Thursday, January 30, 2003

Paybox leaves B2C market.....

Finextra reports that Paybox pulls back from the consumer market.

Under a major restructuring, Paybox says it will focus on the profitable B2B business with regional payment processors, telcos, and banks. The company's consumer-facing operations in Sweden and the UK are to be wound down while the Austrian business is being sold to Mobilkom Austria. The company will maintain consumer services in its home market.

See also the Paybox website.... (in German).
My personal guess? Their focus on shop-payments was not the proper market focus.

Wednesday, January 29, 2003

Universal Business Language, Public Review

A technical committee of Oasis, a consortium dedicated to interoperability on the web, has released a draft of the Universal Business Language for public review. This work may come in handy to standardize looking at business processes and increase straight through processing of generic forms such as purchase orders, invoices etc.

What has this got to do with payments? Well, a lot of the hidden cost of payments are in these processes. So initiatives like these certainly contribute to more efficiency in payments.

Tuesday, January 28, 2003

Way2Pay is testing....

Just out of curiosity I was wondering if Way2Pay. the Dutch version of Paypal, were already building their website. It turns out that they are now busy testing.

Update: 18.20 The links are no longer active.

Monday, January 27, 2003

Credit-card biller revisits positioning of balance due

Washington Post reports that MBNA, USA's second largest credit-card biller revisits the position of balance due on its monthly credit-card bills. The case shows how habits are important in retail payments.

The Delaware-based company had redesigned its bills earlier this month, dropping the total due from the large box at the top -- the "coupon" that was to be sent in with the payment. Only the minimum amount due was highlighted in the coupon. The total due still could be found on the bill, but at the bottom in smaller print.


Government regulations require that the total amount due be displayed on a bill, but don't specify where or how prominently it should be disclosed. Consumer groups and some industry experts criticized the change as likely to mislead consumers into paying only the minimum amount due -- which would trigger interest payments.

eBay account hijacked; some payments recovered

Kansas City Star
reports extensively about an auction fraud on eBay. An interesting case, where customers that used Paypal got their money back, and those that used a money wire lost it.... starts with 'free' online donation service

The payment service provider Ogone has helped charitative foundations to develop a donation service on the web. The service is available at a charitative portal site and is not completely free, but works with a provision percentage of 10 percent. Given that most donations will not be high value sums of money, the service can be viewed as an effort to recoup some of the fixed costs of the current Ogone platform.

ATM's out of order due to Internet worm....

Lynn Wheeler posted this link to an article in a mailing list.

...SEATTLE (Reuters) - Bank of America Corp. said on Saturday that customers at a majority of its 13,000 automatic teller machines were unable to process customer transactions after a malicious computer worm nearly froze Internet traffic worldwide. ....

Friday, January 24, 2003

The end of Chipper ... your e-money back ?

The Dutch newspaper Het Parool reported on January 21, that Chipper users can no longer go to the post office to redeem the residual electronic money on their Chipper chip. Therefore Postbank customers that want their money back need to send in their card to the customer service. Then again, in many cases the electronic money is on the chip of a debit-card that is actively being used. And who's going to send in his favorite debit-card to redeem only a little bit of e-money?

The Parool makes a fuss about the fact that Postbank should have made more announcements about the withdrawal of the Chipper than they did. I don't understand why they didn't take the issue one step further. Now that there are no more terminals that accept Chipper-payments, Postbank would be in a position to redeem the electronic money of the cards to the individual users. It would cost them some money, but then again, it would be the gentleman-like way forward, given the redeemability requirement of the e-money directive.

Internet Consumer Fraud Continues to Rise ?

See this article by Roy Mark from which I take these quotes:

According to the FTC, 47 percent of non-identity theft complaints were Internet-related, a 31 percent increase since 2000.


The top 10 categories of consumer fraud complaints in 2002 include Internet auctions (13 percent), Internet services and computer complaints (6 percent), advance fee loans and credit protection (5 percent), shop-at-home/catalog sales (5 percent),foreign money offers (4 percent), prizes/sweepstakes and lotteries (4 percent), business opportunity and work-at-home plans (3 percent), telephone services (2 percent), health care (2 percent), and magazines and buyers clubs (2 percent).


Beales also said there is no evidence that the explosive growth of the Internet has led to an increase in consumer fraud. Instead, he said, it has revived a number of near-dead frauds such as chain letters.

Thursday, January 23, 2003

Innovation: 3D model for direct debits..?

