-Market Mobile Banking Models in the Developed World

November 27, 2012 in Uncategorized | Comments (0)

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A U.S. federal report released in September found that 8.2 percent of households in the country are unbanked. That’s nearly 10 million households, and 17 million adults. Another 20.4 percent are underbanked—or 24 million households, and 51 million adults. Those numbers add up to more than a quarter of the population of the U.S.

The percentage of both unbanked and underbanked has increased slightly since the last survey (conducted in 2009). Americans are also using alternative financial services more, including payday loans, check cashing, money orders, pawn shops, etc. Both increases are most likely due to the economic recession and resulting high unemployment rates.

Given that the recession is global, I’m guessing that if other countries were to conduct similar surveys, they would see similar results. And that has me thinking.

With mobile financial services bringing more people into the formal banking system in emerging markets around the world like South Africa, Mexico, Peru, Colombia, Pakistan, Sri Lanka, India, and Indonesia, etc., I’m wondering if the same models could be applied in developed markets.

Lack of access is often the major hurdle in emerging markets. Bank branches are few and far between. Roads are poor or nonexistent. Transportation options are slow (walking) and/or unreliable. That’s obviously not the issue in most of the developed world. In fact, the U.S. survey respondents cited insufficient funds, and the fact that they don’t need or want an account.

Prepaid debit cards and payroll cards are relatively new products. With a prepaid debit card, you load an amount of money on the card, and then use it for purchases at points of sale. Payroll cards are similar, but can receive payroll funds directly from employers. Neither card was considered an “alternative financial service” in this survey, but continue to be increasingly popular especially among the unbanked and underbanked.

Some banks are offering these cards now—and they’re smart. Everyone else is missing a market opportunity. The business model is similar to what we’re seeing work in emerging markets with simple accounts accepted by a wide range of merchants. More important, almost half (49.2 percent) of unbanked households that have used a prepaid card report being likely to open a bank account in the future.

Prepaid cards don’t build a credit history like secured credit cards do. That’s a drawback, for sure. They also have a myriad of fees. But they do help create financial literacy and a familiarity with credit that can be a step in the right direction.

As we move away from cash and toward mobile payments, I think we need to consider that those without bank accounts will get left even farther behind unless there are mobile services that meet their unique needs. There are sufficient numbers to create a real opportunity, and we have already seen such success with programs like Standard Bank’s AccessAccount in South Africa, which can be opened in less than 8 minutes via mobile at a local sales agent with no minimum balance and a low fee structure. Launched in March of this year, the bank reports opening 140,000 of these accounts every month.

Battle at the POS Heats Up

November 13, 2012 in Uncategorized | Comments (0)

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In September of this year, mobile payments provider Square announced that it had raised $200 million. Investors included, among others, Starbucks Coffee Company—a surprise for many in the mobile payments industry, as Starbucks has been so successful with its own app.

The press release about the funding includes some impressive numbers. Last fall (2011), Square had about 150 employees and processed about $1 billion in payments (annualized). This fall, it has over 400 employees and processes over $8 billion in payments (again, annualized). Talk about explosive growth.

Square pioneered a new point of sale (POS) by allowing small businesses and consumers to accept credit card payments via their mobile devices. Several Square-like equivalents have popped up lately, including PayPay Here, iZettle in Europe and Tortuga in Asia.

Now it’s clear that Square is onto something new. Its Pay With Square app allows consumers to pay for purchases by simply telling the cashier their name. GPS and a few apps cooperate behind the scenes to take care of the rest—no credit card swipe required. (See my earlier post for details.)

Square’s success is certainly helping to fuel the battle at the POS not only in terms of where the payment is taken, but also in the method of payment. Back in May, Visa and MasterCard both entered the ring in an effort to defend their long-established market dominance. Each launched its own “digital” wallet service—not “mobile” wallet, mind you. Yet.

Visa’s solution, called, is made for online transactions. It stores your credit card, billing and shipping details, allowing you to pay for online purchases by providing only your email address and password to the merchant. It’s not tap-and-pay, but it’s a start. And the company says it plans to introduce the mobile aspect soon via NFC, QR codes or other technology that would allow tap-and-pay, scan-and-pay or something similar.

MasterCard’s answer is PayPass Wallet, which expands on the PayPass brand that does currently offer tap-and-go NFC payments (i.e. Google Wallet). The new addition, PayPass Wallet, is also geared toward online purchases, storing the necessary card, shipping and billing details and allowing you to check out faster, though via a special button on the websites of participating merchants (or in their mobile apps). And like Visa, MasterCard says it has plans to roll out to points of sale at some point in the future, but offers no specifics regarding timeframe or technology.

POS rookie Google Wallet continues to march on, working out the kinks, adding more credit cards, and steadily signing up merchants and users. One stumbling block continues to be the small range of compatible consumer devices. Isis, the NFC mobile payment joint venture between AT&T, Verizon and T-Mobile, just launched its pilots in Salt Lake City and Austin in October.

