PP003 - Mobile Payments
Participants: Tim Jones of the Centre for the Study of Financial Innovation, Peter Scott of Sun Microsystems and Mike O’Hara of Voices in Business
Mike O’Hara: Hello and welcome to the Payments Podcast, brought to you by Voices in Business and sponsored by Sun Microsystems.
Recent advances in mobile telephony have led to a world where mobile phones and other devices such as PDAs and Palmtop computers are increasingly being used as a, kind of, electronic wallet, allowing payments to be made quickly, securely and efficiently. Some mobile devices are now even embedded with special chips that use Near Field Communications technology to allow contactless payments to be made by just swiping the phone past an appropriate reading device. The growth in this technology brings with it a number of opportunities and challenges for the banks. So how will they capitalise on those opportunities, and what are the pitfalls awaiting them as this mobile commerce evolves. I’m your host, Mike O’Hara, and I’m here with Peter Scott, Global Head of Banking Sector at Sun Microsystems, who will be putting questions to e commerce guru and former CEO of both Mondex and SimPay, Tim Jones, who also joins us today. Good morning Gentlemen, and welcome to the Payments Podcast.
Tim Jones: Good morning.
Peter Scott: Good morning.
MOH: Peter, over to you.
PS: Thanks, Mike. Well, Tim, good to see you here today.
TJ: It’s delightful to be here, Peter.
Fantastic, well listen, the first thing that I thought we ought to kick off with is really how you see the market for mobile payments being segmented, because I think there’s a general view that this is a holistic market and it’s all fairly similar. I think the truth is fairly different as we’ve discussed before we actually started up the Podcast, that it breaks out into low value virtual world, low value physical world, and then that difference between the high and low value across the virtual and physical world as well, and some of the slides that we’re referencing here can be actually downloaded from the Payments Podcast site.
Yes, and we’ll provide a link to those in the show notes.
That’ll be great, okay, but perhaps talk us through those different segments, and where you see banks actually making investments and launching products and services, and really what do you see as being the major differences between those different segments?
I think you’re absolutely right, there are very different things going on inside the umbrella term of Mobile Commerce or Mobile Banking or Mobile Payments. So let’s pick on a few of those things, the Mobile Industry itself has made a great deal of money and have built a very large business from personalisation of handsets. That’s a mixture of physical personalisation, the Nokia Express on covers to change the physical look of your handset, but there’s a digital counterpart to that, which is ringtones and graphics. And you buy those, typically using premium SMS. I mean, there are other ways but premium SMS where you send an SMS, and then receive one that costs more than a normal one and that’s how the extra money is transferred and the debit goes to your mobile phone bill. That structure is extremely simple for the consumer; it’s a very small number of clicks; it’s intuitive, everybody knows how to text, and with the advent of short codes, so you’re only texting to a five digit number, it’s easy to do and it’s been very successful.
And it’s low in terms of risk management, of course, for the technical companies too.
It’s very low in terms of risk management, Yes. The margins are quite poor, from a, sort of, strictly payments point of view. There’s a lot of cost in there, but because the goods are digital, the cost of creating the next ringtone is so low that as long as you’re covering the fixed costs of marketing those digital products, then you can afford to, in a sense, lose 20, 25, 30%, which is what happens in the premium SMS value chain, and still make a good living. So it’s a very good match of an opportunity and a solution.
Now, if we move away though from that – that world really exists inside the Mobile Industry, and it’s a very successful piece of their business. If we move out into general purpose, everyday life and the use of our mobile phones in our everyday lives, a lot of places around the world have realised, again often by leveraging text, not always, but often by leveraging text messaging, that you can use a mobile to trigger a payment and so, for example, one of the most popular ways of paying the London Congestion Charge is to send a text to trigger the payment. Now, ahead of time, you’ve gone to the Congestion Charge website and you’ve set up…
You’ve logged all your details.
…Yes, you’ve set up a debit card or a credit card, but you trigger that from your mobile. Now, I think that’s a mobile payment; it’s a payment that involves a number of steps, but the trigger step, you are using a text message to do the trigger step. And there are other places around the world where car parking, whether it’s parking meters or whether it’s a parking structure like congestion, or just a car park, can be done in the same or similar kinds of ways and I think that’s, again, very convenient, gets away from coins and has a role to play, but it’s a different business and typically you’re triggering some, kind of, debit.
It’s a, sort of, bill settlement.
