James Silver - Data Management System

Future of 

Payments 

Mobile means 

less cash 

Page 06... 

The payments 

landscape 

Pages 12 & 13... 

Social chat 

and sales 

Page 18... 

_ 04. September. 2012

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Ȗ It’s a drizzly Sunday morning 

in 2020 and Harry is shuffling to 

Sainsbury’s to pick up some milk, 

Alka-Seltzer and cat food. At the 

automated checkout, a camera 

scans his iris and the till spits out 

a receipt. 

That afternoon, at the cinema, he 

pays for tickets with little more than 

a wave of his RFID-enabled (radio 

frequency identification) wristwatch 

past an electronic reader, 

connecting to his bank account. 

Later, dinner is Domino’s pizza 

delivered to his door, paid for by the 

virtual credits he’d steadily been 

accumulating on his Zynga gaming 

account; (he’d also qualified for a 

new range of gardening equipment). 

Harry can’t remember the last 

time he put his hand in his pocket 

for actual, you know, cash. Paying 

for things with coins and banknotes 

Managing Editor 

Peter Archer 

seems, well, like something the Victorians 

did. Like walking canes and 

whooping cough. 

OK. Harry’s cashless society may 

not quite be here in eight years. Yet 

all the modes of payments listed in 

Harry’s Sunday are already viable 

or in use in other fields. Iris recognition 

technology, though flawed, 

can be found at a number of airports 

and border agencies around 

the world, while a wristwatch containing 

an e-wallet was developed 

by Speedpass and Timex nearly a 

decade ago, and a handful of businesses, 

including Wuala cloud storage, 

based in Switzerland, already 

accept virtual currencies. 

Society is on the brink of generational 

disruption in the way 

we pay for goods and services. 

Indeed, it could be argued that we 

are living through a period of what 

might be termed “technological 

congestion” with the arrival of 

new payment methods ranging 

ConTribuTorS 

from F-commerce to smartphone 

NFC (near field communications), 

and payment apps to services like 

Stripe, Braintree and Dwolla. 

And as a global financial services – 

and payments – hub, the UK is well 

placed to take advantage of all this 

innovation, says MP Mark Hoban, 

Financial Secretary to the Treasury. 

“Almost 80 per cent of UK households 

have internet access, 38 million 

adults (74 per cent of the population) 

shopped online last year and 

half of mobile users now access the 

STEPHEN ARMSTRONG 

Contributor to The Sunday Times, London 

Evening Standard, Monocle, Wallpaper 

and GQ, he is also an occasional 

broadcaster on BBC Radio 4 and Radio 2. 

DAVE HOWELL 

Freelance journalist, writer and micro 

publisher, he specialises in business and 

technology, and has written for a range 

of publications and websites. 

James Silver looks into the future and sees a cashless society, which technology 

has already largely enabled, but may yet be delayed by consumer caution 

OVERVIEW 

2012 2 20 2012 20 220 01 

01 12 

12 2 

The state of pay 

and a cashless society 

Society is on the brink of 

generational disruption in the way 

we pay for goods and services 

JAMES SILVER 

Specialist writer on the media and 

technology for, among others, WIRED 

magazine and The Observer, he is also a 

regular presenter on BBC Radio 4. 

CHARLES ORTON-JONES 

Former Professional Publishers 

Association Business Journalist 

of the Year, he is editor-at-large of 

LondonlovesBusiness.com. 

© © Jeffrey Blackler / Alamy 

East London’s Tech 

City uK is home to 

notable “fin-tech” 

start-ups 

internet via a mobile phone,” he 

says. “Some 27 million adults (52 

per cent) use internet banking. The 

UK is a world leader because we are 

such a highly-networked country, 

with multiple, interlinked technologies, 

including PCs, tablets, laptops 

and smartphones.” 

Certainly, East London’s technology 

quarter, which grew 

organically, but was collectively 

branded Tech City UK by the Government, 

is spawning a number 

of notable “fin-tech” start-ups, 

among them GoCardless, an 

online payments platform. 

When viewed as part of a payments 

landscape which incorporates 

Britain’s leading banks, 

payments providers, telecommunications 

companies and retailers, 

new tech companies have the 

potential to offer real advantages 

to the general economy, by making 

it quicker and easier for payments 

to be made. 

Future of Payments 

KATE BASSETT 

Freelance business journalist and former 

editor of Real Business, she writes for 

publications including the Financial Times, 

The Guardian and The Independent. 

(27m) adults 

use internet banking 

80% 

of UK households 

have internet access 

52% 

74% 

(38m) adults shopped 

online last year 

50% 

of mobile users access the 

internet via a mobile phone 

Source: HM Treasury 

“At a time when credit is constrained, 

faster payments makes 

money work harder,” says Mr 

Hoban. “Small businesses alone 

are having to fund almost £110 billion 

in overdrafts and short-term 

loans. They will benefit most from 

faster payments.” 

He says the Government intends 

to develop the UK’s world-leading 

faster payments technology further, 

by ensuring “red tape does 

not stifle innovation” and putting 

in place “a supportive regulatory 

regime that promotes competition”. 

Welcome political pledges, 

with a familiar ring. 

But, ultimately, of course, 

money is emotive and trust slowly 

earned. If Harry’s cashless utopia 

does not arrive by 2020, it will be 

down to consumer caution, rather 

than tardy technology. In other 

words, the public still needs to be 

persuaded that it needs a wristwatch 

to buy cinema tickets. 

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04 


Oyster could yet 

become a pearl in payments 

Smart cards are set to revolutionise the way we pay, but 

contactless payment is still evolving, writes Stephen Armstrong 

SMART CARDS 

Ȗ In every technology race, there’s 

a Hovercraft or a Betamax or a 

BBC Microcomputer – great ideas, 

functioning tech, ultimately a 

dead-end curiosity. 

At the start of 2012, the Oyster 

was looking like the Betamax of 

payments. First issued in 2003 – 

in part to cut back on cash stored 

in buses to reduce robberies 

– competitive pricing made the 

contactless smart card a rapid hit 

with Londoners. By June 2010, 80 

per cent of the £2-billion-worth of 

journeys made on Transport for 

London (TfL) involved an Oyster. 

Small, light, functional – it was an 

obvious love affair. 

Recently, however, TfL seemed 

to lose its love for the Oyster. In 

November 2011, the organisation 

declared its intention to accept 

open-loop payment on its network, 

effectively allowing contactless 

credit card payments on all journeys 

and opening the door to near 

field communications (NFC) payments 

by mobile phone. 

London major Boris Johnson 

made it clear he wants TfL to get 

out of the business of changing 

money and collecting fares, reducing 

costs by allowing banks and 

payment card networks to take an 

ever growing share of transactions. 

For banks and payment providers 

this was good news; Barclaycard 

OnePulse, a credit card issued by 

Barclays with Oyster capability, 

led the charge but others followed 

including, MasterCard’s PayPass. 

“We’re expecting single PayPass 

wallets to dominate payments in 

the future,” says James Davlouros, 

vice president – mobile business 

development, Europe, at Master- 

Card. “People won’t want to carry 

multiple cards around – a single 

card, possibly simply their mobile, 

for point of sale and transport, 

should be better. TfL’s move will 

prove pivotal in this.” 

And yet some analysts aren't so 

sure. “You just have to think about 

how people use their Oyster card,” 

says Alistair Newton, research 

vice president at Gartner’s banking 

division. “It’s kept separate, in 

its own wallet, while people have 

The oyster card 

transformed 

bus,tram, tube and 

rail fares in London 

The national roll-out of smart 

cards could have a fundamental 

impact on the way the UK pays 

maybe two or three credit cards 

in their actual wallet. If they tap 

those on the tube gates or bus card 

reader, you can expect some real 

confusion as all three cards pay. If 

you have to take one card out, that 

slows you right down. And who’s 

going to want to put their most 

frequently used card in a separate 

wallet with photo ID? I’m not sure 

TfL have thought this through.” 

NFC-equipped mobile phones, 

he adds, have problems that hinder 

their uptake. The NFC chip had 

been included on handsets, but 

telecommunications companies 

insisted it become a SIM feature, to 

increase revenue. This slows down 

the time taken to make a payment. 

TfL requires 500-millisecond 

transaction times or faster and it’s 

not clear yet whether SIM cards 

in NFC phones, running either 

DESFire, PayPass or payWave, can 

achieve that. 

Just as these details emerged, the 

UK government granted Oyster 

a new lease of life – in spring, the 

transport secretary announced a 

national roll-out for pre-paid cards, 

in part to allow greater variation 

in the fares. The roll-out might 

allow Oyster’s contactless system 

to restructure around models followed 

elsewhere in the world. 

Stored-value cards, like Tokyo’s 

PASMO, Hong Kong’s Octopus and 

Singapore’s EZ-Link, all operate 

with radio frequency identification 

(RFID) technology and have been 

in use in Asia since the 1990s. 

Where, for instance, Octopus 

differs from Oyster is its retailer 

relationship. Octopus cards can be 

used in pharmacies, newsagents, 

dry cleaning shops – the kind of 

stores that cluster around transport 

hubs. The stores have been 

involved since day one and their 

main benefit is access to the vast 

and constantly updated passenger 

data silos that Hong Kong’s Mass 

Transit Railway collects. Thus, 

stores can discover exactly which 

times of day they’ll have the greatest 

footfall, literally knowing the 

number of people likely to pass 

their door between 2pm and 3pm. 

There are problems, explains 

Jerome Cle, chief executive of 

SCCP Group, which runs the 

SWIFF mobile card payment platform. 

“Card ownership is almost 

universal but, despite the available 

network of retailers, usage 

outside the travel network is not 

bloomberg via Getty images 

widespread,” he points out. “The 

technology is not sophisticated or 

secure enough for consumer needs 

– there are no detailed transaction 

records and no mechanism for 

payment dispute resolution.” 

Innovations in pre-paid card 

technology, however, could overcome 

many of these flaws, says 

Howard Berg, director at digital 

security giant Gemalto. The 

company is introducing pre-paid 

option featuring a built-in keypad 

and display screen, which 

enables users to enter a PIN 

and see their balance. "You can 

straightaway understand how 

much is on your card," says Mr 

Berg. "So at the point of sale, 

you're 100 per cent confident 

that you’ve got the money to 

cover the transaction.” 

With pre-paid smart cards rolling 

out in hospitals, schools and 

universities for everything from ID 

to canteens, there’s the potential, 

especially for debt-averse consumers, 

budget-conscious consumers 

or low-income families, for the 

national roll-out of smart cards to 

have a fundamental impact on the 

way the UK pays. The Oyster could 

yet prove to be a pearl. 

CARTES 2012 

Electronic 

wallet at 

heart of 

challenge 

The major players in the payment sector, 

where mobility already represents 

a key strategic approach, have made 

the electronic wallet their chief issue. 

"It all began in 2011, with the ISIS 

Mobile Wallet and the Google NFC 

Wallet. This was a real detonator, 

marking the start of the e-wallet era 

and triggering the wallet war we are 

now seeing," says Isabelle Alfano, 

director of the CARTES show, the 

world's leading smart technologies 

event dedicated to security, payment, 

identification and mobility. 

To spread the use of the e-wallet, the 

first aim is to transform payment into 

shopping by proposing new services 

to consumers: price comparers, alerts 

about discounts and special offers, 

options for recharging phone SIM 

cards, buying train tickets, and so on. 

But current developments also 

raise numerous questions in terms of 

security and private life. 

For the smart security industry, 

these questions are not so much 

challenges as new opportunities and 

a number of technological responses 

are already appearing, which associate 

security with personal data 

protection in e-wallets. 

The CARTES 2012 show, from 

November 6-8, at Paris-Nord 

Villepinte, features representatives 

from 143 countries, 450 exhibitors 

and 140 conference events with 

international experts. 

100,000 

uK point-of-sale terminals accept 

contactless payments, 2012 

Source: barclaycard 

6.9bn 

smart cards globally, 2012 

Source: Eurosmart 

$5.1bn 

forecast value of smart 

card market, 2012 

Source: Eurosmart 

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Commercial Feature 


Helping SEPA deliver on its promise: 

the future of payment platforms 

Martin Herlinghaus, director, merchant 

services at arvato Finance, discusses the 

importance of putting the user experience 

at the heart of payment innovation 

The traditional boundaries of 

domestic payments are tumbling 

down around us. The growth of 

e-commerce in a global marketplace, 

combined with customers 

purchasing from wherever location 

and whatever device they 

choose, means merchants have to 

ensure their payment processing 

strategies put the user in control. 