It’s an interesting battle to watch, and not only because of the different companies vying for control. Technology is developing so fast that NFC may already be yesterday’s news. We’re clearly still in the learning phase, with each solution providing valuable lessons for the next. Offerings are also moving from payment only to payment + additional value. And I think that “additional value” is the key to making mobile payments work. Check back soon for my follow-up post about how QR codes are entering the fray and may give NFC a run for it’s money.

Good News for the 90% Unbanked in Pakistan

October 24, 2012 in Uncategorized | Comments (0)

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According to the World Bank’s Financial Inclusion Data, just 10 percent of the population of Pakistan has a bank account. That leaves 90 percent without one. As I mentioned in an earlier post, Pakistan is the fifth largest mobile phone market in Asia. With approximately 130 million mobile phone users, Pakistan has one of the fastest-developing branchless banking markets in the world.

Two recent Sybase 365 partnerships promise are part of this mobile banking expansion. We’ve joined forces with Habib Bank Limited (HBL) and Allied Bank Limited (ABL) to offer mobile financial services to customers across the country.

These deployments will enable both banks to enhance the mobile banking currently available to customers. Perhaps more important, they provide a new avenue into the formal banking system for the large unbanked and under-banked populations living in remote areas. With limited access to ATMs and the Internet, people living in rural areas have traditionally had to spend a day or more traveling to banks and utility providers to cash checks and pay bills, often waiting in a long lines when they arrive. The proliferation of mobile phones and mobile banking continues to help these communities by saving time, simplifying lives, improving security, and fuelling local economies.

The HBL deployment should launch before the end of this year. ABL has its sights set on 2013. While both banks are early to enter the market, United Bank Limited (UBL) Omni was the first bank in the country to offer branchless banking, launching in 2010. Easypaisa, by operator Telenor Pakistan, is a well-established and popular mobile commerce service that anyone can use.

Mobile is undoubtedly emerging as a vital banking channel in emerging and developed markets alike. Both of these branchless banking initiatives will help change the way Pakistanis interact with their financial institutions and communities—and undoubtedly bring more people into the formal banking system.

Apple iPhone 5 Ignores NFC Hype!

October 10, 2012 in Uncategorized | Comments (0)

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Apple’s recent launch of iPhone 5 had one glaring omission: NFC.

The industry had been looking to Apple, hoping it would give near-field communication (NFC) a leg up by bringing the mobile payment technology to its large user base, and hopefully wrapping it within a great user experience.

So be it. It’s another hurdle for NFC of course, but it’s far from a death sentence. If Apple had put an NFC chip in iPhone 5, it would have simplified adoption, and been a clear play to own the secure element. The omission means that Apple is not planning to own any NFC secure element at this stage, so the question of who will remain unanswered.

Other device manufacturers are designing and releasing enabled devices—more than 60 phones are available now. Accessory manufacturers are launching NFC-enabled sleeves and cases that add the payment technology externally to iPhone 5 like what we have seen with the CBA Kaching application in Australia. (See this video for details.) Operators will still continue to push it onto the SIM cards.

Other banks and payment networks worldwide (Raiffeisen Bank International in Austria and the UnionPay network in China, for example) are also rolling out contactless payment services using external accessories or existing phones, and there are more plans and pilots afoot in France, Taiwan, and the U.S.

What was Apple thinking? My guess is that the company feels it has a stronger bid with mobile commerce through the 400 + million credit card details it has from iTunes. With that, why does the company need NFC? Besides, Apple is a closed shop. Always has been. I’m not sure why the news that it’s not supporting a global standard has been such a surprise.

Apple is continuing to do what it’s always done: enabling its own closed ecosystem, and going its own way.

Banks Now Lead the Charge in Developing Markets

August 16, 2012 in Uncategorized | Comments (0)

The M-PESA mobile money transfer and payments service took the world by surprise in 2007 when it debuted a successful business based on serving an previously underserved population: the rural poor. Mobile technology made it possible to reach unbanked and under-banked people in developing markets without having to build, staff and secure brick-and-mortar branches.

Mobile operator Safaricom, part of the Vodafone group, developed the idea and launched the service. Many operators recognized the same opportunity in their own coverage areas and followed its lead, including Cellcom Malaysia (AirCash), Globe Telecom (G-Cash), Mobicom Africa (MobiKash), MTN Uganda (Mobile Money), Orange (Orange Money) and Smart (SMART Money).

So far, it’s been the operators leading the charge in developing markets. But now, we’re seeing a shift, as more banks are beginning to invest in their own mobile financial services.