Yes. And it’s not now settling typically to the mobile phone bill. It’s typical settling to some, kind of, bank sector instrument. The device is being used a trigger.
Now this is similar to Monetise, and I don’t whether you’re familiar with…
It is, I am familiar with Monetise, and I mean, that’s another dimension which is now coming into seeing the mobile phone as a, sort of, digital automated teller machine, that can perform the functions of an ATM, except that it can’t dish out physical money, of course. Now in another life [laughs]…
…I’d developed a digital…product for money called Mondex, and our view was absolutely clear, that we expected mobile phones to become digital cash dispensers, that would dispense cash. And who knows, in maybe ten or 15 years time from now, that may even come back, but that’s another story, and really not for today, but what monetise have done is very clever and very sensible, it basically allows you to use the mobile phone in a messaging sense as though you were at a cash dispenser and so you can get a balance, you can get your transactions and so on and so forth, and you can then send money to top up your mobile if it’s a prepaid mobile. So again, a different, but very sensible, use of the thing.
Now, if we then go to yet another part of town, back in the 1990s, in the Far East, Hong Kong, Japan, Singapore, but particularly Hong Kong and Japan, with the JRE Suica in Japan and with Octopus in Hong Kong, realised that consumers on mass transit systems really liked the concept of beeping through a turnstile. Now they did this with cards, but it was first seen the relevance of mobile inHong Kong. And what happened was, that people started to physically sellotape their Octopus cards to the back of their handsets, so that they would just beep through.
Now the Express On Cover Brigade spotted this pretty quickly and so very quickly, you got Express On Covers for your handsets that allowed you to put the card in. They noticed that in Japan and very quickly, you know, Sony, who own Felico, which is one of the leading technologies in this space, started to think, okay, well actually what consumers are really saying to us here is that they would like this functionality embedded in their mobile phone, and that’s the history of the development that now see it as a joint venture between Sony and DoCoMo, which is the daughter company of NTT and which has the largest market share as a mobile operator in the Japanese market, to create this very exciting range of handsets, and they first thing they did was to embed the chip for the mass transit in the handset. Then they’ve connected that chip through to the rest of the electronics of the handset, so that you can now go online from the handset and top it up and all of that, sort of, thing.
This is the Osaifu-Ketai?
Osaifu-Ketai, absolutely right.
The portable wallet.
Yes, but because DoCoMo are very strategic in their thinking, they stepped back and said “Okay, well, is that the end of this story or is there further to go?” and I love DoCoMo’s strapline, and I’m not sure they’re still using it, but they used to where they decide, they called the mobile phone “the remote control for your life”, and I think that’s extremely wonderful. I think it is wonderful, it’s a very powerful statement of intent. And so they said “Okay, I think then we can now go to a yet another area, which is debit and credit and chargecard payments”, straightforward buying stuff in shops.
So you’re basically moving up the value into higher value transactions.
Yes, and DoCoMo decided that what they would do would be to spend a very large of money to take a significant equity position in a credit card company in Japan and use that to implement the DCMX product on DoCoMo handsets. So that now you get a handset that comes with a software credit card, all ready in it and when you go to the point of sale, the same beep and go interface that was there first to allow you on and off the mass transit system can now be used in a shop to pay with a credit card.
Okay, so they’ve made that transition essentially from the physical contact less low value segment into the virtual higher value payments.
Well, no, it’s physical, it’s still physical, because it’s stuff buying in shops.
Okay, it’s stuff buying in shops.
Yes.
So it’s gone, sort of, from the low to the high value. The only question that I’ll put there with DoCoMo is really just how pervasive the technology is. I know there are 20 million potential subscribers who have the technology within their handsets, but there was only something like 1.5 million actual users of the technology and there are only something like 150,000 actual readers inJapan today that actually accommodate this. And that’s another point that I’d like to just touch in is, there are a lot of happening things happening, and we’ve got stuff happening with Visa contactless, as you point out with Oyster and Barclaycard, on the Underground in London. In New York City, we’ve got Mastercard with City and singular and something with Nokia that’s running, but there’s a whole series of, a plethora of these different initiatives taking place assumedly using different standards, and I’m just wondering whether what we sought to do here is to understand how is the market segmented, but what’s that leading to in terms of investment approaches by institutions in the technology?