Customers who have difficulty 

making payments can find a more 

accessible option with one click or 

touch of a screen, so companies 

cannot afford complexity to get 

in the way. 

Innovation is critical and mobile 

wallets have been at the forefront 

– the ability to transact seamlessly 

wherever you choose to 

purchase, with concepts such as 

one-touch payments for music 

or apps make the process almost 

invisible to the customer. 

A number of frameworks have 

been developed to facilitate crossborder 

transactions, but just 

enforcing these on to a diverse 

consumer base will simply cause 

fear, uncertainty and doubt that 

will ultimately affect sales volumes. 

Success will come for 

those merchants who are able to 

balance an excellent user experience 

with the tangible benefits 

that these frameworks bring to an 

international marketplace. 

SEPA: a golden opportunity? 

The introduction of SEPA (Single 

European Payments Area) is 

designed to facilitate simpler and 

more cost-effective cross-border 

transactions. 

It promises much: the UK Payments 

Council website states 

that SEPA will assist pan-European 

trade, helping UK businesses 

compete by making it simpler and 

cheaper to receive Euro payments. 

From a consumer perspective, 

it facilitates the transfer 

of funds for individuals travelling 

and should mean UK-issued cards 

become more widely accepted 

– an excellent advantage for 

the global e-commerce market, 

where debit cards may not previously 

have been accepted. 

The framework was launched 

several years ago and up until 

recently interest has remained 

low. The industry has felt that the 

concept has been “forced” upon 

them, and with little guidance on 

practical implementation around 

e-Mandates or the need for customers 

to know their lengthy Bank 

Identification Codes (BICs) and 

International Bank Account Numbers 

(IBAN). 

However, the deadline of 2014 

has been recently set and SEPA 

is coming, regardless of adoption 

rates. So the challenge for 

merchants now is how could this 

framework be used in the next 

round of payment innovation? 

Harnessing the potential 

The way to get maximum value 

from frameworks such as SEPA is 

to consider how it can integrate into 

existing solutions, evolving them 

into platforms that match what customers 

and businesses are looking 

for – today and tomorrow. 

The SEPA Task Force, set up by 

arvato Finance, has worked with 

our global customers, including 

1&1, Facebook and Google, to 

develop innovative, effective solutions 

that will enable them to meet 

the 2014 deadline, keep transaction 

costs low and ensure their 

customers continue to receive 

the very best experience. 

By integrating into existing 

platforms and keeping customers’ 

needs uppermost, arvato 

believes SEPA Direct Debit 

offers the potential for a payment 

method that: 

Is familiar to payers, so won’t 

require huge education for 

customers; 

Offers security when payments 

are revoked; 

Will have a heavy uptake in countries, 

such as Germany, the Netherlands 

and UK, which will support 

ambitious expansion plans; 

Introduces streamlined processes; 

And offers loyalty between payer 

and payee, as it sets up a secure 

payment relationship which 

encourages repeat purchases. 

Taking up the challenge 

Maintaining high adoption rates 

for SEPA will be a challenge, so 

it’s important that the solutions in 

place are flexible enough to adapt 

and evolve to suit changing customer 

purchasing demands. 

Undoubtedly, those companies 

who can work collaboratively 

with payment industry experts 

to understand the ways in which 

their customers and the payment 

market will develop, and look at 

innovative ways of harnessing 

so-called “requirements”, will turn 

them to their advantage. 

1&1: Preparing for growth 

As the world’s number-one web 

hosting company, 1&1 is known 

for offering its customers reliable, 

user-friendly web design and 

hosting services, so it is imperative 

that its payment methods 

meet the same high standards. 

A successful global expansion 

has to be built on technology and 

processes that are not only standardised 

to deliver speed to market, 

but are also flexible enough 

to incorporate local market sensitivities, 

practices and customers’ 

preferences. 

1&1 is working with long-standing 

partner, arvato, to develop 

an innovative solution to support 

both legacy and future payment 

methods, throughout its international 

expansion. 

“We see a huge opportunity to 

expand our payment offerings 

to include SEPA Direct Debit, as 

this enables us to target more 

customers across new markets. 

However, we need to be able to 

maintain existing payment methods 

to offer customer choice,” 

says Robert Hoffmann, of 1&1 

Internet’s management board. 

“arvato’s future-proof payment 

platform meets our needs today 

and will ensure a smooth transition 

to full SEPA requirements as 

the 2014 deadline approaches. 

More importantly, this will all be 

seamless for our customers.” 

SEPA Direct Debits 

¤50bn – 100bn 

potential annual savings to EU economy 

71.5bn 

750 

28% 

of credit transfers 

are SEPA- compliant 

32 countries 

490m 

citizens are affected 

by SEPA 

electronic payment 

transactions annually 

mandates could be 

converted to SEPA 

of eurozone direct debits 

are SEPA-compliant 

February 1 

2014 

0.5% 

SEPA migration deadline 

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€ 

and

06 


Will chip bear 

fruit for Apple? 

SMARTPHONES 

Until recently, the smart money has 

been on Apple incorporating a chip 

in its next iPhone for short-range 

wireless transactions, but latest 

reports may have cast doubt on such 

speculation, writes Dave Howell 

Ȗ At the moment NFC (near field communication) 

has failed to set the world alight, at least outside 

Japan. In the UK and US, all eyes remain on Apple, 

who some predict will make the next generation 

iPhone an NFC-enabled device. 

Retailers have already adopted the iPad into 

their stores across the US as fast and efficient next 

generation tills. NFC would be the next logical 

step to take, as the availability of a mass-market 

smartphone with NFC capability would kickstart 

the NFC market as a whole, and drive retailers 

and the payment processing service providers to 

develop their systems rapidly. 

Meanwhile, for consumers, an NFC-enabled 

iPhone would finally deliver an electronic wallet 

into their hands. If “wave and pay” from Barclays 

was a revelation to shoppers, simply moving their 

smartphone near a pay point will be nothing short 

of a revelation. 

"Mobile technology has long been a revolutionary 

force in our lives and NFC-enabled devices, 

such as the Galaxy S III, will fundamentally change 

the way we pay,” says Sandra Alzetta, senior vice 

president of mobile at Visa Euope. “The future is 

mobile and cash usage will continue to decline, as 

people use their devices to manage their money, 

shop and pay.” 

Retailers have already adopted 

the iPad into their stores across 

the US as fast and efficient next 

generation tills 

Worldwide m-payment users 

Source: Gartner, 2012 

160.5m 

2011 

212.2m 

2012 

448m 

2016 

(forecast) 

Mobilising payments 

will mean less cash 

From browsing to checkout, m-commerce is 

set to transform the UK into a nation of mobile 

consumers, as Dave Howell reports 

MOBILE ECONOMY 

Ȗ Think about last weekend. 

Like millions of others, you will 

probably have visited a hole-inwall 

for cash to pay for low-value 

items. An estimated 21 billion 

such cash payments are made 

each year, 80 per cent of which 

are below £10. 

The sheer scale of these transactions 

requires the creation, transportation, 

collection and, ultimately, 

the destruction of about a 

billion bank notes annually, with 

a huge attendant environmental 

impact, all of which is paid for by 

the taxpayer. 

But all that could be about to 

change. According to the Payments 

Council, by 2018, the volume of 

cash payments is projected to fall 

by 20 per cent, after adjusting for 

inflation. And in five years, cash 

is likely to make up less than half 

of UK transactions (45 per cent) 

for the first time. Welcome to the 

mobile economy. 

You may already be one of the 

users of Barclays’ “wave and pay” 

system that allows payments to 

be made without chip and PIN, or 

perhaps make mobile payments 

(m-payments) with Barclays’ Pingit, 

which allows up to £750 to 

be sent via a smartphone? Or 

your favoured option could be 

the Orange Quick Tap initiative 

with Everything Everywhere and 

Barclaycard, which offers UK 

NFC (near field communication) 

payments of under £15 at retailers 

such as Pret A Manger, EAT, Subway 

and McDonald’s? 

Well, imagine if you could make 

these payments without cash by 

simply using your smartphone 

as a wallet? That is the promise 

of NFC, which allows your phone 

to wirelessly communicate with 

a retailer’s till or other phone 

users. And NFC is only one of a 

range of m-payment systems that 

now offer you contactless payment 

options that together are 

developing the digital economy, 

with your smartphone or tablet 

PC at its heart. 

“Consumer behaviour is beginning 

to shift,” says Mary Carol 

Harris, vice president and head 

of mobile strategic alliances at 

Visa Europe. “Contactless cards 

issuance and acceptance technology 

are not only providing the 

infrastructure for future mobile 

NFC services, they are easing consumers 

into the habit of using a 

contactless payments device to pay 

for goods rather than using cash.” 

According to Juniper Research, 

smartphone shipments will 

increase by 40 per cent this year 

with m-payments expected to 

exceed $180 billion (£114 billion) 

by 2017. “NFC technology is transforming 

mobile phones into payment 

devices that will change the 

way people live, work and play,” 

says Niki Manby, Visa’s head of 

emerging products in Asia Pacific, 

Central Europe, the Middle East 

and Africa. 

While Jim Wadsworth, head 

of mobile and digital payment at 

Accourt, adds that NFC is about 

more than just payments. “NFC 

Dwolla's cyberspace 

vision free of credit 

card fee 

Pages 08 & 09 

enables other services too, such 

as secure access control, the provision 

of information via ‘smart 

posters’, and joins together digital 

social media with the real world – 

for example, it will enable users to 

‘like’ and share anything they see 

in the real world where it has an 

NFC Facebook tag,” he says. 

The use of barcode and QR code 

scanners to quickly capture product 

information is also on the rise. 

In addition, m-commerce is delivering 

a level of personalisation 

never seen before. Retailers can 

now detect when a past customer 

walks into their store – a coffee 

shop for instance – and know 

what they ordered last time. Some 

US stores are even allowing preordering, 

so that as a customer 

hurries towards a café’s doors, 

their latte and muffin are already 

being prepared. 

And with more of us storing our 

digital lives online in the cloud, 

it was bound not to be too long 

before payment systems moved 

there too. A good example is 

Google’s Wallet, which had some 

limitations at its launch (not 

least, a lack of compatibility with 

smartphone handset models). 

Now that Google has moved its 

payment platform to cloud, these 

have been rectified. Cloud-based 

solutions, where payment information 

is held centrally, mean 

that debit or credit cards can now 

be used over multiple devices. 

Changing handsets or buying 

a new tablet PC? No problem, as 

you can keep on making purchases 

with your existing payment information. 

This kind of seamless 

interface between your preferred 

payment method, the cloud and 

the mobile device in your pocket 

is the future of m-payments and 

m-transactions. 

“Retailers’ e-commerce teams 

are buying into m-commerce with 

app and enhanced websites, and 

their retail store teams are broadly 

piloting or rolling out contactless 

payment to work with the cards 

that are being distributed by the 

banks as a standard on credit and 

debit cards,” says Neil Garner, 

founder and chief executive of 

Proxama. “They are installing 

contactless payment terminals 

as part of their natural upgrade 

plans. This is all happening today, 

with M&S and The Co-op among 

those who have announced their 

intentions in this area.” 

However, Richard Johnson, 

group strategy director of Monitise, 

cautions that too many 

individual solutions will hinder 

customer adoption. “This space 

is never going to flourish if it’s 

full of a plethora of closed-loop 

schemes where you have to have 

to open a special account, use a 

certain device or shop in only one 

type of store or where merchants 

look at solutions individually,” he 

says. “In the long run, consumers 

are going to demand interoperability; 

payments have got 

to be seamless and they need to 

‘just work’.” 

If banks, payments providers 

and businesses get it right, then 

Ms Harris of Visa Europe predicts 

that, within a decade, “an 

entirely new shopping experience” 

will be created. She says: 

“From browsing goods to checkout, 

deals and offers, the opportunity 

is enormous for consumers, 

retailers and financial institutions 

around the world.” 

Payment platforms, such as 

PayPal Mobile, Amazon Payments, 

Google Wallet, Master- 

Card’s MoneySpend and, later this 

year, V.me from Visa are creating a 

vibrant and rapidly evolving ecosystem 

of payment options. 

For consumers the choice can 

be confusing, but expect the 

larger players, such as PayPal, 

the banks and credit card providers, 

to remain at the forefront, 

with new payment providers, 

like Twitter co-founder 

Jack Dorsey’s Square, to offer 

systems that are tailored for 

phone and tablet users. What 

seems certain, however, is that 

the future of payments will be 

increasingly mobile. 