Dutch Bangla-Bank Limited (see my colleague Haridas Nair’s blog post about DBBL) launched a suite of award-winning mobile banking services early this year, aimed at bringing mobile financial services to the unbanked and under-banked. ONE Bank Limited is planning to jump in to mobile in Bangladesh as well, and there’s plenty of room for competition in the country, where 45 percent of the population has mobile phones and just 13 percent have bank accounts.

Two of Pakistan’s largest banks, Allied Bank Limited and Habib Bank Limited, will also soon offer mobile banking services, both with the aim of reaching the unbanked and under-banked population of the country. With approximately 130 million mobile users, Pakistan is the fifth largest mobile phone market in Asia, and one of the fastest developing markets for branchless banking in the world.

The momentum of mobile finance is increasing, and banks are pulling into the lead.

Banks and Social Media: Where Is It Going?

August 7, 2012 in Uncategorized | Comments (0)

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A year ago, I blogged about how banks and financial institutions like Amex were starting to experiment with social media (see “Banking on Social Media”), following consumers there, promoting their products and services and generally testing the waters. Now, banks have gone a step beyond: social payments.

In February of this year, Philippine telecommunications giant Globe Telecom offered its well-established GCASH mobile commerce service as an iPhone app that enables customers to send money not only to people in their phonebook but also to their email and Facebook contacts. In June, Poland’s Alior Bank announced Alior Sync, a separate business and all-digital financial services firm, which offers (among other things, see below) Facebook-based payments. Social media and banking is now very real.

In the case of Alior customers, they can transfer money directly to friends on Facebook through the surprising channel of photos. Both senders and recipients must use the Alior Sync application. The payments are authorized with single-use codes sent via SMS and protected with captcha. Recipients can transfer the funds they collect to any bank account in Poland. Targeted at young, tech-savvy consumers, Alior Sync, unlike Globe Telecom, is actually relying on technology for all of its customer interactions. The digital bank has no physical branches; only a web-based, virtual branch with live “tellers” available for video, audio, or text chat to help customers do whatever they need to do, and mobile apps (Android and iOS) that provide basic services including balance and budget tracking, funds transfer, and invoice payment. Customers can also make PayPal payments through email.

ASB Bank in New Zealand originally broke Facebook ground in the fall of 2010 with its virtual branch, available from the bank’s Facebook page. A number of agents are available via chat to answer questions from anyone who asks, ASB customer or not. Incidentally, ASB also recently launched a Facebook-friends payment service coming soon to its mobile app, which customers already use to send payments to anyone with an email or mobile number (similar to Commonwealth Bank Australia with its Kaching app.)

It’s clear that banks are connecting to the Facebook Platform API and moving forward. What’s not clear at this point is how consumers are going to respond. ASB’s virtual branch has been popular, garnering thousands of “likes” and serving enough customers that the bank has kept it alive for going on two years. But, ASB is just answering questions, not handling financial transactions.

Currently banks look to be best positioned to be successful when it comes to payments. In a survey Sybase 365 conducted late last year, banks scored highest when it came to who consumers would prefer to provide a mobile payments service. (See “Mobile Consumers Trust in Banks.”)

For that reason, it’s interesting to me that banks are looking to use Facebook as their channel network. I like to see the innovation, and my wife and I are giving the Kaching app a try. I’m very curious to see how this will evolve over the coming year.

Mobilizing Relief Aid

July 31, 2012 in Uncategorized | Comments (0)

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Dutch Bangla Bank Limited (DBBL) recently kicked off a pilot program in cooperation with the United Nations’ World Food Programme (WFP) in Bangladesh, where over 200 beneficiaries will receive food aid via DBBL mobile banking.

That is, Bangladeshis will receive aid money in a mobile account on their mobile devices, and be able to use it to buy food from local merchants. Similar to other WFP mobile-based assistance programs (such as those in Niger and Zambia), this method of distribution provides assistance to people in need while also adding funds to the local economy.

Is mobile the new medium for distributing disaster aid?

After Haiti’s 2010 earthquake, the country’s mobile phone network was the first network to come back online. Many aid organizations used mobile to find survivors, collect donations (The American Red Cross collected $7 million in 24 hours by allowing people to donate $10 with a text message.), and share information about food supplies, shelter, medical facilities, keeping sanitary and other important topics.

A similar story arose out of Japan last year, following the earthquake and tsunami. Mobile donations poured in from around the world. People living in Japan checked in with family and friends through social media on their mobiles, and were able to receive public service announcements and other important information.

As mobile devices and mobile money become more widespread, it’s easy to imagine a future where aid agencies choose the mobile channel for their organization, collection and distribution efforts first, for its lower costs (no transportation or physical distribution points required), better privacy, higher security, and most important—its immediacy.