Right, so I think what is happening is that there is a very clear convergence going on and at the core of that convergence is NFC, Near Field Communications. So, people used to say to me, “Tim, why do people call this NFC? Why don’t they just call it what it used to be called, which is RFID, why confuse us?”, and the difference is quite important. NFC is just a comms standard. It’s just a standard for radio communication across a very short distance between two devices, but because it’s a, sort of, comms standard and nothing more, it is completely agnostic as to which of these devices is first active and which of them is passive and which of them’s in charge, okay, it can be either. RFID is about reading a passive tag with an active reader. NCF basically says, “Okay, we don’t know yet which of these two devices that are going to talk each other as, kind of, initiating the transaction, which one’s in charge, and it doesn’t matter. Let’s create this comms standard that says, here’s a classic Isostack comms standard that allows these two devices to communicate, and then we can leave to the application layer to actually initiate.”
All of that wonderful Java on the telephones.
That’s the one. [Laughs].
So that is powerful because you now can go forward and devise applications that work however you wish them to. So, another part of this story is that – ‘cause your point about how many terminals are there out there is well made, and I think it would be a substantial break to the evolution of mobile commerce if one were waiting for the mobile handset to be there before the terminal estate went in. But, of course, because of, and this is completely another history now, because of frankly what happened with Exxon Speedpass, which was the petroleum and then, sort of, road gating thing that happened in North America.
Tolls, Yes.
Tolls. What that did, which was beep and go in a, kind of, way was to basically get Mastercard, Visa and American Express saying “Oh, my goodness, what’s going on here? Are we about to disintermediated from this? We’d better go and do this, kind of, beep and go stuff for cards”, and they very sensibly focused on, in the jargon of the cards industry, QSR, Quick Service Restaurants, so the, sort of, McDonalds, Burger King sector, to say, “Look, this is one of the great cash holdouts, this sector, people use cash, there’s all sorts of hygiene and change and speed reasons why it would be great to make those electronic payments. The risk profile in those outlets is low, let’s do a beep and go payment card, but basically just using a standard debit or credit card, you know, banking structure behind it, and so the only thing really you’re changing is the, kind of, interface when you’re actually making the payment. And so that’s turned into Express Pay and PayPass and VisaWave and that’s great. Now, I think that would be very successful over time and what that’s doing, of course, is bringing in a very substantial terminal estate against the provision of cards, contactless cards, nothing to do with telephones, but of course, as the telephones get exactly the same comms stand at NFC, then the terminal doesn’t mind whether it’s being spoken to by a card or a phone.
So one of the strategic risks here for banks is that the banks are unwittingly, in a sense, although, of course, the bankers that are thinking are now beginning to realise this [laughs], putting in an acceptance estate against a card proposition, that has every prospect of migrating to being a phone proposition with all of the different challenges about who’s in charge and who’s driving the commercial infrastructure and the commercial architecture that comes with that transition, because, of course, the bank can control it when it’s a card based architecture, but they can’t control it, to the same extent, when it’s a phone based architecture.
To what extent do you see the GSMA organisation bringing a greater convergence of standards and approach?
I think what the GSMA are doing with NFC is again very sensible. I think one of the things people should be aware of though is that although there is a growing consensus emerging about the correct architecture for the internals of the handset for NFC, we’re not quite there yet and so although there are a couple of NFC capable handsets that have now been launched, Nokia have one, I’m pretty sure I’m right that they are not using the final expected architectural approach, and I’m not saying Nokia would agree with that, which is to physically link the SIM in with one of the spare terminal points, ‘cause you know there are eight contact points and I think only six are used and they’re going to use one of the others, so that the SIM has a hardware link into the device to make the SIM play a role, which will be for consumers, I think, quite a valuable role, in the way that NFC is done. The value is that by involving the SIM in the management of the applications that are using the NFC interface when you change handset, you put your SIM into the new handset and it should be much easier to reconfigure all of your applications so that your new handset becomes your old handset, if you like, in terms of its functionality.
Now, although I think there is an emerging consensus about how that’s got to be done, it’s not, I think there’s some still hard work, standards hard work to do, and then, of course, you’ve got to get into the manufacturing cycle, and then we’ll see the handsets come out. So I think we’re some way off seeing pervasive handsets, in another words a large percentage of handsets in the market which are NFC capable and can, you know, attract a number of NFC applications to sit within them. There’s another business issue which may cause a break to the evolution here, and that is that we have a multi-application problem.