Yesterday, during a conference on mobile payments, a discussion took place on the (il)legitimate use of the direct debit system for debits over the internet. Officially there are no rules and consumers should abide with the old procedure (send a fax with their signature) to allow a one-time direct debit over the web. Unofficially all kinds of arrangements exist, some more explicit and open than others. It is for example possible to start a direct debit relation with the Chamber of Commerce, without fulfilling the necessary criteria (signature). Users get an id/password and can then order excerpts of the register. If problems occur, the Chamber of Commerce will take the loss.

Now in practice this specific Chamber of Commerce application works fine, but officially such practices are contrary to the joint direct debit rules of the banks. And a possible negative effect of these implicit/informal arrangements is that the direct debit product may be the victim of bad publicity as a result of bad informal practices in the market. If organisations do not have their back-office in working order but do use the direct debit system, a lot of work may occur for banks and consumers (basically the regular chargeback issue as a result of insufficient authentication or fraud). Consequently Dutch banks have set out to develop rules and requirements for the Internet-direct debit.

During yesterdays conference, it turned out that Dutch banks have not succeeded in establishing a workable model for Internet direct debit. And may need some more months for contemplation.... Yet, a possible solution may be to implement the 3D model and a liability shift for direct debits. How would this be done?
1. Formally, the current direct debit rules and regulations can be viewed as baseline rules and regulations, for which the responsibilities of issuing and acquiring bank are clear.
2. Individual banks may go beyond these baseline rules and allow all kinds of new products based on the direct debit, yet in those cases, these individual banks need to guarantee chargebacks and need to solve any problems that they may have created by geoing beyond the baseline rules.

In my view this solution may be a very workable solution, very much in line with the recent developments in the competition area and in other product domains (debit- and credit-cards). So I've suggested the bankers association to further explore the idea. Not only would it formalize current practices, it would also be a nice first Dutch innovation in the world of payments.

Tuesday, January 21, 2003

MOB-meeting at the central bank....!

It may appear strange to outsiders but the MOB are having a meeting at the central bank tomorrow. MOB stands for "Maatschappelijk Overleg Betalingsverkeer" and means that it is a group with a lot of representative organizations that have to do with payment services. All kinds of retailers will be represented (shopkeepers, petrol stations, restaurants etc) as well as (representing distance selling organizations), representatives of banks, the Dutch Association for banks and of elderly people and visually impaired.

This constitution and meeting of the MOB is the implementation of one of the suggestions made by the central bank as a part of the work of the so called Working on Tariff Structures and Infrastructure in Dutch Payment Systems systems (Group Wellink). The basic idea is to have a structural forum where representatives of interest groups can meet to discuss the relevant issues in payments services. Other suggestions of the central bank were:
• the introduction by the banks of the possibility for private customers to choose between different tariff structures;
• continued research into the public efficiency of pos payment instruments as a basis for policy aiming at optimum efficiency in the retail payment market;
• contracting for corporate debit card services,including networking services,to the banks;
• the creation within Interpay of a users ’advisory group on the use of debit and prepaid cards;
• improving the transparency of Interpay by having it provide more detailed information in its external reports;
• the inclusion in Interpay ’s Supervisory Board of independent experts in order to improve corporate governance.
See for further background information the article at p 37 of this Quarterly Bulletin.

The first meeting of the MOB effectively means that the previous Working Group on Efficiency in Payment Systems will cease to exist. But the agenda items will remain more or less similar and constitute issues such as: safety, availability of cash and bank services, introduction of a service that will make changing banks easier etc. Apparently, some of the most ' burning issues': market structure and fees for debit-card authorizations (both at POS and at the ATM) will not be discussed tomorrow. But perhaps those are saved for a rainy day....

Finally, our foreign readers may not be fully aware of it, but the meeting of the MOB takes place at the same day we have parliament elections. The elections were all about ' new politics', openness and a new way of public debate. I hope that the MOB will start to function in a similar spirit and decide in its first meeting to publish agenda items, reports, results and draft meeting notes on the web.

Monday, January 20, 2003

Statement of no objections less burdensome...

In the Netherlands, the financial system is regulated by means of a number of instruments. One of these is the statement of no objection, issued by the Ministry of Finance, after consultation with the relevant competent supervisor. For example, if financial institutions are changing their shareholder's interest in other companies beyond certain boundaries (more than 5 % share in a company), such a statement is required.

The Dutch Ministry of Finance has issued a letter to parliament that explains that the plan is to broaden the rules and make the procedure less burdensome. A new system that works with 'bandwith' is now devised and presented.

Shift from bank branch to ATM or not?