From browsing goods to 

checkout, deals and offers, 

the opportunity is enormous 

for consumers, retailers and 

financial institutions 


© © Jeffrey Blackler / Alamy 

Smartphones are set to revolutionise 

contactless payments 

The digital economy means linking 

the traditional retail environment with 

customers who want to shop on the 

move with their smartphone or tablet. 

Many businesses are now using these 

platforms for interactive ads and even 

to drive direct purchasing. 

Think about the last time you stood 

in a store and would have loved to 

access more information about an 

item on the shelf. Barcodes evolved 

into QR codes, which personal devices 

can scan for more information. Now 

SnapTags are offering brand owners 

a new way to place their company’s 

branding within a code which smartphones 

can scan. 

Publishing is also embracing 


SCAN AND BUY 

Quick response 

to mobile technology 

will boost sales 

the digital economy. All the major 

publishers have an iPad edition of 

their leading titles. But this doesn’t 

mean that print is dead – far from it. 

Publications are using QR codes to 

offer readers an interactive experience 

right on the page. 

Augmented reality, meanwhile, 

looks set to become even more 

creative. New business services, such 

as Crossfy, don’t even need special 

codes to be printed. The publisher 

decides which images in their publications 

will be interactive. When a smartphone 

sees these images, the reader 

will see additional information, move to 

the brand’s website or see purchasing 

information for the product or service. 

$617bn 

expected value of 

m-payment market in 2016 

Source: Gartner, 2012 


08 


Are dollars on 

the web a credit 

card killer? 

Ben Milne, founder of Dwolla, tells James Silver 

of his cyberspace vision of a payments world free of 

credit card fees 

PAYMENTS PLATFORM 

Ȗ Interstate 29 cuts through the 

centre of the United States from 

the eastern side of the Dakotas 

along the state lines of Nebraska 

and Iowa to Kansas, Missouri. This 

multi-state region, spliced by the 

I29, is heartland America, where 

farming, manufacturing and financial 

services have traditionally predominated. 

But it’s also home to a growing 

cluster of technology companies, 

collectively known as Silicon 

Prairie, one of the best known of 

which is Dwolla – a peer-to-peer 

payments platform based in Des 

Moines, Iowa. 

Dwolla, an inventive mashup 

of the words “dollar” 

and “web”, cannot 

be accused of 

lacking ambition. 

In its 

bid to 

rewire 

the 

hitherto somewhat stolid, suitand-tie 

world of payments, the 

start-up says it has nothing less 

than the credit card giants in its 

sites. 

“We want to be our generation’s 

version of Visa,” grins Ben Milne, 

Dwolla’s amiable 29-year-old 

founder, soon after his heavilybearded 

features pop up on Skype. 

“We want to empower anyone with 

an internet connection to be able 

to access their money, exchange it 

with someone else and receive it – 

at an exceptionally low cost. 

“Our generation is built on the 

internet. We believe in freedom 

and we don’t understand geography 

in the same way [as previous 

generations]. We just know that 

money is data and we want to be 

able to exchange it without making 

it less valuable. Our technology 

just facilitates that.” 

Currently only available in the 

US, Dwolla allows its customers 

to use their iOS [mobile operating 

system] and Android-enabled 

devices, as well as social networks 

and physical locations, to send and 

receive money. 

The company, founded in 2009, 

describes itself as “a cash-based 

payments network”, on top of 

which it has built technology 

for moving cash around fast. 

“Whether that means buying 

a latte with your phone at your 

favourite coffee shop, paying for 

a new pair of shoes online or 

sending money to a Facebook 

friend, Dwolla represents a whole 

new payment experience that we 

believe is the future of cash,” shrills 

the company’s website. 

While the “future of cash” 

seems a tall order (the US Federal 

Reserve may have something to 

say about that), Dwolla is already 

making in-roads in this notoriously 

risk-averse industry. In its 

latest released figures, from April 

2012, the company announced 

that 100,000 users and 15,000 

merchants were generating daily 

transactions worth between $1 

million and $4 million. Although 

it won’t reveal the latest numbers, 

Dwolla is believed to have grown 

steadily since then. 

Initial investors included the 

actor and serial start-up backer 

Ashton Kutcher (which didn’t 

harm their profile), followed by $1 

million in Series A funding from 

two Iowan financial services companies. 

In February 2012, Union 

Square Ventures led a $5-million 

Series B funding round. 

The spark of inspiration for the 


start-up, explains Mr Milne, was 

less a wide-eyed eureka moment 

than a slow-burning sense of frustration 

that so much revenue from 

his previous business – selling 

speakers online – was devoured by 

credit card fees. 

“I just got obsessed with it, 

man,” he says. “I couldn’t look at 

how much money was coming in 

without thinking about how much 

was going back out. It became less 

about celebrating a good day in 

sales and more about boiling with 

anger about how much I’d lost that 

day to the credit card companies. I 

was losing about $55,000 a year at 

the time – that would have paid for 

a great employee, a new product 

line or a car.” 

From there Mr Milne started 

researching online about how to 

avoid paying interchange (card) 

fees. The more information he 

consumed, the more convinced 

he became that “there was a huge 

opportunity for technology to 

solve a problem”, he says. “It’s 

amazing that technology serves 

people taking pictures and sending 

text messages, but the technology 

stack when it comes to moving 

money hasn’t really got any better 

in 30 or 40 years. So the opportunity 

is just massive, which makes 

it a really exciting sector to be in.” 

Exciting or not, Des Moines – 

often dubbed Middle America’s 

capital – is a long way from America’s 

hyperactive coastal technology 

hubs of Silicon Valley (in the San 

Francisco Bay Area) and Manhattan’s 

Silicon Alley. Indeed, many 

would argue that a fin-tech (financial 

technology) start-up based in 

back-of-beyond farming country 

is hardly well-placed to take on the 

plastic giants of Visa et al. 

Mr Milne takes the jibe in good 

sport. “I don’t live in a cornfield, I 

live in a loft, in a city,” he says. “The 

advantages we have of being outside 

the coasts are: one, I can get to 

the east or west coast really easily; 

two, building a team was great, 

because we were able to benefit 

from the geographic knowledgebase 

people here have, which is 

understanding 

the payments 

landscape 

Pages 12 & 13 

finance and payments. First Data 

[Solutions], Jack Henry [Banking], 

Principal Insurance, EMC [Insurance] 

and Wells Fargo – those 

are the employers in these communities 

and people here know 

payments. We were lucky enough 

to figure that out and I think had 

we not been here, we might never 

have understood that.” 

Warming to his theme, he adds: 

“Also when you are in a community 

[like Silicon Valley] where you’re 

competing with everyone else all 

the time for the next headline in 

techcrunch, that creates a certain 

type of culture. Here, we’ve been 

able to have 30 super-smart people, 

heads down, building something 

without anyone on the planet 

having any idea what it is.” 

While the company was in its 

seed investment stage, Mr Milne 

had cannily turned to investors 

steeped in both Iowa and financial 

services, attracting a total of $1 

million from The Veridian Group 

and The Members Group (a subsidiary 

of the Iowa Credit Union 

League) in November 2010. That, 

he says, enabled Dwolla to navigate 

labyrinthine – and prohibitively 

expensive – US non-banking regulations, 

which differ in every state. 

“I would have needed $8 million 

to $10 million before I could 

have legally opened an account,” 

he says. “That deal meant that 

we didn’t have to raise all that 

capital. It also brought us our first 

customers, a bank to operate as 

our back-end and the structure we 

needed to operate legally – a huge 

thing in payments.” 

Dwolla’s founder knows he has 

a titanic battle on his hands if the 

credit card and banking systems 

– so entrenched in our daily lives 

– are to be disrupted by freshthinking 

and technology. Yet the 

internet renders the sector’s infrastructure 

entirely redundant, he 

claims. “You don’t actually need a 

card or a card-reader. You don’t 

need to swipe. You don’t need any 

of that architecture any more. Our 

phones all have GPS [global positioning 

system]; we are connected 

constantly to the internet. And 

as offline and online commerce 

converge, the ability of an API 

[application programming interface] 

to pass an authorisation back 

We just know that money 

is data and we want to be 

able to exchange it without 

making it less valuable 

and forth is really all that matters.” 

Unshaven and scruffy, Mr Milne, 

whose first business was a lawnmowing 

firm, looks like any of 

10,000 tech entrepreneurs from 

Boston to Berlin. That’s fine for 

e-commerce or the frenzied world 

of apps. But perhaps less so in the 

sober environment of financial 

services. People are naturally 

cautious when it comes to their 

finances. The mattress stuffing 

can look appealing beside a fasttalking 

start-up guy, promising to 

unseat Visa. Won’t some (perhaps 

slightly older) customers think 

twice before trusting him? 

“I don’t look like a banker,” he 

quickly concedes, laughing. “I 

run the risk of not being trusted. 

If you look me up on YouTube, 

you’ll see I swear a lot. Those 

are things that I know. But I do 

think recognising the problem 

and sticking to my motivations, 

allows people to accept you for 

what you are. Look, I’m not trying 

to take money out of the economy, 

by selling you something instead 

of something else you could pull 

out of your wallet. I want to put 

a lot of money back to work in 

the economy. And if I can do that, 

and make a good living for myself, 

then I’m a pretty happy guy.” 

Despite consistent interest in 

Dwolla from Europe and Canada, 

Mr Milne says that while he is 

“working on” expanding overseas, 

his focus remains on getting the 

core US business right first. “This 

is not a build it and flip it company,” 

he asserts. “I’m in it not for 

the next few years, but possibly for 

the next decade. We need to make 

sure we’re building the right technologies 

for the future. And that’s a 

marathon, not a sprint.” 


DwollA 

BY NUmBERS 

2009 

Year founded 

28 

Employees 

Total investment to date 

How DwollA 

WorKS 


$0.25 

for any amount 

over $10 

Transaction fee 

$1-$4m 

Daily transactions range 

15,000 

number of 

participating merchants 

100,000 

number of users 

$6.31m 

1. 

2. 

3. 

4. 

Sign up 

Fund account via 

another Dwolla user or 

your financial institution 

Send money to merchants 

and people through mobile 

apps, email, SMS, Facebook 

friends, Twitter followers, 

LinkedIn connections, by 

location or Dwolla ID 

User receives money 

instantly and is able 

to transfer to another 

merchant, person or 

their bank account

10 


Guarding against the hackers and fraudsters 

MONEY MALWARE 

Ȗ The age of purchasing on the 

go and one-tap payments is here. 

From search to shopping, booking 

a taxi to redeeming a voucher, 

ever-increasing aspects of dayto-day 

life are converging on our 

smartphones and other devices. 

Most new handsets will soon 

be enabled with NFC (near field 

communication) technology as 

a matter of course, transforming 

phones and tablets into electronic 

wallets or purses. 

But just as the rise of plastic, in 

the form of credit and debit cards, 

spawned new security risks, so 

similar concerns are now being 

voiced about the burgeoning 

m-payment environment. 

As more of us use our devices 

to buy goods and services, as well 

as manage our finances, ensuring 

we have strong security systems 

attached to these transactions is of 

paramount importance. 

The evidence suggests the risks 

are rising. The Kaspersky Lab – a 

leader in security applications – 

revealed in research published 

earlier this year that there was 

a six-fold increase in mobile 

malware incidents between 2010 

and 2011, while “the number of 

distinct mobile malware families 

more than doubled” over the 

same period. 

“The latest mobile devices have 

inbuilt security modules that allow 

data to be stored securely, but this 

doesn’t mean they aren’t susceptible 

to malware,” explains Simon 

Collins, vice president of business 

consulting at WeDo Technologies. 

As the m-payments market 

develops, we will all need 

to become much more 

security-aware as we make 

mobile payments 

Adoption of of e-payment systems, 

especially on on mobiles, is is gaining 

pace. But how do do you ensure your 

transactions stay safe and secure? 

Dave Howell reports 

“Criminals will always opt for 

the easiest way to manipulate a 

system, so they’re likely to target 

things like the keypad or display. 

Keystroke logging, for example, 

lives inside malware programmes 

that run underneath the operating 

system of a device and allows 

criminals to track which keys are 

struck on the keyboard.” 

The good news is that if NFC 

takes off – and all eyes are on Apple 

and whether the new iPhone will 

have NFC capability – the security 

systems in place will ensure that 

payments made using that technology 

should be secure, as they 

use the same security protocols 

as current contactless card-based 

systems, like Barclays PayTag, that 

can be attached to any phone to 

make secure NFC payments. 