Let’s imagine now, I’ve got this fantastic Java software…
That wonderful Sun Java?
That wonderful Sun Java software, I’ve got that sitting in my handset, and because everybody now is getting so excited about NFC, that I’ve got a NFC capable software version of my British Airways Frequent Flier Card, my hotel cards, some credit cards, and they’re all sitting there, and I go to a point of sale. So now, I’m going to a point of sale and I’ve beat my handset. And the point of sale says “And which of the 15 things I accept [laughs] is talking to me please?” Now that is a classic application select problem. To which there are a number of potential solutions, you know, you might say, “Well, it’s the consumer’s job to pre-select before they go to the pad.” My personal view is that that is ergonomically unacceptable; it just will not fly. My personal view is that you either only allow one thing to happen when there are multiple choices and there’s some, kind of, once only selection or whatever, or it’s the other way round. You beep the point of sale device, the other device realises there are six things that could be done…
And it requests you select?
…and it requests you select, and that select is done on the point of sale side by the operator so that “Oh, I want to use my BA card here to lodge these Frequent Flier Points because I’m doing a hotel check-in, and they’ll give you my Visa card to actually do the pre-auth for the hotel stay”, Yes?
It’s interesting actually that only last week, Sun Microsystems Inc, acquired another company, a software company specialising in mobile Java software. So it’s something that, you know, Sun as an organisation is actually building out in terms of its capability and it’s technology infrastructure. But, Tim, can we, before we move onto to some of the other issues here, there’s a couple of points that I think are interesting to make. We’ve talked about market segmentation; we’ve talked about the low value virtual world, could we just talk a little bit about mPacer because I think that’s an interesting example…
I wanted to come onto that, Yes.
…where we see a mobile telephony company actually moving into higher value payments, which I think traditionally and intuitively we would say that they would not wish to go into because of all the consequent risk management implications of managing large payment infrastructure.
Okay, I’m a big fan of Mpacer. I’ve got not commercial involvement with it, but I think it’s a very interesting architecture. It emerged out of Vodafone Group, in fact the Corporate and Social Responsibility Area within Vodafone and the initial work was co-funded with the Department for International Development and the UK Government. And the technology was created in large part by Consult Hyperion in Gilford, a consultancy that specialises in digital money and digital identity.
And what Consult Hyperion with Vodafone realised was, that if we’re designing here a system to work in a country like Kenya, not everybody’s got a handset, and so if you could actually put the application on the SIM so that if you had your own SIM you could then use any handset and you didn’t need extra specific software in the handset, that would be a powerful solution, and that’s what they’ve created. So the Mpacer application sits in the SIM within the handset, okay, but what does it do? Well, the initial conception of it was to provide a way for Microfinance Institutes in
Kenya to disperse money to borrowers and to receive money back.
Now Microfinance is this idea made famous by Grameen in Bangladesh, but there are Microfinance Institutes all over the world, and it’s a very powerful and growing segment of bringing capital to the some of the poorest people in the world. Of giving up small amounts of money, to microbusinesses often can be as informal as people going into the fields to pick crops and then coming to the roadside to sell them, or people doing hairdressing businesses, or car repair businesses or whatever the businesses are, receiving relatively small amounts money and often using a, kind of, peer group club within the structure to, you know, have everybody who’s borrowing talking together about their challenges and encouraging each other to succeed, so that you have relatively low bad debts. But some of the costs involved in dispersing the money out and getting it back are high, not least in terms of the time that it takes people walking hours to go and get money to some, kind of, a central physical point.
Now, what Vodafone have done is extremely clever; they’ve basically set up a pool of liquidity, a bit like a PayPal structure, where every participant that’s got a SIM has got a little account. The Microfinance Institute, let’s say you’re going to borrow 1,000 Kenyan shillings, pops 1,000 Kenyan shillings in to your little account, so that’s great. You can now go to a Vodafone Airtime reseller, and ask for 1000 shillings, say, to be withdrawn.
Right, so it’s actually using the Vodafone office distribution channels as a way of…
But, of course, right, but, of course, let’s think – remember we’re in Kenya, so the Vodafone Airtime reseller could be…
Could be a shop at the corner.
It could be anything, Yes. It’s just somebody who’s playing that role. And effectively you exchange some text messages, which leads to your little account in this PayPal structure being debited, the Airtime reseller’s being credited with a small commission, which is their payment for performing this role, and then they give you physical Kenyan shillings.
