After my blog entry about Germany losing Euro 2008 due to Twitter, Techcrunch are reporting a new service, Tipit, that allows you to make payments with Twitter. It actually doesn't though ... it just sends you a message to send the money you promised via PayPal.
Even so, money via social apps are growing rapidly. For example, at the turn of the year Facebook was reporting developing Payments Applications and, guess what?
There are now quite a few, with the most popular being Spare Change.
Spare Change has almost 5,000 daily users today, and describes itself as: "the first integrated
payments application on Facebook. Put a little money in your Spare Change
account. Spend it on your favorite applications all over Facebook."
Following yesterday's dialogue about the
long tail of banking being mobile focused, the EPC and
GSMA announced a cooperative agreement for mobile payments this week. Here's
the press release:
GSMA Press Release 2008 GSMA Teams Up With European Payments Council
Alliance will accelerate deployment of mobile payment services
30th
June 2008, London: The GSMA, the global trade body for the mobile industry, and
the European Payments Council, which represents 8,000 banks in the European
Union and EEA and Switzerland, are to work together to accelerate the deployment
of services that enable consumers to pay for goods and services in shops,
restaurants and other locations using their mobile phones.
Both the GSMA
and the EPC envisage that this cross-industry cooperation will enable banks to
deliver better mobile payments services to their customers, supported by mobile
operators' infrastructure. These services will be facilitated by a ‘Trusted
Service Manager', which will support banks and mobile operators in the
distribution, configuration and activation of the bank's payment application on
the UICC within users' NFC handsets. The GSMA, through its Pay-Buy-Mobile
initiative, and the EPC will focus initially on defining a contractual framework
document detailing the minimum set of requirements for a Trusted Service Manager
to interface with banks and mobile operators.
"Together, the European
Payments Council and the GSMA are well-placed to develop the tools our members
need to deploy mobile payment services that will work internationally to the
benefit of consumers," said Alex Sinclair, Chief Technology Officer of the GSMA.
"We look forward to a productive working relationship with the EPC."
"We
are convinced that this cross industry cooperation between GSMA and EPC is the
best way forward for efficiently enabling the mobile as a channel for initiation
of payments in SEPA, and this cooperation model could also be a model for other
parts of the world," said Gerard Hartsink, Chairman of the EPC.
Following this announcement, Commissioner Reding and Commissioner McCreevy
released an official response (pdf download) from the European
Commission:
EU Commissioner for Internal Market and Services, Charlie McCreevy, and EU
Telecoms Commissioner Viviane Reding welcomed the announcement today of GSMA,
the global trade body for the mobile industry, and European Payments Council
(EPC) to promote the use of mobile payment services. EPC and GSMA have agreed
today to accelerate the deployment of services that enable consumers to pay for
goods and services in shops, restaurants and other locations using their mobile
phones.
“Bringing more competition to the payment services market has been my aim and
agreements such as this show the possibilities that new technologies and
innovative approaches offer in this regard” said Mr. McCreevy. "This is exactly
what the Payment Services Directive, which comes into force at end of 2009, is
designed to promote", he added.
"Voluntary industry agreements by the mobile industry are always welcome
where they bring about concrete benefits of consumers and enhance the
level-playing field for European companies in due respect of competition rules",
said Commissioner Reding. "I therefore applaud today's announcement which should
bring Europe to the forefront of mobile payments."
Mr. McCreevy recalled that a huge effort is being made by industry and
stakeholders to create the conditions for a Single European Payments Area. In
this regard he said that standards and requirements resulting from the agreement
should be prepared in an open and transparent manner. "It is important that all
stakeholders can have access to the process so that the outcome is of benefit to
all." he said.
The Long Tail in banking would be a mass market of
niche microgroups that incur no cost overheads to manage but, for each
transaction, creates a small profit. As the mass of niche transactions build,
the small profits become big profits. This is not far off what banking does
anyway – processes massive volumes of small transactions – but, right now, we focus upon making money out of account management.
Account management involves staff to deal with the
customer onboarding process, KYC and AML requirements, service on the telephone
and in branch, as well as transaction processing and account maintenance.
However, in the case of the long tail of banking,
there are no accounts. You want to reach people who were previously
underserved, because it would not be profitable. Using technologies
such as the internet means that, today, you can serve them. You can serve them because there are
no people involved, no account onboarding process, no branches or telephone
support services, and no account maintenance costs.
So, are we talking about the unbanked?
Yes, but a whole lot more.
We are talking about children, students, the
unbanked, the underbanked, the grey market, the welfare market, the pensioners,
the migrant workers and more. And we are talking about social lending
and saving, PayPal, prepaid and mobile.
Social lending sites, such as Zopa and Prosper, are
connecting the long tail of savers and borrowers. This is best
demonstrated by Kiva, where
anyone can invest a few dollars in microfinancing people globally. A
global connection of niche players. I've blogged about these sites before, but they show one aspect of internet financing that
is based around a long tail model.
PayPal is an even better example of showing a
great way to create profits out of the Long Tail, although its reach goes far
beyond the long tail.
As mentioned yesterday, PayPal provides a method of moving money between
people globally in multicurrency at low cost. PayPal claim to reach out to over
160 million registered users, with one in three requested at least one payments
transaction every quarter. PayPal make their profits and revenues by charging a
$0.30 flat fee per transaction as well as a variable percentage of 4.9%,
reducing to 1.9% or 2.9% for Premier and Business Accounts respectively. There
are also fees for cross-border transactions.