For consumers, the ability to 

make fast and convenient payments 

using contactless cards or 

their phone is not only attractive, 

but here to stay. That’s why users 

should be cautious about the security 

of the environment where a 

transaction takes place, says Vanja 

Svajcer, a mobile security expert 

with Sophos Labs. “For instance, 

it would not be very wise to make 

e-payments in an internet cafe 

where potential attackers may 

have installed malicious programmes 

to intercept the confidential 

information,” he says. 

“As long as the operating system 

can ensure that the data is 

stored securely, where no other 

application can read it, it can be 

considered a secure platform. The 

problem arises when the device is 

not properly configured, so that 

the data is accessible to potentially 

malicious applications. It is 

very important for users to make 

sure the data on their device is 

encrypted and that the data which 

leaves the device is also encrypted 

and accessible only to the user.” 

That’s advice echoed by WeDo 

Technologies’ Mr Collins, who 

says that, while many mobile and 

web payment systems have good 

security, a significant number 

do not. “Systems using SMS or 

unencrypted information transfer 

are particularly vulnerable, 

as well as those that don’t use 

security modules in the SIM or 

mobile device,” he says. “Every 

system should be checked for 

flaws in the security design. 

Unfortunately, there are some 

As with e-payment security, safeguarding 

m-payments is of paramount importance 

mobile operators and systems 

operators that lack in this area.” 

Recent revelations regarding the 

vulnerabilities of Google’s Wallet 

on Android phones shows NFC, still 

in relative infancy, can be exploited 

by hackers. However, as these 

systems are backed by standard 

fraud protection from the banks 

that support them, any money lost 

though an m-payment fraud should 

be refunded in most cases. 

As the m-payments market develops, 

especially if NFC takes off, we 

will all need to become much more 

security-aware as we make mobile 

payments. At present, however, 

says Vaughan Collie, a fraud expert 

with Accourt, m-commerce is still 

too limited a target. “Fraudsters 

have a knack of focusing on potentially 

high-value targets where 

they can maximise the return 

on their investment in time and 

money spent on the attack,” he 

says. “M-commerce in its various 

guises is still a relatively small 

market from a transaction revenue 

point of view and has therefore not 

attracted significant focus from 

criminal elements – yet.” 

New payment platforms that 

use contactless systems are still 

developing, but are based on sound 

security principles. As mobile payments 

become more popular, they 

will of course attract the attention 

of hackers and fraudsters, yet 

users are far from powerless. The 

number of e-payment systems 

that are now on offer can be bewildering, 

but the advice is the same: 

always be aware of the system you 

are using and take precautions to 

protect yourself. 



Contactless 

comes of age 

David Chan, chief executive of Barclaycard Consumer Europe, 

charts the progress of contactless payments in the UK 

Ȗ Most of us have seen cash all our 

lives and yet couldn’t name the people 

on the back of our bank notes. 

Given this, the fact that over 80 per 

cent of people can now recognise 

the contactless payment symbol is 

an encouraging sign for a technology 

that was only introduced into 

the UK by Barclays and Barclaycard 

five years ago. 

More impressive still is that in 

July this year contactless transaction 

made by Barclays and Barclaycard 

customers surpassed a 

million a month, as the payment 

technology becomes more and 

more available on the high street 

and beyond, including big names 

such as Waitrose, Marks & Spencer 

and McDonald’s. 

Critics will point to the fact that 

this is a tiny proportion of total 

chip and PIN transactions; however, 

with its £20 limit, contactless 

is slowly but surely eating not into 

debit and credit transactions but 

into cash purchases. 

Our research shows that over 

the last 12 months there has been 

a real shift in consumer spending 

preferences, with a remarkable 

61 per cent of people saying they 

preferred using cards over cash 

to buy items up to the value of 

£20. With that in mind, we believe 

it is now time to give contactless 

more credit. 

One consequence of contactless 

entering the mainstream consciousness 

has been the attention 

given to its security with the 

perception that such cards favour 

convenience over risk of security. 

However, when we spoke directly 

to the public, 75 per cent were unaware 

that contactless, like all card 

payments, is insured against fraud 

and that we bear the risk entirely. 

What’s encouraging is that when 

told this, fewer than 10 per cent still 

had concerns about making contactless 

payments. 

Contactless is not just about simplifying 

the moment we pay by 

removing the need to enter a PIN 

or hand out change; it’s about offering 

the right way to pay for each 

specific situation. We are focused 

on offering choice that matches 

the needs of the shopper, and this 

means thinking more widely than 

just credit and debit cards. We 

understand that often customers 

want to leave the plastic at home, 

along with the cash, and carry not a 

wallet or purse, but rather a phone 

or other device. We’re here to make 

life easier by offering a wide range 

of payment options to suit each and 

every one of our customers. 

We’ve come a long way in five 

years and have opened up a world 

of possibilities in payments. We’re 

proud that contactless is now 

firmly established in the public’s 

consciousness and our challenge 

from here is to turn that awareness 

into action. With an ever- growing 

array of contactless devices, support 

from a growing range of retailers 

and rise in the transaction limit, 

we’re confident in the future of contactless 

payments. 

Returning to those faces on the 

back of bank notes, next time 

you’re poised to hand over a picture 

of Charles Darwin, consider 

whether that is actually the natural 

selection or whether contactless 

might be more convenient. 

Offering choice to 

our customers 

Contactless cards 

Barclays and Barclaycard have 

powered the introduction of contactless 

payments since 2007. 

There are now more than 19 million 

contactless-enabled Barclaycards 

and Barclays debit cards, making 

payments easier and quicker for 

both retailers and shoppers. They 

enable customers to make a purchase 

of up to £20, without the 

need to sign or enter a PIN. 

barclaycard PayTag 

We launched Barclaycard PayTag, 

turning any phone into a contactless 

way to pay, earlier this year. It 

is a sticker which is the third of the 

size of a standard credit card and 

gives our customers the option of 

using them to make easy, convenient, 

everyday purchases without 

the need to upgrade their current 

handset. We offer it to Barclaycard 

customers at no additional cost. 

Mobile Payments 

In the summer of 2011, we 

launched the UK’s first contactless 

enabled mobile phone with 

Orange, revolutionising how 

payments are made. The move 

marked a new era for consumers, 

offering greater simplicity, 

convenience and control. We are 

also powering new technology 

so that credit or debit card holders 

from any UK bank can top-up 

Barclaycard’s mobile payments 

application in the Quick Tap wallet. 

As Orange brings the service 

to the latest Android handsets, it 

will open up the opportunity for 

contactless payments to more 

Orange customers. 

barclaycard Payband 

At the Wireless Festival this summer, 

we introduced PayBand, a specially 

designed silicon wristband so 

the crowds were able to enjoy the 

festival atmosphere and performances 

without the hassle of having 

to carry cash. As the UK’s first 

fully contactless festival, with all 

retailers offering contactless technology, 

festival-goers were given 

the chance to pay using any contactless 

device. 

Fear of the unknown 

Donna Dawson, behavioural psychologist, 

explains the fear of the 

new: “There are connected issues 

at work – habit and fear. We’ve been 

using coins since 600BC, which is 

a tough habit to break. Because of 

this, different ways to pay have the 

shock of the ‘new’ and, if we have no 

experience of something, we fear 

it. Increased recognition leads to 

a significant trend developing and 

represents the breakthrough of a 

psychological barrier. So the fact 

that we’re witnessing this with a 

technology which is only five years 

old, compared to centuries of cash, 

is remarkable.” 

Co-op and contactless 

Mark Hale, chief information 

officer and supply chain director 

at The Co-operative Food, 

explains how the technology 

works in its stores: 

“Customer reaction has been 

very positive since we introduced 

contactless payments into our 

stores within the M25 and Manchester 

city centre in May 2012. We 

identified, from implementation 

in other retailers, that customers 

often worry they’ll do something 

wrong and so hold back from using 

their cards. We learnt from that 

experience and have focused on 

training our store colleagues to 

help customers through their first 

purchase and have supported this 

with clear point of sale promoting 

the fact that contactless is available. 

We also made sure that our solution 

was part of the chip and PIN device 

so that the customer didn't have 

to look for a different terminal to 

make a contactless payment. Once 

shoppers have used contactless 

technology, they really seem to 

appreciate the quicker payments 

and are choosing to use it on a 

regular basis. My advice to customers 

is to try it when you next make 

a purchase in one of the stores that 

offers contactless payment.” 


12 


Understanding the 

payments landscape 

A rapidly expanding payments market is transforming the industry and offers 

opportunities in a number of key sectors, as data from Juniper Research shows 

Contactless cards 

UK Contactless cards in circulation 2009-2012 

20m 

15m 

10m 

5m 

0m 

Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 

remote mobile payments 

Remote mobile purchases 

digital and physical goods 

2012-2017 

$600,000m 

$350,000m 

Online payments 

$800bn 

$600bn 

$400bn 

$200bn 

$0bn 

$0m 

eRetail gross transaction volumes 

operator billing 

Upstream API access 

Advertisers 

retailers 

Developers 

other SaaS 

providers 

2001 2011 

operator 

as PaaS 

provider 

rest of world 

Europe 

rest of world 

Europe 

Asia 

North America 

2012 2013 2014 2015 2016 2017 

Asia 

North America 

Downstream 

unified communications 

Enterprise 

clients 

Consumer 

clients 

First introduced into the UK in 2007, there are 

now more than 23 million contactless cards in 

circulation. However, usage and awareness 

levels are low; in January, a YouGov survey 

found that just 12 per cent of the population 

believed they owned a contactless card. Payment 

caps have increased slowly and rose 

from £15 to £20 in June. 

Those buying physical goods in the UK via smartphones 

are spending $300 a year each and, via tablets, 

more than $700. Sales of digital goods (apps) 

have soared as consumer smartphone adoption 

has increased. Companies, such as eBay and 

Japan’s Rakuten, are leading the way with mobile 

transaction volumes; more than $5 billion in mobile 

transactions was recorded via eBay Mobile in 2011 

and this is expected to reach $8 billion this year. 

Global eRetail sales grew nearly 12-fold between 

2001 and 2011. Online payment providers are now 

offering in-built financing; PayPal’s Bill Me Later 

offers instant credit at the point of purchase. 

Growth in social media has increased online 

micropayments. And merchants are seeking to 

integrate online as part of seamless cross-channel 

sales processes. However, credit and debit card 

payments predominate. 

This allows consumers to have content purchased 

on their mobile handsets charged to their phone 

account and offers operators a way back into 

content monetisation in the wake of the app store 

revolution. In most regions, billing is capped and 

applicable only to digital purchases. All equipment 

manufacturers, except Apple, now support NFC 

(near field communication), although Apple is 

expected to include NFC in the iPhone 5. 

Key players 

Gemalto, Giesecke 

& Devrient 

and Oberthur 

Technologies 

ones to watch 

Dot Origin, Smart 

Technologies 

Group and sQuid. 

Key players 

mBlox, Netsize, 

PayPal 

and Sybase 

ones to watch 

BOKU 

and Onebip 

Key players 

Amazon 

Payments, 

ClickandBuy, 

Google Checkout, 

Neteller and PayPal 

ones to watch 

Braintree Dwolla 

and Stripe 

Key players 

Bango, mBlox, 

Netsize 

and Sybase. 

ones to watch 

Aepona, BOKU 

and boxPAY 

market 

segmentation 

online 

payments 

Payment 

mechanisms 

PSMS billing 

PSMS volumes 

2012-2017 

$15,000m 

$10,000m 

Money 

transfer 

$5,000m 

SmS/ 

Premium 

SMS 

raconteuronthetimes.co.uk theraconteur.co.uk twitter.com/raconteurmedia 

$0m 

2012 

Fixed 

2013 

online 

banking 

remote 

payments 

2014 

rest of world 

Europe 

2015 

eCom 

Direct- 

to-bill d 

PayPal Prepaid cards 

Asia 

North Americ 

2016 

2017 

t

merce 

Credit/ 

ebit card 

online 

banking 

ransfer 

a 

Mobile 

(mCommerce) 

Mobile 

banking 

Money 

transfer 

NFC credit/ 

debit cards 

Prepaid 

cards 

Contactless 

payments 

Historically the dominant mobile payment mechanism, 

PSMS (premium short message service) 

suffered from several high-profile subscriptionbased 

scams which led to tighter regulation. Usage 

fell as the ringtone market declined and consumers 

migrated to app stores using credit cards. However, 

PSMS is relatively simple to implement and 

lack of pre-registration means it remains popular 

for impulse-buy content outside app stores. 