It’s clever, isn’t it?
And then you go off and do whatever your business is, and you make some money, and then to pay it back you come back and you do exactly the same thing in reverse.
In the same way that you would top up your phones, you’re actually repaying the credit.
Yes, exactly right. And so what you’ve done then is to turn the Airtime reseller into a human cash dispenser and a human bank branch teller, without many of the costs.
Now, if we think just technically about text, text is extraordinarily cheap if you’re a mobile operator because it’s asynchronous. The Network is scoped for the peaks of call volumes, and so if the Network is busy, you just park a string of text somewhere until the busyness goes 300 milliseconds later, and then shoot them through. So, from the Mobile Network operator’s point of view, restricting this to being an asynchronous text exchange is very, very, very inexpensive in terms of Network capacity, so it’s a very elegant solution. Now, what I believe is happening with Mpesa is twofold. Firstly, the people in Kenya are saying “Okay, this, kind of, you know, Microfinance Institute to me and me back to the Microfinance Institute, that’s great, but I actually want to send some to my brother.” And so now I think [laughs] what we’re going to see…
It’s a remittance market.
…it’ll become a remittance market locally. And then what’s very exciting is that Citigroup have now joined in with Vodafone and are working on this, and I think we’re going to see multi-country remittance.
Well, they’re talking about India, aren’t they, and they’re talking about Poland, I think, as well.
Yes, and UK to Kenya, I think to trial it to understand how it’ll work. Now, this means that we have this, what I think is very elegant architecture, with two Corporations, Vodafone and Citigroup, and others may well have joined them or join them. The point is that you can now legitimately point to creating a Global Network which is a Bank and Mobile Network Operator solution, leveraging the power of both, which will be a very strong competitor to the incumbence in the Global Remittance market, people like Western Union.
Well, one of the challenges that they’ve got is just the cost of the infrastructure and managing the cost of the infrastructure.
And so what we have here…
So if we’ve got a low cost mobile phone…
…with a very low cost infrastructure, it’s a very exciting solution. Now strategically for banks, this actually poses a bit of a problem. We’ve already talked about DoCoMo, kind of, doing their own thing with DCMX; we’re now talking about Vodafone working with Citigroup Group and maybe others, but who knows. What, I mean, how many other large Global or semi Global Mobile Network operator groups…
There’s not many of them out there, are there?
…out there? So, I mean, what if Telefonica and 02, that Group decided to work with Santander, which would not be a huge surprise? What if the Orange Group decided to work with a major French bank? What if T-Mobile decided to pick a partner, and it could be any partner, and let’s imagine it’s HSBC, now we have a bit of a problem, which is…
The market’s very tied up.
Well, I mean, it’s one of those dances where there are so few partners, there are going to be some very large Global banks with significant Global ambition in Retail Banking, thinking “Oh my goodness, what just happened?” [laughs]. I’m now a wallflower because it appears that everybody else has paired off. So, it’s a feature that the Mobile Network Operator Industry was pre-consolidated by regulatory fiat. Because they only issued a small number of licences in each country, and the, sort of, multi-country consolidation, kind of, created this issue where you’ve got four, five, six, seven, Mobile Network Operator Groups, and that’s it. And so I think, you know, Andy Grove’s book, Only the Paranoid Survive, talks about inflection points.
[Laughs].
It’s a great book.
Yes.
And he talks about how…
It rather looks as if we’re at one of those.
I think we’re at one.
There’s significant disruptive technological change.
Because everything looks calm and fine, but, you know, deals are being done right now which may well set a course for significant commercial change over the next five or ten years, so it’s an exciting thing.
One thing about remittance is is that there are other very excellent infrastructures, again leveraging off mobile. There’s a very high quality bank in Spain, Bankinter. Bankinter have a system called Hal, which basically, roughly how it works is, neither party to the transaction needs to have a bank account, at either bank. I think it’s being done between Spain and Morocco. You go into a Bankinter branch, you sign a piece of paper to do the KYC, you give the physical money that you wish to send to Morocco over and various codes and things are exchanged, the mobile phone number of the recipient. You’ve text the recipient in Morocco, and give them some, kind of, password. They go to any cash dispenser of the receiving bank, tap in their mobile phone number, tap in the password and out pops the money in Moroccan currency. I mean, between the two banks, there’s just an end of day net single settlement, so…
It’s a slightly more elegant approach than the prepaid card approach, whereby you go and credit in and then you get another card on the other side where they draw the funds up, but there are “know your customer” implications in that.