Mobile OS Vendors Continue to Invest in Mobile Payments

July 11, 2012 in Uncategorized | Comments (0)

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In the last several weeks, two leading mobile operating system (OS) vendors moved into the mobile payments space. Apple announced its new mobile wallet Passbook that will debut with iOS 6 this fall. Microsoft quickly followed with its announcement of the new Microsoft Wallet mobile payment app, also due out this fall as a part of Windows 8…and Google continues to revamp Google Wallet

It’s clear that Apple and Microsoft are making a big move into new territory. Neither company is waiting for an ecosystem to form before they jump in. They’re not waiting for co-ops like the Isis partnership, banks or brands. They want to make sure that they’ll become a key component of the value chain.

While on the surface it appears the three major mobile platforms now have a mobile wallet capability, as always the devil is in the details. Each vendor has taken very different approaches to create a mobile wallet service within their OS, particularly in how they authenticate payments.

Google’s wallet is device-centric, with a secure element embedded within the phone itself being used to validate payments. So if you want to access the service, you can only do so from a handful of devices. Microsoft has adopted the SIM-centric model that has been promoted by the GSMA.

With Google’s model, the Operator can be excluded from the value chain, but with Microsoft’s the operator is required for the provisioning of the SIM.

Apple, as they often do, has taken a very different approach. Apple’s Passbook enables third parties to push barcode- and QR code-based loyalty cards, store cards and boarding passes in to a single location on the iPhone. So the British Airways boarding pass for your flight tomorrow, or your existing Starbucks card barcode, could be stored in you Passbook.

Apple’s Passbook is, in many ways, more remarkable for what it doesn’t do. Whilst British Airways could update that boarding pass if the gate changes, you can also use the pass to confirm the time of the flight. And while your balance on the Starbucks pass can update, you can’t top up your account from within Passbook. To do either, you would need to use the existing iPhone app and not Passbook

Depending on your definition, you could argue Apple’s solution is not really a mobile wallet, as it purely stores passes, and has no payment capability of its own. Apple seems to agree, as the product name is Passbook and not (say) iWallet.

However, while Passbook is limited, it is an incredibly simple version of any existing service that uses barcodes or QR codes to push passes in to Apple’s Passbook. And there is no cost for third parties to do so.

This is the start of the bid from the mobile OS vendors to say that they’re going to control the wallets. Operators are making a clear play for a slice of the pie, but at present only the Microsoft wallet has a clear role for operators in the value chain. With the approach that Google and Apple have taken, the only thing mobile payments need from operators is really the connectivity. Again, it’s all coming down who is going to own that relationship with the customer.

Take Apple. When it launches Passbook, it will already have worldwide distribution. And though the current version has no payment capability, Apple has the credit card details of 400 million customers already banked in the iTunes Store, to which it could easily link to this. I can’t imagine that Apple won’t leverage that advantage in some way down the road.

Watch this space over the coming months, as this looks like it is just about to explode…

NFC Accelerates Toward Its Roadblock

June 12, 2012 in Uncategorized | Comments (0)

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We’ve heard a number of announcements lately about new mobile near-field communication (NFC) devices. In April, someone leaked news about the Nokia Lumia 610 NFC, the company’s first NFC phone, due out in early Q3. The same month, Barclaycard announced PayTag, an NFC sticker UK consumers can attach to the back of their current phones, which doesn’t add NFC capability to the handset, but does enable consumers to tap their mobile, rather than a credit card, to pay.

At the same time, there are a lot of opportunities in the market right now for creating the ecosystem for mobile NFC, in the form of requests-for-proposals from banks, mobile operators and other third parties.

The mobile NFC market is obviously starting to accelerate, but it still struggles with the same fundamental issues. Predominantly, those revolve around where the secure element (SE) will lie, and who will own and control it. If the SE is going to be secured on the SIM card, the mostly likely choice is that the MNO will control it. If SE is built into the device itself, or memory card or other add on, that would open up the ecosystem to other players. At the end of the day, the only easier way to create the NFC ecosystem is for banks, MNOs, and handset manufactures to cooperate, and work out how to manage the secure element in all phones. As we know, however, this is unlikely

Because of this stumbling block, we’re still years away from having a widespread NFC payment ecosystem. Industry leaders seem to agree, as 81 percent of those we asked at Mobile World Congress earlier this year said they thought NFC would not emerge as a driver for mass adoption of mobile payments for another two-to-five years. Consumers aren’t queuing up for it either: out of more than six billion mobile devices in the world, only around 40 million (or 0.0067 percent) have NFC capability.

It can be frustrating to know that we have the technology for NFC, just not the business model. A few enterprising souls among us are forging ahead, using the tools they have to figure out their own contactless payment methods, from gluing their entire contactless credit cards to the backs of their phones, or removing the RFID chip from the cards using acetone and gluing it to something else—even fashioning bracelets out of the chips and wire as in this story.

Maybe in less than the time it takes banks, operators and other players to agree on who controls what, we’ll be onto the next technology, and it won’t have the same issues. Two to five years is long time in the mobile payments industry.