Mobile 

payments 

Point 

of sale 

nFC 

handsets 

Key players 

Bango, mBlox, 

Netsize 

and Sybase 

one to watch 

Onebip 

mobile NFC marketplace 

NFC smartphone 

user- base 2012-2017 

1,200m 

800m 

400m 

online banking 

£60m 

£45m 

£30m 

£15m 

£0m 

mobile banking 

Mobile banking service 

user- base 2012-2017 

800m 

600m 

400m 

200m 

0m 

2012 2013 

Mobile money transfer 

30 

15 

0 

0m 

Prepaid cards 

2.5m 

2m 

1.5m 

1m 

0.5m 

0m 

2012 

2007 

2008 

2013 

2008 

2009 

2014 

2009 

2014 

2015 

UK online banking fraud 2007-2011 

Mobile money transfer 

services launched 2001-2011 

45 

2001 

2003 

2005 

UK Prepaid cards 2008-2011 

rest of world 

Europe 

2007 

2010 

NFC (near field communication) payments technical 

solution is now judged to be in place based on 

agreed cross-sector standards, while payment 

security concerns have been alleviated. Merchants 

and retailers are rolling out NFC-contactless 

infrastructure; the Post Office now supports NFC 

in 11,500 branches. All equipment manufacturers, 

except Apple, support NFC and Apple is expected 

to follow suit with its iPhone 5. 

While online banking was initially geared towards 

transactions, focus is increasingly now on product 

marketing and use as a communications platform. 

Several banks are introducing personal finance 

management products and seeking to incorporate 

mobile as a critical means of accessing online 

portfolios. Improved security has seen online banking 

fraud levels fall since 2009, despite increased 

phishing attacks. 

Banking by mobile has been given further impetus 

as crisis-hit financial institutions redefine channel 

strategies. There is a transition from simple textbased 

alerts to smartphone apps and the web 

as primary mobile channels, although SMS (short 

message service) is increasingly used for product 

marketing and cross-selling. More than 860 million 

consumers worldwide are expected to access 

some form of banking via mobile by 2016. 

Almost 200 mobile money transfer services had 

been launched globally by the end of 2011 and most 

since early-2009. The trailblazer has been Kenya’s 

Safaricom and its M-PESA service with nearly 15 

million users, and more than $12 billion transferred 

since 2007. Service providers in developing 

markets are seeking to augment money transfers 

with more sophisticated microfinance services and 

savings accounts. 

These can be disposable or reloadable and are 

preloaded with funds while expenditure is limited 

by the preloaded value. They can be closed loop 

and redeemable by a single merchant, as with 

a gift card, or open loop and general purpose. 

Prepaid cards are often used by consumers who 

do not qualify for credit or debit cards and are 

increasingly popular in under-banked nations. 


Key players 

CorFire, 

Gemalto, NXP 

and Proxama 

ones to watch 

Thinair, Narian 

and Nokia. 

Key players 

Royal Bank 

of Scotland, 

Deutsche Bank, 

Barclays and 

BNP Paribas 

ones to watch 

Intuit and 

Tesco Bank 

Key players 

Key players 

American 

Express, Green 

Dot, MasterCard, 

NetSpend 

and Visa 

ones to watch 

Moneycorp 

and PayPal 


2010 

rest of world 

Europe 

2015 

2016 2017 

2009 

Asia 

North America 

Asia 

2011 

North America 

2011 

2016 

2011 

Accenture, 

Fundamo, 

Gemalto 

and Fiserv 

ones to watch 

Monitise 

and Tyfon 

Key players 

Accenture, 

Comviva, 

Fundamo, Gemalto 

and Sybase 

ones to watch 

Boom Financial, 

DonRiver, mChek 

and Monitise

14 


Focused on 

‘smashing 

the ball out 

of the park’ 

START-UP 

James Silver meets Oxford 

graduates, Tom Blomfield and 

Matt Robinson (pictured left 

and right), who are taking on US 

payments top guns in an online 

shoot-out 

GoCardless is an online direct 

debit platform which simplifies 

the collection of regular payments 

Ȗ On a corner of Finsbury Square, 

East London, where the hipsters 

of Old Street’s technology companies 

start to be replaced by suit and 

tie-clad City workers, sits a somewhat 

forlorn and half-empty office 

building. Rent is reportedly cheap 

there (by City standards) and a 

bewildered security guard seems 

unsure where my interviewees, the 

team behind online payments platform 

GoCardless, are to be found. 

When I finally shuffle out of a 

half-hidden lift at the rear of the 

building, two of the company’s 

founders, Matt Robinson, 24, and 

Tom Blomfield, 27, tell me the 

office block is rumoured to be soon 

turned into a hotel, which will presumably 

leave them scouring the 

streets for new digs. 

Given how things are reportedly 

going for the pair (and their 

co-founder Hiroki Takeuchi), 

GoCardless’s next offices are set 

to be rather swankier. Founded 

in January 2011, the start-up has 

grown by 50 per cent every month 

since its launch. Developed at Sili- 

con Valley-based tech-accelerator 

Y-Combinator, GoCardless closed 

an initial £1-million funding round 

at the end of last year, led by Accel 

Partners and Passion Capital. 

Although the team won’t confirm 

it, it’s understood that a further 

round of (Series A) funding is likely 

to be announced soon. 

A range of tech start-ups, including 

Twitter co-founder Jack Dorsey’s 

Square, Stripe and Braintree, 

are jockeying to reboot different 

aspects of payments. But US-based 

Dwolla and GoCardless are the key 

players in the race to build proprietary 

systems which aim to turn 

plastic cards, readers and other 

hardware into historical artefacts. 

GoCardless is described by its 

founders as an online direct debit 

platform which simplifies the collection 

of regular payments. It 

charges users a flat fee of 1 per cent 

per transaction, capped at £2. The 

company partners with a number of 

online accountancy providers, such 

as Kashflow and Freeagent, plugging 

into their payment options. 

©Eleanor Farmer 

A couple of factors have 

played into the GoCardless 

team’s hands. The first was the 

2009 Payments Service Directive 

(PSD), which opened up 

payments in the EU to new, 

potentially disruptive suppliers. 

Another is fast-changing technology 

which web-based start-ups 

are best placed to exploit. 

“The wave of tech companies 

now innovating in this area can 

leverage cool ways, like using social 

networks or browser footprinting, 

to tell whether people are who 

they say they are, which traditional 

payments companies wouldn’t be 

doing,” explains Mr Robinson. 

GoCardless, for example, have 

built their own anti-fraud tool. 

“There are so many things like 

that we can do, but we’re not going 

to tell you about them, otherwise 

we’ll have to design some new 

ones,” he smiles. 

Start-up business plans are rarely 

worth the printer toner expended 

upon them and GoCardless’s early 

iterations wrongly identified con- 

PAYmENTS 

GoCardless by 

numbers 

2011 

Year founded 

12 

Employees 

£1m 

investment so far 

$1-$4m 

Daily transactions range 

2,500+ 

Participating merchants 

Growth rate 

every month 50% since launch 

sumer-facing transactions, including 

card-based subscriptions to 

services like Spotify or LOVEFiLM 

as their focus. 

“The problem is those services 

are already very competitive with 

their rates, which means you are 

competing over fractions of pennies,” 

says Mr Blomfield. “Rather 

than try to compete at mass-market 

payments, where we’ve really 

found a lot of traction is in smaller 

business or B2B [business-tobusiness] 

transactions. Our typical 

merchant [client] might be a 

web-hosting company that takes 

payment from a few hundred 

businesses, with the amounts 

varying every month. Until now 

that was an arduous, manual 

process. What we’re offering is 

ease-of-use and time-saving for a 

human being.” 

Mr Robinson adds: “Not only 

could we add the most value there, 

we also realised it was a huge and 

underserved market. So it makes 

sense to stay really focused on it 

and smash it out of the park.” 


In the unwanted 

event of apocalypse 

now in Europe… 

Charles Orton-Jones looks at ways of hedging against the 

worst possible scenario in crisis-torn European money markets 

EUROZONE 

Ȗ British exporters are terrified 

of a Europocalypse. Greece is on 

the brink of bankruptcy. Spain 

and Italy are not too far behind. 

Nobody, not even the governors 

of the European Central Bank, 

can predict what will happen. We 

might see a sovereign default or 

two. Banks may go bust. Nations 

may leave the euro. In one grim 

scenario, the euro itself becomes 

unstable, devaluing wildly. 

Fear of the eurozone crisis is 

already having a measurable 

impact on British firms. A study 

of 1,000 small and medium-sized 

business by invoice finance spe- 


cialist Bibby Financial Services 

reveals one in five firms is too 

concerned about the crisis to even 

think about doing business internationally. 

A third say the crisis is 

having a negative impact on their 

day-to-day performance. 

British exports dipped 20 per 

cent from March to April this 

year, way above the normal seasonal 

change. So what can British 

exporters do to reduce exposure? 

Currency hedging is attractive. 

Alastair Archbold, senior foreign 

exchange trader at Foremost Currency 

Group, points out it would 

already have paid dividends. 

“An exporter who expects an 

income of €250,000 in the first 

six months of this year could have 

fixed the rate in January at 1.20, 

allowing accurate budgeting for 

the year, and only lodged a small 

Fear of the eurozone crisis is 

already having a measurable 

impact on British firms 

Universal Commerce 

british exports 

dipped 20 

per cent from 

march to April 

this year 

Source: onS 

With the boundaries between retail channels increasingly blurring, 

companies that can offer consumers a seamless shopping experience will 

be well placed to take advantage, says Jon Rutter, product management 

director for mobile solutions at First Data 

The retail experience is changing all 

around us. Today’s consumers no 

longer rely exclusively on any one 

channel. They go into a store having 

already researched products 

online or on their mobile phone – 

recent research suggests 84 per 

cent of people already know what 

they want when they go into a shop 

– or they see something they like instore 

and order it later on the internet 

to be delivered to their front 

door. Others may do the opposite; 

buying online and picking up from 

the high street. The various channels 

are blurring as never before. 

The emergence of e-wallets 

stored in mobiles will only accelerate 

this trend, allowing consumers 

to pay for products in the same 

way whether they are at home in 

front of a computer, on the train 

on the way home from work or at 

the traditional checkout. In 2011, 

Google became the first global 

brand to release a virtual wallet 

application for use in mobile 

devices, enabling customers to 

store payment card information 

on their mobile phones, paving 

the way not just for swifter online 

payments, but for the continued 

spread of contactless payments. 

The new model of how consumers 

make purchasing decisions is also 

changing. The old predictable path 

where customers would go from 

initial awareness to a final purchase- 

decision has radically evolved, into 

one where they find their own journey 

to making a purchase, using a 

variety of different influences – 

whether conscious or otherwise – 

along the way (see diagram). 

deposit in order to do so,” he says. 

“Due to the weakening euro, this 

strategy would have already saved 

the client £15,000.” 

As the crisis unfolds the cost of 

hedging is increasing. Arnab Dutt, 

a director of Market Harboroughbased 

polyurethane manufacturer 

Texane, warns that finding a good 

foreign exchange deal is not easy. 

“Presently the banks will offer 

you a plethora of complex hedging 

products as insurance. But these 

products will now have eye-watering 

premiums. It may be better to 

approach professional FX dealers 

instead,” says Mr Dutt. 

“Either way in this environment, 

expect this insurance to be expensive.” 

He advises: “If the bank or 

FX broker fails to make you clearly 

understand how the product works 

and what are the potential downsides 

– leave.” 

If the crisis is really bad, a client 

may go bust. This is why 

credit insurance is valuable. If a 

creditor can't pay, the policy will 

cover the shortfall. The trick is to 

double-check you are getting the 

cover you need. Garbhan Shanks, 

partner at law firm Addleshaw 

Goddard, says: “Exporters should 

carefully consider the cover a policy 

delivers and the claims history 

of the insurers themselves. In 

the aftermath of the 2008 global 

financial meltdown, numerous 

insurance buyers inexplicably 

found themselves without confirmed 

cover at precisely the time 

Much of this is due to the development 

of new online influencers. 

