21 October 2017
Nick Ogden


Nick Ogden - ClearBank

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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.

It works over there so why not over here?

28 July 2010  |  5836 views  |  0

The EU’s 2009 e-money Directive aimed to enable the design of new, innovative and secure electronic money services. In some ways Europe has come a long way in this area: use of credit and debit cards, Electronic Funds Transfer, Electronic Banking and Chip and PIN authentication have all increased dramatically, a date has been set for the demise of the cheque and the European Commission continues to push on with plans for the harmonisation of the payments landscape. The culmination of these developments make for a solid foundation for an “e-money society” in Europe, a concept whereby instead of carrying cash, small payments are made from an ‘electronic purse’ – the vehicle for which could be a mobile phone or payment card – which stores relatively small amounts of money. While this would benefit consumers, businesses and the European economy as a whole, there is still a long way to go with this in Europe. The 2011 update to the Directive should make it easier for businesses to offer e-money services, but in the meantime there are lessons to learn from other parts of the world that would help us build on these foundations and really drive the concept of e-money forward.  

Japan is well known for its well-developed e-money infrastructure. Thanks to RFID integration with mobiles, travel cards and even loyalty cards, it’s now possible to do a great deal – from shopping at vending machines, coffee shops and convenience stores, to travelling on the underground and paying for hotel rooms and flights - without carrying cash or using a credit or debit card. NTT Docomo – one of the main telco providers in Japan - launched the “osaifu keitai” (wallet phone) service in July of 2004 and it revolutionised the way people thought about their mobile phones. Using Sony’s contactless FeliCa technology, the mobile could now function as an e-money card and train pass. Five years on in 2009, Docomo reported that about 60 per cent of customers were using the service, which translated to 34,800,000 handsets. The concept shows no signs of stopping either; according to statistics published by the Nikkei newspaper, during the first half of 2010 the number of e-money transactions swelled by 39 per cent compared with the same period a year ago. So what’s the difference in Japan; why the big take up there and not here? My thoughts are two-fold: firstly the customer is not restricted to a £15 limit and secondly, if the customer loses their card or phone, the cash is not lost because the data is stored and maintained centrally. This capability is, interestingly, one of the principal changes to be introduced in the 2011 update to EU e-money legislation.

Another well known example is Kenya, where M-PESA (the Swahili word for money) is used to promote the Kenyan e-money system, which has been driven by a combination of lack of infrastructure and a high proportion of unbanked citizens. While M-PESA originally created some tension because the system satisfied the market but didn’t satisfy the regulators, it has now prevailed and even offers betting alongside its payment and money transfer services.

It’s clear from these two very different examples that Europe is lagging behind, although there is perhaps one exception: a bank in Austria whose e-money solution works for car park payments. This may be a mundane service, but it is both profitable and of course delivers clear consumer benefit.  Customers get an SMS message just before their “meter” is about to expire and can then extend their stay from wherever they are (for up to 3hours).

The 2011 update to the EU’s e-money Directive should make it easier for EU businesses to offer e-money services, but this will only work if new e-money issuers are ready to process the transactions. While the Asian market model provides a good example to follow, one component that’s missing in Japan is interoperability, as the onus is on the phone to support multiple e-money wallets. So let’s catch up; better collaboration between all the various players in Europe will facilitate adoption and help address interoperability. Banzai to that!

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job title Executive Chairman
location London
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I am passionate about business change and have been fortunate to have had some success with my various start up ventures. I am also fortunate to be a director of the UK Faster Payments Scheme.

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