The Dutch Office for Statistics has released an article that states that in 2001 the number of automated teller machines in the Netherlands has increased, while quite a few bank branches were closed. A similar trend is visible in Belgium, Germany, Austria, the United Kingdom and France. In the other countries of the European Union, both the number of bank branches and automated teller machines is increasing.....

Thursday, January 16, 2003

Visa warns retailers about surcharging: a boomerang?

Australian website The Age reports that Visa is about to send 250,000 retailers information on the credit card surcharge and will tell them that 80 per cent of consumers oppose the fee. This information campaign should be viewed as the part of a larger discussion on reforming the payments landscape.

The funny thing is that whenever credit-card companies chose to enter foreign markets, they always started with rules that had a anti-competitive component. The no-surcharge rule is such an example. It stipulates that a retailer is not allowed to distinguish the price of the good when paid for in cash or by credit-card. It is a very understandable rule from the point of view of a system that is new on the market and requires acceptance by the public. Yet, in the long run it doesn't make sense. Retailers should be allowed to determine their own pricing policy and to include the cost of different means of payments as a part of the total transaction price. This allows consumers to choose between the more efficient/convenient payment mechanism.

In the Netherlands, we've had the no-surcharge rule and it has been abolished. Not that it made a lot of difference. In practice the credit-card acceptance over here is limited to industries/retailers with a considerable margin. And the credit-card itself is not as widely used (60 million trx) as the debit-card (1 billion). So the issue is not top-of-mind and practices differ between retailers. For debit-cards surcharging is even a common practice for those payments below a certain value (mostly 10 Euro). Being out of cash, I bought some lunch refreshments today for 7 Euro and paid the surcharge fee of 10 Eurocent. And in the weekend I often do a cash-back at the local supermarket (that charges me as well). Do I care? In practice I don't, but when interviewed I say I do.

So when I look at the Visa information campaign I wonder: this can't really be an issue ? I may be seeing things upside down from here in the Netherlands, but it looks to me as if Visa abuses the no surcharge rule to influence public opinion. And I'm not sure if that is the proper way to proceed. Would'nt this campaign be viewed by consumers as a waste of obviously abundant resources by card companies that have a quarrel with the RBA? And wouldn't they think that by the looks of it RBA may have been right?

That would then be a fine example of the boomerang-effect.

Tuesday, January 14, 2003

Jupiter Research discover weblog as a media tool

Planet Multimedia reports that Jupiter Research has decided to create weblogs for its analists. These Jupiter Research Analyst Weblogs unfortunately don't go with a news feed in RSS-XML. The current postings appear to be quite politically correct and not so much a personal point of view/opinion but a Jupiter point of view.

It will be interesting to see where this development will lead. In my opinion weblogs are a useful tool to record developments in a subject area. As such they could also be used more intensively in the university domain. If science is all about monitoring/investigating developments, the first logical step would be to log these developments. Having logged all kinds of events, a pattern may occur that may be the basis for further research/investigation.

European Parliamentary Financial Services Forum (EPFSF)

Today I accidentally ran into this very informative link:
The European Parliamentary Financial Services Forum (EPFSF) facilitates and strengthens the exchange of information on financial services and Europe's financial markets between the financial industry and Members of the European Parliament.

Testing the SMS-possibilities

E-merce reports about a test of and CMG, that use SMS messages to send visitors to a dance events mobile tickets. The bar-code in the SMS will be scanned and serves as the entry ticket to the event. In 2003 Moxmo will arrange for the payment of these tickets.

Another article notes that the Bijenkorf, a large luxury department store is testing SMS as a means to send advertisements. Customers that also have access to the payment product of Mobile2Pay (a Paybox-like payment mechanism for the mobile phone), can immediately pay for the goods offered.

The experiments show that before exploiting the 3G capabilities, operators will use the mobile phone and SMS as the basic means for transactions. The experience will also be helpful as a basis for further development of 3G-services.

Monday, January 13, 2003

Internetbanking is growing: off-line banks preferred

Planet Multimedia links to an interesting research study by Nielsen.

The study shows that on-line banking in Europe grew from 15 to 25 million users. The top 5 countries are:
1. Sweden (51,3 % of on-line population does e-banking),
2. Australia (39,6 %),
3. France (38,7 %),
4. Netherlands (38,5 %),
5. Brasil (36,2 %).