Social media platforms, such as 

Facebook and Twitter, can drive 

impulse purchases and peer recommendations, 

while the use 

of online discount sites and deal 

aggregators has become commonplace 

among a new internet-savvy 

generation. Location-based marketing, 

too, has contributed to the 

ever-increasing crossover between 

the online and offline worlds, giving 

retailers the ability to target customers 

with tailored offers when 

they come within range of a store. 

Customers now expect a seamless 

retail experience, regardless of 

whether they eventually purchase 

products in a store, online or over 

a mobile device. This has given rise 

to the concept of Universal Commerce, 

where the entire shopping 

process – from marketing to payment 

– is integrated into one experience, 

and where transactions can 

take place anywhere, any time and 

on any type of device. 

Already, customers are creating 

their own personalised shopping 

and money-management experiences, 

and the race is on for traditional 

and new players in the payments 

space to feed this demand 

through ever-more innovative and 

tailored offerings. 

Yet, while there may only be one 

purchasing experience for cus- 


when they needed it the most.” 

Factoring provides similar 

cover, though in a different way. 

Invoices are passed on to a third 

party for immediate cash payment. 

The factoring firm chases 

the debt. Most have branches 

or affiliates across Europe, run 

by teams of multilingual export 

credit controllers, meaning they 

are well placed to enforce payment. 

The “non-recourse” variant 

of factoring means your firm is 

not liable even if the debt is not 

paid by the creditor. 

Letters of credit provide the 

highest level of certainty. The 

buyer's bank issues a letter guaranteeing 

payment. The letter 

will usually be sent via the Swift 

inter-bank financial messaging 

service. A version, known as a 

Bank Payment Obligation, was 

launched in 2010. This automates 

and speeds up the payment guarantee 

process. 

Naturally, if the meltdown is 

severe enough, these measures 

may fall short. Philip Herbert, 

partner at law firm Hamlins, 

says that many contracts include 

a clause to cover unexpected 

chaos. “If the export agreement 

includes a force-majeure clause, 

there is the possibility that the 

buyer could seek to assert it is 

no longer bound by the contract 

terms.” In some storms, there is 

no safe haven. 

tomers, for financial institutions 

and merchants the challenge is to 

pull together the different aspects 

that comprise Universal Commerce 

in one ecosystem, including 

smartphones, actionable intelligence, 

integrated applications 

and partner platforms, all within a 

secure infrastructure. 

Central to this is the need for 

financial institutions and merchants 

to work with a partner that has relationships 

across the entire payments 

value chain, providing a single 

point of contact for everything, 

and allowing for a consistent and 

seamless customer experience. 

Those that can put in place such 

an infrastructure will be the ones 

that can take advantage of the new 

opportunities that exist in the new 

age of retail. 

First Data has produced a free 

white paper outlining the implications 

of universal Commerce 

for consumers, merchants and 

financial institutions. For more 

information visit www.firstdata. 

com/en_us/insights/UnivCommwP.html?cat+White+Papers 


-20%

16 


A question of the 

future of payments 

ROUNDTABLE 

Charles Orton-Jones leads a discussion 

among four industry leaders on latest 

developments and the shape of things to come 

wHY ARE wE SEEINg So mANY 

PARTNERSHIPS? 

AL: Payment by its very nature 

is a partnership industry. The 

only reason you can get off a 

plane anywhere in the world and 

use the same bank card and same 

pin to access your cash is because 

of partnerships. LINK in the 

UK consolidates all the ATMs in 

the country, connects into Visa 

or MasterCard or Swift to go 

overseas, then connects to Atos 

Origin in France, which connects 

into Société Générale for you to 

be able to take money out of their 

ATM. But it is not an industry 

which is high-profile. What has 

changed is the introduction of 

mobile devices which is big news 

in its own right, so the partnerships 

are high-profile. That is the 

only difference. 

JLB: We need collaboration 

to create the ecosystems to support 

very large-scale use with 

a ubiquitous experience. If you 

take, for example, NFC [near field 

communication] payments for 

transport. Until you are able to 

travel the whole country or maybe 

the whole Continent – in an NFC 

context where you buy your ticket 

in an NFC environment and use 

it in an NFC environment – until 

you have that, the consumer experience 

is going to be fragmented. 

Consumers are ready to use the 

technology. The challenge to a 

variety of industries is to get the 

ecosystems in place. What we 

need is for a bunch of players in a 

vertical industry to get together 

and declare they are going to 

work together to adopt contactless 

payments. First Group are 

doing so, but we need Stagecoach 

and a variety of other players to 

do so too. 


JACoB DE gEER 

Founding chief executive of izettle.com, which 

produces a mini chip-card reader and app 

that lets anyone process card payments on 

an iPhone, he launched the service in Sweden 

last summer. it is now available to individuals 

and small businesses across Sweden, norway, 

Denmark, Finland and the UK. The firm recently 

closed a $31.6-million Series b funding round. 

PETER AYlIFFE 

President and chief executive of Visa Europe, 

he previously spent more than 20 years 

with Lloyds TSb where he held a number of 

executive posts in the bank’s retail business. 

He also spent five years as a non-executive 

director on the Visa Europe board and is a 

non-executive director for investor in People. 

He was named Industry Personality of the Year 

at The Card Awards 2009. 

PA: Visa has always operated 

on the basis of working with 

open platforms so everyone can 

compete on our platforms. That 

has been a fundamental thing 

for us. We believe that it is in the 

consumers’ interest not to have 

different closed-loop systems 

so that every time I want to use 

something I need to use a different 

payment device wherever I 

go. For example, the Oyster card 

is closed-loop. I can use it on the 

transport system, but I can’t use 

it anywhere else. Hence Visa has 

been working with mobile phone 

operators, such as Telefónica and 

Vodafone, and with handset providers 

– we have just done a major 

deal with Samsung around the 

Olympic Games. Collaboration is 

the best way to go. 

THERE ARE So mANY NEw 

START-UPS AND PlATFoRmS. 

IS THE INDUSTRY Now Too 

FRAgmENTED? 

JLB: I think what we are seeing 

is a function of the fact that these 

new markets are very nascent. 

We are going to see lots of innovations 

for a period and then we are 

going to see consumers guide the 

market on which solutions are the 

most acceptable to them. Then we 

will see some consolidation. 

AlASTAIR lUKIES 

Co-founder of Monitise, he says the payments 

industry thought he was “insane” when he 

first proposed a mobile payment platform in 

2003. Today the Monitise platform is used by 

more than 300 financial institutions to allow 

consumers to make payments and check their 

bank balances on a mobile. The AIm-listed firm 

is valued at £304 million. 

JAmES lE BRoCQ 

A 23-year-old veteran at Barclays and 

barclaycard, he became managing director of 

o2 Money in 2010. He has also overseen o2’s 

adoption of contactless technology, and the 

introduction of pre-paid Load & Go and Cash 

manager cards. The mobile operator’s latest 

product is o2 Wallet, which allows customers 

to use their mobile as a payment device. 

AL: One hundred per cent 

spot on. If you think of search, of 

music, of mobile phones, of video 

recorders, of Walkmans, there is 

always multiple innovation. You 

get pioneers; you get inventors 

who create stuff. But it will all 

eventually go through a period 

of consolidation. The winner is 

not necessarily going be the best 

technology. The techies hate me 

saying this because they always 

say how pure their solution is, but 

consumers don’t give a monkeys 

about technology. Consumers will 

use what is intuitive to use. And I 

think that Apple, more than any 

other brand on the planet, has 

proven that time and time again. 

JDG: I agree. I don’t think 

we have seen the beginning of 

fragmentation yet. Over the next 

two or three years, payments 

companies will be popping up all 

over the place. Give it four or five 

years and you will see a massive 

consolidation. 

By 2020, some 50 per cent of all 

processed Visa transactions will 

be on a mobile device 

PA: If you are a consumer, it 

must be quite difficult to follow. 

They ask, “What do I need? Do 

I need an O2 wallet? Do I need 

a Visa wallet? Do I need a MasterCard 

wallet? A PayPal wallet? 

A Google wallet?” It is unclear. 

Hence I think we will start to see 

more consolidation over time. But 

now is not the time to strangle 

the innovation; let’s get the ideas 

about and work together to see 

how we can leverage them. 

wHAT IS THE SIzE oF THE 

oPPoRTUNITY FoR THE 

vICToRS? 

PA: By 2020, I think that 50 

per cent of all our processed Visa 

transactions will be on a mobile 

device. That is how big it is. We 

have already seen at the Olympics 

that one in every six transactions 

taking place across the venues was 

contactless and in Horse Guards 

it was one in every four. There are 

24 million plastic cards in the UK 

which can accept contactless payments. 

That capability is moving 

to mobile. By the way, I have no 

idea what a mobile will actually 

look like in 2020. 

JDG: Smartphone penetration 

across Europe is 30 or 40 per cent. 

Yet point-of-sale payments penetration 

across Europe is something 

like 1.5 to 2 per cent. That is a massive 

gap to be bridged which we 

can do with the help of cell phones. 

At iZettle we are democratising 

payments, making it possible for 

anyone, even a sole trader, to take 

card payments. 

wHAT IS THE UlTImATE goAl 

oF THE PAYmENTS INDUSTRY? 

JDG: The ultimate goal of the 

payments industry is to increase 

the transaction flow the greatest 

extent possible. If you ask most 

card schemes what is on their 

agenda, they say it is to declare 

war on cash. Across Europe pay- 


ments or electronic payments, 

and 70 per cent are still cash and 

invoices. 50 per cent is still cash. 

There is massive potential to 

convert those to card payments. 

JLB: Ultimately the end goal 

for O2 in the UK is to connect 

our customers to the people and 

things which matter to them. We 

will be looking to bring services 

and experiences and capabilities 

and products to our customers 

that they are interested in 

and motivated to use. So I don’t 

have a goal which is paymentdominated, 

I have a goal which 

is around giving our customers 

access to the products, services 

and experiences which enables 

them to remain connected to the 

people and things which matter 

to them. 


18 


Can chat convert 

to sales on the 

hype network? 

SOCIAL PURCHASING 

Ȗ Amid plunging share prices and 

a flurry of lawsuits from disgruntled 

investors, Facebook’s May 

stock market launch looks increasingly 

troubled. 

No wonder, then, that the world’s 

largest social network, with 845 

million monthly active users, has 

been quietly road-testing new 

revenue streams. 

In August, the platform 

announced that, after a successful 

trial with games-makers Zynga, 

Kixeye and Playdom, it would 

make a payments subscriptions 

feature available to all developers 

with apps on Facebook, to allow 

them to “establish recurring revenue 

streams and offer updated 

content or premium experiences 

for a monthly fee”. 

Users can sign up with a credit 

card or PayPal and then manage 

their subscriptions via their Facebook 

payments settings. The social 

network, which now has 235 million 

monthly gamers, will continue 

to retain its hefty 30 per cent cut of 

all in-web app payments. 

There’s little doubt that virtual 

goods, and games in particular, 

are the ideal product for the 

social shopping mall: engagement 

levels are high, purchasing 

seamless and delivery instant. 

They also offer a range of ways for 

companies to monetise. 

Tapjoy, a free platform on 

which visitors are rewarded 

for interacting with popular 

brands, now claims 90 million 

active monthly users. Players 

of social drawing game, Draw 

Something, owned by Zynga and 

available on IoS, Android and 

Facebook, for example, can earn 

tokens to buy “colour packs” 

by interacting with ads on Tapjoy’s 

marketplace. This virtual 

payments model, underwritten 

by advertiser hard currency, 

generates about 30 per cent of 

revenues earned by developers 

on the service. 

But when features such as calendars 

are utilised, the sophistication 

of social purchasing, 

particularly in the area of gifting, 

starts to increase sharply. 

Paul Bowen, Tapjoy’s UK vice 

president and general manager, is 

sceptical that anyone “has really 

cracked social payments yet”, 

but points to Karma, a gift-giving 

service within Facebook, created 

by Tapjoy’s founders, which was 

acquired by Facebook in May for 

$80 million, for the way the company 

tailored its app specifically 

to the social networking site. 

“Karma have created a very optimised 

experience. There have been 

too many cases of e-tailers just 

dumping their normal web-stores 

inside Facebook and expecting 

them to work,” he says. 

And it’s both in bespoking apps 

and building on technological 

advances that social purchasing’s 

best chances for growth lie, 

argues Vincenzo Annunziata, senior 

social media strategist at Carat. 