There are, and…
Whereas if it’s done through a registered phone where you perhaps have to show some identity in order to get the SIM card in the first place, you can actually circumvent that.
And then we’ve got, you know, Visa and Mastercard, there’s a Mastercard ICICI initiative, I think in India, saying “Well, why don’t we use BankNet and VisaNet?”, which I think actually has a lot going for it as well. And that’s a variant on the prepaid card thing, but you could easily, just as easily, use BankNet and VisaNet with mobile phones on the end going to cash dispensers, and so, I think what I’m saying is, we are now beginning to see emerging two or three really quite different and, kind of, better infrastructures and the stuff that’s happened with Globe and others, again in South East Asia, has been the, sort of, you know, pointing us towards this, so I think it’s a very exciting time in the remittance world. Remittances are going to remain a huge opportunity for the foreseeable future. You only have to look at the people building Dubai, most of whom are South Asian, to see what enormous market remittances is going to remain, and exciting to see it going on.And it’s extremely topical right now. I mean, we’ve both just been at the International Payments Conference here inLondon, and there was a separate stream running, dedicated to remittances, so it’s a hot topic.
Tim, before we move on, let’s just talk about Mobile Banking a little bit here, because Mobile Banking is in there as part of the mPayment space and I think people tend to roll it in. My perception is that historically, Mobile Banking is something that banks have said, “Yes, let’s move to that, we move to internet based banking, let’s move to m-based banking. The younger generation are more demographically likely to engage with this
technology; banks have moved into it, but historically I think they have been somewhat disappointed in the levels of take-up.And I was at the Asian Banking Conference in Jakarta a few weeks ago and a couple of banks out there put it very succinctly and said, “You know, we thought it was going to be somewhat transformational in terms of the volumes of business that we’re going to go through. What we found was is that it’s almost a hygiene factor. We have to offer a Mobile Banking service just to complete the suite of services, because our customers expect it”, but it isn’t leading to a major shift of transactions. And I think that that is partly because the mobile, as a device, is still relatively immature in its technology. So, let me just postulate something, which is, kind of, a little bit different. Firstly, I don’t believe that there’s something called Mobile Banking. I think there are appropriate banking offers and I think that more and more, the focus for banking offers will be about internet and mobile delivery, so sometimes at home you will be looking at your PC screen and doing, kind of, richer interactions and more reflective interactions. You will be looking at different product choices; you’ll be looking at statements in more detail, and that will be complemented by you triggering transactions and looking to see whether something you’ve asked for has actually happened on your mobile device. Now, let’s just remind ourselves what a bank offer is. For my money, a Retail Banking offer is, a safe haven for my money, where my salary is paid into, from where my regular payments are managed and my principal source of spending cash; that’s what a Retail Current Account relationship is. Everything else is, kind of, extra. That’s the core of it. Now, let’s imagine that I’m Steve Jobs, I’ve got the iPhone coming out, and the iPhone is, kind of, I think an exciting device, really beginning to, sort of, bring alive this convergence of the PC.I’ve not seen one, have you seen one?
I’ve just seen the keynote on the internet. The Macworld keynote, but it was impressive. I’m looking forward to seeing one in the flesh. And let’s imagine now that we have the technology sufficiently well developed so that, from a technical point of view, obviously the consumer doesn’t need to know this, what’s happening behind the scenes is that there is a secure banking application sitting on my iPhone which is refreshing itself across the data network all of the time I’ve got a signal. It’s completely up to date, it’s synchronising…
Real time position?
…real time position, every few seconds, with my – I can’t see this happening, it’s just being done across 3G or GPRS, it doesn’t matter, Yes. So there’s no, kind of, WAP screen waiting, because the stuff’s secure, but it’s all sitting on my handset, therefore even if I’m riding the tube or I’m in a tunnel, I’ve got it up to date to the last time I had a signal, which, for 99.9% of the time will be absolutely the correct up to date position. And I’ve got the same thing available on my PC at home, or my other devices, it’s exactly the same view, it’s just being delivered to the phone. And what if I then decided to create a company called iBank, and iBank basically says, “Look, we’re iBank and we’re the 21st Century Bank, and what we do, is hoping to make money, and salary payments, regular payments in cash, nothing else.” “You want a loan, you want savings? “Yes, we’ve done a deal with ING Direct, so you can save, and by the way, anybody that does a deal with us, when your money leaves iBank it’s immediately with them and working for you. If you agree a loan facility from one of our loan partners, it’s instantly brought onto your account with us, and is available to you.”