Introduction of fees for ATM-service: a deadlock prisoners' dilemma

Leo van Hove has today pointed out to me that in December 2002, Austria has experienced what is about to become the next new phenomenon in retail payments. I would label this the deadlock-prisoner's dilemma. A brief summary of what has happened, with links to the original Austrian newspaper (in German):

-One bank started the introduction of fees for getting cash at the ATM machine and pointed out that this move was necessary due to the EU-regulation that stipulates equal prices for the same payment service, regardless of its location (domestic or not),
-There was a lot of resistance from the consumer protectors at the labour union, with the threat of a complaint at the competition authority,
-The bank withdrew its pricing plan.

If we look at this situation from a game-theoretic point of view we see a prisoners' dilemma. All banks individually can do the calculation that introduction of this fee is beneficial and necessary from a business point of view. Even from a more broad perspective (efficient allocation of cost/benefits of cash) the introduction of the fee will benefit society. Yet, being the first to introduce the fee will be detrimental to the image of the first mover. So all banks sit back and wait; thus ending up with a more costly situation.

The theoretical solution for this dillemma is coordination; by moving together and cooperating, the banks can end up in the optimal game situation from the viewpoint of all players. Yet, this optimum cannot be attained due to regulatory constraints (anti-competition rules). And apparently neither the central bank nor the Ministry of Finance have stepped in to overcome these constraints.

In the Netherlands we have also witnessed a similar situation; yet it occured at the end of June, 2002. Due to a complex interaction between reporters adn bank spokesmen, banks called of the planned introduction of ATM-fees (not many consumers where aware of this fact as it occured largely behind closed doors). And they are now still deliberating how to resolve the current situation: which I would call: deadlock-prisoner's dilemma

Will this be the end ?
Well, a poll at the Standard's website reveals that 72,2 % of the readers believe the fees will somehow, sometime be introduced, with only 20,9 % that think it is the end of the discussion. The remaining 6,9 % has no opinion.

And as for the Netherlands, we've seen a more general further introduction of fees in both the consumer and business segments of the market. Most probably banks will seek to recoup expenses through indirect fees rather than direct fees.

Wednesday, January 08, 2003

Change in financial supervision in France

Financieel Dagblad reports this morning that France will consolidate its supervision on the Financial Sector. The 'Commission des opérations de Bourse' (COB), the 'Conseil des Marchés Financiers' (CMF) and the 'Conseil de discipline de la gestion financière', will merge into: Autorité des Marchés Financiers (AFM). This new supervisor will get a lot of legal competences en will also have member of the financial community in its board of directors. Most interesting however is that the new supervisor will be paid for by the companies it supervises.

With the move to direct taxation of supervision to the supervised entities, the Franch government copies a model that is already in place in a number of Anglo-Saxon countries. It is a sensible move towards more direct cost allocation and tax payment for public services. Yet, it is remarkable that in these times of governance-issues, no one questions whether it is wise to combine the hierarchical supervision relationship with a billing relationship that generally suggest that the paying company has a hierarchical influence over the provider of the services.

See also the page of the Paris Chamber of Commerce (in French), the early project proposal of the government and an article in LeMonde.

Tuesday, January 07, 2003

The cost of cash: robbery...

Yesterday evening a pump station was raided resulting in the murder of a female employee. The police have not disclosed any information on the robbery, except that they have not yet found the criminals. The public discussion here in the Netherlands is now all about securing pump stations.

A similar discussion occurs with respect to the transport and delivery of cash. One of the major companies in this market, Brinks, has announced that changes in their delivery schedules have been made, following a violent attempt to stop one of their deliveries. As a result they now only do daytime transport and delivery.

Today J. Schraven, the chairman of Confederation of Netherlands Industry and Employers (known as VNO-NCW), suggested to ask the army to accompany cash transports in the future. Reactions to this suggestion are, unfortunately, lukewarm.

Although we could speak of incidents, we need to realise that this security problem is exactly where central banks come into play. Central banks issue cash and use the proceeds to finance and subsidize their operations. Improvements and security measures for bank notes are thus financed from the revenue stream of cash. In my opinion, the concept of security measures should not be taken too strictly (limiting the measures to physical adaptations of bank notes). By stretching the concept to safe transport, delivery and handling of cash, we can see that the current revenue flow of cash needs to be redistributed. A part of the revenue stream of cash should therefore be used to ensure both trust in cash and a safe usage environment. Practically speaking: central banks should fund/pay the army, police and perhaps even retailers to reimburse costs/efforts related to ensuring the safe availability of cash in their countries.

Of course, this redistribution of revenue may negatively impact the balance sheet of central banks. But it is one of the most urgent policy issues for central banks all around the world to deal with. Perhaps that is why it has been defined as 'out of scope' by the central bankers that are contemplating policy issues in retail payments. And although I understand and respect the scoping decision made by my former colleagues in the BIS-working group, I would strongly suggest they reconsider their scope.