Mr Annunziata also cites a social 

gifting service, Wrapp, an app 

which enables users to send virtual 

gift cards to Facebook friends, 

for the way it could, potentially, 

launch “real-time gifting” using 

geo-location to customise offers 

to where groups of friends happen 

to be. “That would mean that, if 

I check in at Pizza Express with 

five Facebook friends, I’d get a 

discount,” he explains. “That’s 

absolutely where I see social purchasing 

going more and more.” 

Beyond gaming and gifting, 

the success of social purchasing 

is harder to gauge. Certainly 

as social activity converges 

online social 

media networks 

are seeking new 

revenue streams 

As a brand, you always want 

to communicate with your 

influencers because they will 

create buzz 

Despite reports of growth, social purchasing 

remains a niche player or marketing medium, 

writes James Silver 

on mobile devices, US retailers 

are hurrying into the space. 

Top main street brands, including 

Best Buy, Target and Wal-Mart, 

have created the Merchant Customer 

Exchange (MCX), which 

will streamline m-commerce 

payments and create “customisable 

offers”. Yet, while Forrester 

Research estimates that US 

m-commerce will increase to $31 

billion by 2016 (with compound 

annual growth of 39 per cent), 

it will still only represent 7 per 

cent of total e-commerce sales. 

Besides, how much of the 7 per 

cent can be classified as “social 

purchasing” is moot. 

The indications are decidedly 

mixed. While Payvment, the 

leading e-commerce platform on 

Facebook, saw its monthly active 

shoppers treble during 2011 to 

more than one million, research 

by online marketing tech firm 

Monetate found that platforms, 

such as Facebook and Twitter, 

lag far behind search and email 

as a tool for sending users to 

e-commerce sites. 

The report analysed more than 

100 million “shopping experiences” 

and found that, while 4.25 per cent 

of referral traffic from email in the 

second quarter of 2012 went on to 

make a purchase (and 2.49 per cent 

from search), social had a conversion 

rate of 0.59 per cent. 

Unsurprisingly, therefore, social 

is still chiefly viewed by the industry 

as a “seeding” or marketing 

medium. Mr Annunziata says its 

main value is to drive chatter among 

© ©mattjeacock 

niche advocacy groups. “As a brand, 

you always want to communicate 

with your influencers because they 

will create buzz,” he says. 

F-commerce success stories in 

this sphere include Adidas, who 

according to Katie White, head of 

social at communications agency 

Isobar, “have mastered the art 

of the flash sale on Facebook, 

allowing their most hard-core 

fans to buy limited-edition and 

new-release product for the first 

time through their Facebook 

page”. She also cites Dulux for 

“wrapping conversion into social 

interaction, showing their specific 

colour ranges through content on 

Facebook and allowing their users 

to click straight through to their 

site and order a tester”. 

Yet individual brands, however 

large, are in a sense an irrelevance, 

while the key social players are 

still testing payments models. 

Twitter, for example, is experimenting 

in social gaming, commerce 

and giving, via Twitpay, 

while Apple is vying for a stake 

in the social-purchasing world 

with its potential acquisition of 

The Fancy, and Facebook’s much 

vaunted NFC-enabled handset 

has the potential to own users’ 

purchase journeys from search 

to checkout. Pinterest, too, is said 

to be close to launching shop. 

pinterest.com – a virtual windowshopping 

platform for brands. 

But for now, social purchasing 

remains in a sort of hyper betamode, 

caught in the slipstream of 

e-commerce. 

PAYmENTS 

From TwitPay 

to iZettle 

Tim Dunn, director of mobile strategy 

at Isobar, imagines a day in the 

life of smartphone user Joel, just a 

few months from now... 

9:14am: Joel’s on the tube when 

he gets a text from his friend Tim 

who he owes £20. So Joel opens a 

Tweet and tweets the money using 

TwitPay, which pays it directly into 

Tim’s account. 

9:55am: Next, Joel nips into 

Starbucks to grab a bagel and latte, 

paying via the Starbucks app, which 

means he simply has to show a QR 

code to the till to charge his account. 

1:03pm: While in the queue at Eat, 

he checks in on Foursquare and 

sees that American Express have 

a special offer running: they will pay 

for his lunch today, if he uses the 

Amex account on his phone. He 

quickly flicks his phone over and 

pays by Amex. 

1:56pm: Joel stops at a street stall 

as it’s his turn to buy cakes for the 

office. The stallholder inserts Joel’s 

credit card into his phone, which 

has the iZettle plug-in attached, to 

take payment. 

4:40pm: Back in the office and 

checking his boss isn’t looking, 

he renews his Zynga premium 

subscription via the social games 

company’s Facebook app. 

7:29pm: After work, Joel’s phone 

buzzes with an alert from Ticketmaster: 

there are tickets left for Trashcan 

Sinatras. With just a few clicks, he and 

his girlfriend are in. On the way, he 

spots that the iPint app from Carling is 

offering vouchers which they take into 

a pub for free drinks. 



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that you’ve been searching for 

online. You type in your payment 

details, click the “Pay” button and… 

you get that message telling you 

your payment can’t be processed. 

As a consumer it’s frustrating. If 

it’s your business, it’s considerably 

worse – not only have you probably 

lost a sale, but your brand has been 

damaged. Research shows that a 

growing percentage of consumers 

will not bother trying to make 

the purchase again. Instead, they’ll 

simply find another site and buy the 

product there instead. In the current 

tough market conditions, this 

is a more serious problem than ever 

for companies in all sectors with an 

online presence. 

Very often this common, but infuriating, 

experience is caused by 

busy circuits or other errors within 

the highly complex networks that 

connect banks, credit card companies 

and merchants. 

To avoid this problem, more and 

more forward-thinking companies 

are turning to a fast-growing 

payments service provider called 

GlobalCollect. Instead of being 

tied to a single online payment circuit, 

GlobalCollect’s unique structure 

gives it access to a whole network 

of different payment circuits. 

So, when a transaction is declined 

because the primary payment processor 

cannot authorise the transaction, 

GlobalCollect automatically 

and dynamically reroutes that transaction 

to a series of back-up processors 

until the payment is approved 

or occasionally declined for non- 

technical reasons, such as a lack of 

funds in the customer’s account. 

All this happens in seconds and 

is completely invisible to the shopper. 

Customers at companies using 

GlobalCollect simply make their 

purchase and go away happy. 

GlobalCollect clients are discovering 

that across different industries 

the average added revenue that 

this system brings them is around 

8 per cent, with one example reaching 

a remarkable 27 per cent. 

Best of all, thanks to its expert 

knowledge of international payments 

systems and of the particular 

requirements of each industry 

sector, GlobalCollect simplifies the 

complexities of the various payment 

services systems. As a result, 

clients can focus on running their 

businesses, rather than worrying 

about how, and if, their payments 

are being processed. 

With GlobalCollect’s full reconciliation 

service and 24/7 live reporting, 

clients can access their latest 

financial information whenever they 

want and can feel in complete control 

of the payments system. 

Thanks to its regional expertise 

and local knowledge. GlobalCollect 

can also advise clients in 

almost any country about the 

payment method that consumers 

there prefer. Detailed, regularly 

updated knowledge such 

as this is helping GlobalCollect to 

keep ahead of the competition and 

serve its clients better. 

Regional exPeRtise 

Thanks to its regional expertise 

and local knowledge, GobalCollect 

ACQUIRER 2 

can also advise clients in almost any 

country about the payment method 

that consumers there prefer. 

VeRtical maRKet 

Knowledge 

GlobalCollect’s vertical global 

market directors provide clients 

with insights and advice through 

their extensive knowledge of the 

industries they represent, whether 

the sector is retail, gaming or travel. 

With 18 years’ experience in the 

payments industry and a team of 

more than 350 professionals worldwide, 

GlobalCollect is now the 

world’s largest bank-independent 

payment service provider. It offers 

181 currencies in more than 221 countries 

and over 100 payment methods. 

The company’s global reach and 

its two decades of experience 

mean that it can offer depth of specialist 

experience and thought-leadership 

in particular fields that clients 

particularly appreciate in the fastchanging 

world of e-commerce. 

GlobalCollect’s vertical global market 

directors provide clients with 

insights and advice through their 

extensive knowledge of the industries 

they represent, whether the 

sector is retail, gaming or travel. 

These experienced e-commerce 

professionals can offer GlobalCollect 

clients information about new 

developments, examples of best 

practice and solutions to emerging 

challenges within the industry. All 

this is in addition to their vast knowledge 

and experience of payment 

processing in e-commerce. 

As well as having a wide range 


GlobalCollect’s choice of payment 

provider routes means that 

if a payment is rejected by one of 

them for whatever reason, it will be 

automatically switched to another 

route to be handled successfully. All 

this happens in seconds and is invisible 

to customers who simply make 

their purchase and go away happy. 

ExAmPlES oF INCREASE 

IN CoNvERSIoN RATES 

(figures show increase on processed volume) 

+ 6.4% 

+ 6.3% 

+ 10.1% 

of blue chip companies among 

its clients,GlobalCollect’s conferences 

and seminars are attended 

by instantlyrecognisable names 

who come to learn more about 

new trends and cutting-edge 

technology in the online payments 

space. 

In addition to its sector expertise, 

the company also focuses 

on geographical areas. It supports 

more than 30 different languages 

and it enables its customers 

to offer alternative payment 

methods on a local level in local 

currencies. But, because these 

customers don’t have to maintain 

relationships and negotiate rates 

with local payment service providers, 

they can also save themselves 

time and money. 

Fraud prevention is another 

issue that GlobalCollect can help 

with. The company complies with 

card scheme security rules and 

offers fraud-screening services. 

It processes transactions in highly 

secure networks with back-up 

systems. So every payment that 

customers of companies using 

GlobalCollect make is secure – 

as well as being much more likely 

to be processed successfully. No 

wonder, then, that the world’s 

most successful online names are 

turning to GlobalCollect. 

To see what leading merchants 

in travel, gaming and other industries 

have to say about us and to 

get advice from the GobalCollect 

experts on how to increase 

your revenue, simply visit www. 

globalcollect.com/raconteur 


Gaming 

Travel 

Software

20 


New frontiers of 

electronic payments 

Kate Bassett takes a tour of the world 

of contactless payments and e-wallets, 

and maps out the way forward 

INTERNATIONAL PAYMENTS 

Ȗ When it comes to the payments 

market, it’s the countries you perhaps 

wouldn’t expect that have 

been among the most innovative. 

Take Turkey. It may be a nation 

known for its Ottoman minarets, 

Crusader castles and bustling 

bazaars, but with a young population, 

a booming bank-card 

market and high levels of mobile 

phone usage, this country is 

leading the way in Europe when 

it comes to contactless cards and 

mobile NFC (near field communication) 

payments. 

Or look at Kenya: a country, 

which suffers from poverty, unemployment, 

political unrest and food 

security issues, but has also developed 

the phenomenally successful 

M-Pesa mobile payments system. 

Across the globe, local entrepreneurs 

are changing the landscape 

of the payments industry. In 

the US, Twitter co-founder Jack 

Dorsey last year launched Square: 

a personal credit card reader that 

plugs into your iPad or iPhone's 

headphone jack. In August, Star- 

Paying for cabs in China, trains 

in Turkey and at the convenience 

store in the States is going to look 

very different in the next five years 

bucks invested £16 million in 

the scheme and announced that 

7,000 of its shops would accept 

payment via the service. 

In Sweden, Magnus Nilsson and 

Jacob de Geer, who founded iZettle 

in 2010, went on to raise venture 

capital funding, led by Greylock 

Partners and Northzone. Their 

mini chip-card reader and app 

is aimed at mobile tradespeople, 

such as plumbers and beauticians, 

who find traditional card processing 

too expensive. iZettle is the 

first company to commercialise a 

mini chip-card dongle for Android, 

the dominant smartphone platform 

in the region. 

In the UK, Monitise founder 

Alistair Lukies has performed the 

seemingly impossible task of getting 

the major banks and mobile 

operators to work together as 

part of his mission to turn mobile 

phones into electronic wallets. The 

business he started in 2003 now 

turns over £34 million a year and 

has nearly 16 million registered 

customers worldwide. 

BRAzIl 

Whether paying for a taxi ride, 

a haircut or a café-com-leite, 

brazilians nearly always pay by 

credit or debit card. The number 

of credit cards in brazil has 

quintupled to more than 628,000 

in the past decade, according to 

industry association ABECS. last 

year, a new financial card Elo was 

introduced into brazil by banco 

bradesco, banco do brasil and CEF, 

and began its quest to claim 15 per 

cent of the credit-card market in 

the country by 2016. Meanwhile, 

m-commerce initiatives, such as 

the partnership between banco do 

brasil and mobile operator Ôi, have 

finally begun to emerge and mobile 

shopping is expected to skyrocket. 