It becomes a facilitation layer between different service providers.
Right, but basically what we’re saying is, iBank is 21st Century and instant and modern, it’s everything you’d expect from the world, dozy old Banking Sector is, kind of, a little bit Victorian and has things like cleared balances, what does that mean, ho ho ho?
We can access those in real time.
Well, we’ve got a bunch of partners who’ve got it to change their systems, so that money between us happens instantly and then there’s the dozy antediluvian Neanderthal rest of the world’s Banking Sector where ho ho ho, it might take five days to get you your money out to one of those dinosaurs or back from one of those dinosaurs, but who’d be stupid enough to have any there anymore, now that iBank’s here?
So although I don’t think Mobile Banking on its own is, you know, kind of, much, what the Mobile and the PC between them allow now is basically to – my house, I have three teenage children, and my house is littered with their bank statements.
[Laughs].
When they joined a nameless large bank, the bank decided that it would send them statements. They didn’t want statements; they never look at their statements, like most teenagers, they’re broke. They spend all their money [laughs] and there’s nothing there to look at. None of them were offered online banking, as part of…
Extraordinary, that’s extraordinary.
It is extraordinary, so the mismatch between what kids would desire…
And what they’re actually getting from their banks.
…and what they’re actually being offered is huge, and iPhone and iBank, there’s just an opportunity there to create this emotional difference, which is very much in line with what Steve Jobs is trying to do in the iPhone more generally, to create an emotional difference that this is taking the device and the lifestyle that it supports to another level.
Right, well, Tim, it’s been an absolutely fascinating discussion, and we’ve covered a huge amount of ground here. I think the final wrap point that I’d like to talk to, is where do you see the banks investing in the future, and what advice would you have for banks investing in the future? We’ve talked about the transformation in the remittance base and potentially in the Microfinance base, but what advice would you offer to a bank today, and in what, sort of, timeframe do you think is relevant for them to actually get their skates on and do something?
My advice would be that you need to be developing a Retail Banking strategy that fully embraces new channels, and that recognises that probably the single – equally joint first in importance is mobile and with PC Broadband, but those are the two channels, and obviously there’s convergence for some people, with, you know, there’s convergent devices, but they are both strategically incredibly important. And your consumers will expect you to be providing appropriate rich service across both and, you know, if you’re not planning to do that, then you need to be really asking about, you know, whether you’re [laughs] serious about staying in this business. Now, it may be that by keeping close you conclude that some things like NFC are a little further away than some commentators believe, but it may well be that some things actually, if we look at the progress that folks like Monetise and mPacer are making, there are very sensible things that you can do now.
I mean, another area we haven’t talked about is, I’m the Chairman of a little company marketing a credit card text alert system, which has been extremely successful in Hungary, and basically sends you a text message to your mobile every time you use your credit card, which means that if somebody…
Fraudulently starts using it, you know all about it…
…you get a text message and then you think – exactly, the consumer research seems to be extremely strong, the anti-fraud business case for the bank very strong in Hungary, a very exciting product, so…
So emphasising what you said earlier in terms ofMobile Banking, it’s going to be more around specific service propositions to end users rather than…
Yes, but the point is, there are things you can do now, a number of them based around text, because everybody knows how to text, everybody can receive a text, all phones do it, so there’s stuff you can do right now and there’s stuff to, kind of, consider how you’re going to play with as the thing develops out. And therefore you should be looking forward and thinking this is going to be a central part of my offer and how do I now start to get engaged and start to build capacity, to do more as the capabilities improve.
Fantastic. Well, I think that was just really tremendous, it’s been a really exciting discussion.
Thank you, I’ve enjoyed it.
It’s been great fun, so, Tim Jones, thank you very much indeed for joining us on this podcast. Mike, over to you to wrap.
Thank you. Excellent discussion indeed, some real insight there, so thanks for that Tim. Just a quick word to our listeners, if you would like to subscribe to the Payments Podcast, then go along to paymentspodcast.com and on the right hand of the screen you will see details, links and so on of how to subscribe either via iTunes or directly from the website itself. Thank you once again Gentlemen and we will speak to you again next time. Goodbye.Goodbye.
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