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Innovation in Financial Services

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.
A post relating to this item from Finextra:

French and German banks mulling rival to Visa and MasterCard - reports

16 April 2008  |  9957 views  |  0
A group of major French and German banks are looking to establish a pan-European card network that will compete with schemes operated by Visa and MasterCard in the region, according to press reports.

Rival to Visa and Mastercard without cards? - Mobilisation

17 April 2008  |  4296 views  |  0

Any new rival to Visa and Mastercard should seriously consider ditching the card concept altogether and utilising customer's mobile phones. A solution which didn't require the current EFTPOS system might save a few costs as well. I would be thinking about an transaction system which sits above using the mobile network and internet to process the transactions and possibly directly from bank to bank in real time.

Works equally well for debit or credit accounts. Time to clear approximately 10 seconds.

A trusted third party which has no customer or merchant personal or account data facilitates the transactions. No account, name, or identifiable data transmitted anywhere. Integrate it easily into transport, parking and more.

For the bank to bank clearance you can use any network such as a SEPA type network.

It's possible to use the EFTPOS network for the merchant link but any standard internet connection to a (secure) web page or server as there is not any need to encrypt the merchant to bank transmissions, although you would because it's easy. 

No card fraud, no ID theft, reduces losses for merchants and cuts costs and clearance time for banks. No cards or readers required - just any mobile phone. Of course it's safe if the mobile is stolen.

Merchants are authenticated to customers, customers to merchants, merchants to banks all in the one process. 

Smaller merchants and cafe's, restaurants etc could do their transactions on mobile pda's. 

In relation to getting it past the regulatory authorities:

Neelie Kroes, the European Commissioner for Competition Policy, could hardly have put it better in her speech announcing the ruling:

    "It is not sufficient that a MIF [multilateral interchange fee] simply increases the sales volumes of a [credit card network] scheme to the sole benefit of the member banks. Rather, a MIF should contribute to objective efficiencies such as to promote more efficient payment means to the detriment of less efficient ones. Also, the proceeds from a MIF should not just increase bank's revenues – they should be clearly dedicated to the achievement of efficiencies."

  ECC Press release

"Multilateral interchange fee agreements such as MasterCard's inflate the cost of card acceptance by retailers. Consumers foot the bill, as they risk paying twice for payment cards: once through annual fees to their bank and a second time through inflated retail prices paid not only by card users but also by customers paying cash. The Commission will accept these fees only where they are clearly fostering innovation to the benefit of all users."

Because there is no card it might be possible to have no annual card account fees. 

It might be attractive to regulators especially with integrated ID. 

The best part is that it's really easy, safe and private for the customers and the participants need no new infrastructure. 

Now that's what I call competitive efficiency.

Food for thought!


Comments: (2)

A Finextra member
A Finextra member | 18 April, 2008, 11:17

Hi Dean,

I echo your thoughts on several parameters stated by you. In this context do you believe "Mobipay" was heading in the right direction?

Also, would like to hear your views on the recently launched "Revolution" Card. They have clearly addressed some of the requirements of merchants and customers alike in their proposition, but am wondering why they kept the mobile phone out of the looop?

Upendra Namburi



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A Finextra member
A Finextra member | 18 April, 2008, 12:35

You have put me on the spot here but a 10 minute poke around and I draw these totally unfounded conclusions. 

Mobipay are a obviously a good attempt but falls well short of what is possible. 

They obviously realised that people wouldn't give their mobile number to all and sundry so they added the alias bit. A nine digit alias is a scary thought to behold, then a 5 digit PIN into the phone, and you've lost me. Once you add a barcode well it's like Back to the Future.

Revolution is a card and PIN. I mean really, what can I say? 

Stefan Brands, Microsofts new aquisition is also a bright guy but a card is no revolution.

They have all considered some of the problems and I think Stefan certainly has his heart in the right place with a key focus on an actual potential improvement in privacy, but that was a minimum requirement anyway.

The score for 'ubiquity' is  10 for more than >3.3 billion out there and less than = 0

Mobipay's 'ubiquity' might be SIM based or rely on specific networks so I'll qualify that but give them the benefit of the doubt.

Cost is rated - If I have to have a new gadget for the user -5, for the merchant -5. So if everyone needs a new gadget the maximium score is 0. 

The others are a scale of 1 to 10 compared with the best achievable result known.

                             Ease     Ubiquity    Security  Privacy  Cost    Overall

Mobipay                     5          10             3           1           5          5

Revolution                  3          0               3           6           1         2.5

Stefan's Idea              3          0               5           8           0           3

Apologies as Steve will race out now and get Stefan some phones to play with no doubt, not iPhones.

My aim is to provide the best system with the least compromise. Nothing is perfect but we can definitely do better than these. 

I know a score around 9 is achievable, and I'd like to try for 10.

It may take a joint effort to get it closest to perfect, but this is a material world. 

I don't see anything which surprised me the least here. If you know what I mean.


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