UNITED STATES 

While the rest of the world 

has moved to chip-and-Pin 

technology, the uS has dithered. 

but, finally, the country is ditching 

its antiquated magnetic stripe 

technology, with American 

Express, Discover, masterCard 

and Visa all planning to move 

to an EMV-based payments 

infrastructure. Google is trying 

to phase out plastic cards 

altogether; it launched Google 

Wallets in the States last year, 

allowing customers with certain 

smartphones to pay for purchases 

from their handsets. A consortium 

of uS retailers, including best buy, 

Target, wal-mart and lowe's, are 

joining the virtual-wallet market. 

6m 

contactless cards 

deployed in Turkey 

Source: Gemalto 


KENYA 

TURKEY 

According to smart card 

company gemalto, Turkey has 

the third highest level of credit 

card adoption in Europe and it 

is considered one of the front 

runners to become the world’s 

first cash-free state. it was the 

second country in Europe to 

be equipped with contactless 

terminals; there are now around 

40,000 locations, such as stores, 

ferry terminals and parking lots, 

where consumers can make 

low-value purchases with a 

simple tap of their card. Almost 

six million contactless cards have 

been deployed in Turkey so far, 

with Bank Asya and garanti Bank 

leading the way. 

There are now more phones in 

Kenya than adults, according to 

the world Bank, with more than 

80 per cent of people with a cell 

phone using a mobile-money 

model known as m-Pesa. The 

local system, launched in 2007 by 

Safaricom and Vodafone, has been 

used by a staggering 15 million 

people to date, from rural villagers, 

who use their phones to pay for 

produce, to urban dwellers who 

no longer need to make overnight 

trips to their rural homes to pay 

their children’s school fees. Though 

mobile money networks in East 

Africa currently only exist within 

individual countries, there are plans 

afoot to create a regional network. 

INDIA 

67% 

of India's retail 

transactions are 

conducted with cash 

Source: The Associated 

Chambers of Commerce 

india is predominantly a cash 

economy with 67 per cent of retail 

transactions being conducted 

with notes and coins. but mobile 

banking is starting to make inroads 

here. in February, Movida (a mobile 

payments joint venture backed 

by Visa and Monitise) launched 

a mobile payment service with 

India’s second largest bank, HDFC, 

to allow customers to pay bills, 

top-up pre-paid airtime and buy 

tickets from their phones. out of 

a population of 1.1 billion people, 

600 million have a mobile phone. 

India's Associated Chambers of 

Commerce and industry forecasts 

that mobile penetration will hit 100 

per cent by 2015. 

15m+ 

PESA users 

in Kenya 

Source: Safaricom 

2015 

Chinese mobile payment 

market will become the 

biggest in the world 

Source: Kapronasia 

China has made big steps in 

internationalising its local currency 

and shaking off its reliance on US 

dollars. under new regulations 

released by the People’s Bank of 

China, all Chinese importers and 

exporters can now settle foreign 

trade in renminbi. Alongside 

supporting Hong Kong, Singapore 

and London to become offshore 

renminbi centres, the Chinese 

government has also established 

currency swaps with more than 

14 countries. The Chinese mobile 

payments market is set to become 

the largest in the world by 2015. 

At that point it will be worth more 

£50.5bn with 441 million active 

users, according to Kapronasia. 

vIETNAm 


Euromonitor International projects 

that Vietnam will be the fastest 

growing market for card payment 

volume over the next year, with 

pre-paid cards expected to be 

the strongest growth category. 

However, this is a country that 

still loves cash. To wean locals off 

notes and coins, the government 

will be: paying salaries to 80 per 

cent of state workers through 

banks; accepting non-cash 

payment at all public utilities; 

doubling banking penetration to 

30-40 per cent; increasing the 

number of merchants accepting 

cards from 70,000 to 250,000; 

and reducing taxes on non-cash 

transactions. 


CHINA

22 


Thinking of a 

future when science 

fiction becomes fact 

QUANTUM MONEY 

Ȗ In the future you might shop 

with quantum money. This will 

not truly exist until it is spent. 

Quantum theory physics suggests 

that, at the subatomic level, matter 

only exists as an overlay of all possible 

forms, all of which are equally 

possible. If quantum computers, 

as conceived by the research 

physicist Stephen Wiesner, created 

banknotes, they would only be a 

series of possibilities until measured, 

say by an in-store swipe card 

system. At which point they would 

become one irreversible payment. 

This, Mr Wiesner argued, would 

make them difficult to forge. 

If this sounds more like science 

fiction than contemporary finance, 

1 

2 

3 

Quantum money 

Money clouds 

biometric wallets 

EXPECTATIONS 

6 

5 

4 

3 

2 

1 

7 

8 

9 

10 

Technology trigger 

pretty much everything predicted 

for the future of payments at the 

ten or twenty-year range feels like 

something out of Blade Runner. 

Contact payment systems in 

watches or jewellery that can send 

small currents down the skin so 

that a simple handshake transfers 

£10 

11 

13 

12 

4 

5 

6 

7 

8 

9 

10 

14 

16 

15 

17 

MintChips 

Mobile lending 

infonomics 

between accounts are just 15 years 

away while progress in telepathy 

chips – small devices wired into 

the frontal lobes of paraplegics’ 

brains that can trigger computers 

over wifi links to choose movies or 

close curtains – suggests you could 

simply think a payment and it shall 

come to pass. 

Kevin Warwick, professor of 

cybernetics at the University of 

Reading, has chips wired into his 

brain and arm. He believes that in 

25 years you could be walking past 

a Coke machine, think “Get me a 

drink” and the can would spring 

into your hand. 

More immediately, Master- 

Card Labs in Dublin have been 

“soft trialling” a system that 

allows you to shop from your 

sofa by waving a hand. The 

QkR platform links your 

account with your smartphone 

and an Xbox Kinect, 

reconfigured to understand 

specific gestures. Key gestures 

call up a menu, which 

allows you to scroll down 

and order a pizza. 

Of course, there are 

some problems with 

bringing things like 

quantum money on to 

the high street – some 

to do with the higher 

equations of theoretical 

physics and 

some to do with what 

seems to be the main 

raconteuronthetimes.co.uk theraconteur.co.uk twitter.com/raconteurmedia 

18 

Peer-to-peer foreign 

exchange marketplace 

Co-creation 

iP money 

Social capital 

19 

20 

Peak of inflated 

expectations 

21 

22 

23 

24 

problem with clever 

ideas in the world of 

payments: it's the 

25 26

27 

From corporate electronic currencies, 

loyalty points and biometric finger vein 

scanners, payment methods are changing 

shape, as Stephen Armstrong discovers 

answer to a question consumers 

aren’t asking. 

“Take a £10 note,” says John Rutter, 

director of product management 

for mobile solutions at First 

Data, the US payment processing 

company, “it can pop out of holes 

in the wall. You can hand it to 

someone in payment of a debt, to 

buy something at a shop or even 

as a gift. It’s universally accepted 

and a bundle of them look pretty 

good in your wallet – much better 

than a credit card, which looks 

the same whether it’s maxed out 

or ready to spend. New payment 

technologies have to be at least as 

good as a £10 note or we’re wasting 

people’s time.” 

At the same time, few experts are 

denying a potential sea change is 

on the way. Gartner’s 2012 Hype 

Cycle for the Future of Money 

points to waves of policy, technology 

and social trends sweeping 

away the sandy walls of our current 

trading practices. 

Sir Mervyn King, governor of 

the Bank of England, sees no reason 

why the central bank needs 

to clear final settlements, opening 

the possibility of private- 

sector creation and issuance of 

money. There are policy reviews 

everywhere from the Reserve 

Bank of Australia to the UK’s 

Payments Council which reports 

in October. National and even 

regional currencies are vulnerable 

to attack. Trust in governments 

and banks is at a low. Peerto-peer 

networks and trading 

are growing. Set all that against 

companies struggling to raise 

capital and technology advancing 

at an exponential rate, and things 

start to look interesting. 

“You’re already seeing some 

countries banning cards to prevent 

citizens from getting into 

debt,” argues Ian Pearson, a 

futurologist who worked on biometric 

payments at BT and is now 

running consultancy Futurizons. 

“I would expect to see the rise of 

corporate currencies, electronic 

currencies and collaborative 

schemes along the crowdsourcing 

lines producing the next wave 

of building society-style mutual 

institutions.” 

Already crowdfunding is hugely 

successful in raising capital from 

a large group of small lenders 

New payment technologies have to be at 

least as good as a £10 note or we’re wasting 

people’s time 

28 

Trough of 

disillusionment 

11 

12 

29 

Green money 

gaming tokens 

as money 

13 

14 

15 

behavioural economics 

Collaborative currency 

Mobile coupons 

offering low-risk amounts. Originally 

launched as a fan-funding 

scheme to help big-name acts 

without a record deal to secure 

touring and recording advances, 

crowdsourcing schemes and 

sites are now financing films, 

small businesses and start-ups. 

FundersClub, a crowdfunded 

venture capital site launched this 

summer, raised more than $1.5 

million in less than a month. 

Alistair Newton, research vice 

president on Gartner’s banking 

team, suggests that in future 

money raised or spent needn’t 

actually be conventional currency. 

Social capital, time banks, 

mobile lending and even money 

clouds are forecast to grow over 

the next two to five years. And 

Gartner foresees they could 

become viable forms of trading, 

possibly even developing into a 

new shadow currency system. 

Once an open- source currency 

develops, especially one that 

could be spent on, say, both Facebook 

and World of Warcraft, it 

has the potential to become a true 

peer-to-peer currency, which can 

be spent or lent without the need 

for banks or payment providers. 

“The future of payments is offering 

a bouquet of currencies at the 

point of sale,” Mr Newton argues. 

“You’ll pay partly in sterling, 

partly in euros, partly in loyalty 

points and partly in other possible 

currencies.” He points to online 

currencies, like Zynga credits or 

digital currencies like Bitcoin, 

produced online by programmer 

Satoshi Nakamoto with no central 

issuing authority or government 

backing, but accepted by 

businesses like pizza chain Papa 

Share and 

discuss online at 

theraconteur.co.uk 

John’s and computer hardware 

firm LaCie, which already offer the 

tantalising idea of a people’s currency 

with no banks involved. The 

founders say a Bitcoin debit card is 

on the way this year. 

On the high street, meanwhile, 

banks and card companies are 

more interested in the long-term 

development of contactless payments 

and biometric security. 

Jim Wadsworth, who runs contactless 

payments for Accourt, 

believes biometrics offer the key 

to the ultimate in contactless 

Plateau will be reached in : 

2 to 5 years 

5 to 10 years 

more than 10 years 

16 

17 

18 

19 

20 


payment – no need for a mobile 

wallet if your face or your hand 

conducts your transactions. 

“Isbank in Turkey has recently 

installed some 3,400 biometric 

finger vein scanners in ATMs 

and branches across the country, 

letting customers withdraw cash 

without a card,” he points out. 

“They are planning to extend 

this system to shops, creating the 

largest biometric point-of-sale 

network in the world. Finger 

vein and palm vein recognition 

have been widely used in Japan 

for cash withdrawal for a while 

and, as a result of the chaos following 

the 2011 earthquake and 

tsunami, which left many people 

without bank cards, Ogaki 

Kyoritsu Bank is introducing 

biometric palm recognition at 

ATMs, again removing the need 

for cards.” 

James Davlouros, vice president 

of mobile business development, 

Europe, at MasterCard, thinks this 

will take some time. “Merchants 

change their in-store systems 

every three to five years, so you’re 

looking at a good ten years for 

any new technology to become 

widespread,” he says. “Then the 

consumer has to embrace it, which 

can take longer.” 


30 

mobile thick 

wallet solutions 

Digital complimentary 

currencies 

Mobile thin 

wallet solutions 

Loyalty point 

marketplaces 

bandwidth as currency 

Bank digital safety 

deposit boxes 

Slope of enlightenment Plateau of productivity 

21 

22 

23 

24 

25 

Carbon credits 

Micropatronage 

as crowdfunding 

Social network 

payment system 

Time banks 

26 

27 

28 

29 

30 

Digital barter exchanges 

Retail PIvAS applications 

for promotional activity 

Mobile retail 

stock trading (US) 

Physical complimentary 

currencies 

internet micropayments 

systems 

TIME (as of July 2012)

James Silver - Data Management System

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