The importance of the back-office...

.. is immense. With automated througput (Straight Through Processing) one can reduce costs and errors. And a good back-office also allows for flexibility in product development. No wonder that both VISA and Mastercard have been working hard to upgrade their autorisation and clearing and settlement infrastructure. Read more about this "Clash of the Titans' in this article.

Shopping online becomes a habit

E-merce reports huge increases in shopping on the web. The numbers vary from 30 to 70 % and appear to be more than the incidental end-of-year increases. The increase also suggests that until now, the volume of sales has still been quite moderate.

Monday, January 06, 2003

EU infringement procedure for e-money and E-commerce

AFX Press and Online Ireland report that the EU Commission has started infringement procedures on a number of issues, amongst which the implementation of the e-commerce and the e-money directive.

As AFX Press noted:
BRUSSELS (AFX) - The European Commission said it is pursuing infringement proceedings against 13 member states for their failure to transpose EU internal market directives into national law.

The commission said it has asked Belgium, Denmark, Greece, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Finland and the UK to implement quickly legislation concerning motor insurance, cultural goods, electronic commerce and the issuing of electronic money.

See also the EU press release on e-commerce and the EU press release on e-money. The latter states:
The Commission will send reasoned opinions to Belgium, Finland, France and Greece for failing to adopt the measures necessary to comply with Directives 2000/28/EC and 2000/46/EC on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (see IP/98/727).

Friday, January 03, 2003

Trust in on-line payments is on the rise...

Automatiseringsgids reports that the public is gaining confidence in the safety and privacy of payments over the Internet. A joint study by NFO WorldGroup, Forrester en The Conference Board shows that more than one third of the US citizens trust their on-line payments to be safe. This figure has risen from 27,5 % at the end of 2001.

Thursday, January 02, 2003

Western Union pays $8 million fine...

... for not complying with regulatory instructions.

Other than that business is fine. Business Review Albany reports:

First Data has four main business segments — payment, merchant, credit-card issuing and emerging payments services. Western Union belongs to the company's payment services area.

For 2002's first three quarters, First Data reported a 14 percent increase in revenue to $5.6 billion. Net income increased 51 percent to $885 million.

Those results reflect strong increases in global money transfers, better operating margins and the addition of merchant services company TASQ Technology Inc.

New structure of law on supervision for financial sector

Just at the end of last year, the Ministry of Finance announced its intention to redesign the current financial supervision laws. The goal is now to have a single financial supervision law as of January 1, 2005. This law ('Wet op het financieel toezicht') will be made up of four parts:
- general framework/definitions
- prudential supervision (mostly of credit-institutions),
- compliance with information disclosure rules (behavioural supervision),
- infrastructure of payments and securities systems.

What would you do with Robert Redford's credit card?

New York Times reports about a man who found the credit card of Robert Redford near a convenience store in Orem (Utah). The man phoned the Resort where Redford stayed to report the find.

But after being offered free ski-lift passes and dinner for two if he would bring the card to the resort, the man reportedly insisted on some signed Redford memorabilia.

When a resort representative responded that Redford ``does not do that kind of thing,'' the man said Redford wouldn't get his card back and hung up, Orem Police Lt. Doug Edwards said.

Police then called the man, who refused to give his address and told an officer that he threw Redford's card in a trash bin. Police traced the call and went to the man's apartment, where they recovered the card.

The man did not get the free ski passes, a free dinner or an autograph. But he also didn't get charged with a crime, Edwards said.

``The finder was not charged, on account of his sudden change of heart to gladly give the card to the officers when they arrived at his home,'' according to a report about the incident on the city's Web site.

Best wishes for 2003 !

Regular readers will note the language change. As a part of my New Years Resolutions, this weblog will now be in English.

A brief explanation to all new readers:
-The name Retail-betaal-gedachten literally means: thoughts on retail-payments.
-I have started this weblog in December 2001, just before the introduction of the Euro.
-The goal is to document Dutch market and regulatory developments in retail payments.
-By providing references to relevant source documents, the weblog becomes an public archive.
-Please note the disclaimer: although written in English, many developments will still have a typical Dutch flavour.

Current weblog List of publications

Retail payments are still very much influenced by local conventions, regulations etc.....
Readers should not base any decision on the basis of the information provided in this weblog.
This weblog serves as an archive of public events in retail payments. It is an individual account which should not be construed as a formal viewpoint of any organisation.

Copyright Simon Lelieveldt
Feel free to copy, paste or use this log but always mention the author and URL (