The real secret of PayPal’s operation is that:
(a)
it builds on the existing bank network, as you have to have a bank account to
use PayPal; and
(b) an email saying “you’ve got money” makes people open
accounts.
The overall result is that PayPal’s model has
increased reach and breadth immensely by linking people to money using viral
networking. They do reach the long tail through this structure but, in terms of
the long tail, they also have a major restriction. You have to have a bank
account and proof of identity to move monies around with PayPal.
So there’s a barrier for some of the children,
students, unbanked, underbanked, grey market, welfare market, pensioners and
migrant workers.
So we need to look at prepaid and mobile for these
folks.
Prepaid provides a great way to reach the unbanked
and underbanked, as mentioned last week.
In one of the best examples of a prepaid programme,
migrant workers in the United Arab Emirates, working on their massive
construction projects, are receiving their weekly and monthly wages on prepaid
cards.
They can get cash and pay for stuff around Dubai without a bank account,
and the beauty of this card programme is that it comes preloaded with one
cross-border money transfer per payment period for free.
Migrant workers can receive their monies and send
money home painlessly.
Prepaid for kids as gift cards, or for students as a
budgeting method due to weekly restrictions on balance limits of usage, or for government
welfare and company benefits is seen as one of the strongest markets for
reaching the long tail of finance.
However, there is still a restriction here.
To get cash, you have a habitual movement of people
that creates a criminal focus.
I only discovered this one recently, and it was the
idea of moving monies around on cards that highlighted an issue.
The issue is that in countries where the criminal
fraternity are represented typically by gentlemen with large muscles or big
guns, receiving money on a card is a problem. The problem is that you have to
go somewhere to get the card, and then convert the card into cash.
Apparently, for example, many people would know that
they were getting a prepaid card on a Friday morning from their offspring
overseas. So they would toddle down to the Post Office on a Friday morning,
pick up their post with their prepaid card, and then go straight to the cash
machine and convert the card into cash. As they walk out of their Post Office
with their lovely lolly, the men with big muscles and large guns jump out from
behind the nearest lamppost and nick the dosh off them.
Whoops. I apologise as I’m getting a little
colloquial here.
The point, I am told, is that card payments create
physical movements that can be tracked and targeted by criminals.
And so we come to mobile.
Mobile overcomes the
issue because you do not have to go and physically get a card and then
translate that card into money. You can receive a mobile payment anytime,
day or night, and then use the money flexibly either on your mobile account or
as cash, but not by always going to the same place at the same time, every week
or month.
Mobile overcomes these issues because:
almost everyone has one, or can get access to one,
you do not need to have a bank account to have a mobile,
mobile technology is cheap to access and easy to use,
mobile builds upon internet technologies to become even cheaper to access through VOIP
you can move monies wirelessly, silently and easily between people
the money movements do not create physical movements that are necessarily habitual and tracked by criminals
mobile is global
... one could go on and on.
Whether you prefer mobile or prepaid as your
focus, they combine to create the real long-tail of banking. Mobile
and prepaid can reach one and all, with micropayments that do not add
overhead to the bank infrastructure, but can build volume for small transaction
fees on each transaction.
Suddenly, the billions of unbanked and underbanked,
the long tail of society, can be served through the financial system at
virtually zero cost overhead, with margins that are attractive
enough through micropercentage fees on microtransactions. Billions
and zillions of microtransactions.
Think about it.
If Amazon and iTunes can make 40% of their profits
from the zero overheads of stocking the zillionth book and song, then banks can
make profits from the zero overheads of processing payments transactions
through internet, prepaid and mobile on the banking network.
That’s something that rings of the long tail of
banking isn’t it?
I wrote an indepth analysis eighteen months ago about PayPal’s 100 months birthday and now they’re celebrating their official tenth anniversary, so I thought I would add a small addendum. Although I say it’s a small addendum, it’s quite an interesting one.
Basically, I was updating some old slides about PayPal and thought
that I should track their number of users over the years, as they do
publish these numbers. First of all, I looked up the last published
quarterly results from PayPal on the eBay website.
In their latest company presentation, published June 16th, they have these figures:
PayPal operates in 190 markets using 17 currencies
I attended a long discussion yesterday about High Value Payments (HVP).
I wondered why we even bothered to discuss and delineate between Low Value
Payments (LVP) and HVP these days. Surely, we should just talk about Real-Time
Payments (RTP), near RTP (sub two hours) and D+n. Alternatively, urgent versus
non-urgent with T+n, dependent upon your view of the world.
Having introduced enough acronyms in my opening paragraph to confuse a rocket
scientist, I think I can see why we talk about HVP versus LVP … it makes us
sound more interesting and knowledgeable.
A question came up in today’s EBA sessions for Joe Pawelczyk, Vice President for
International Relations at CHIPS, the American Clearing House for over $2 trillion of
wire payments each day. The question seemed quite simple: “Why doesn’t America
use IBANs for their bank account numbers, as all of Europe has now standardised
on this?”
Joe looked a bit non-plussed and piped up with: “Because we
cannot define a stadnardised account number.”
Well, a standardised account number is an IBAN (International Bank Account
Number) and BIC (Bank Identifier Code) isn’t it?
I have been attending a conference on Prepaid this week, one of the largest of its
kind with over 300 delegates all focused upon this burgeoning market. The fact
so many are attending says something, and most of these attendees appear to be
from organisations other than banks. Transit authorities, mobile telephones
operators, governments, utilities, retailers ... oh yes, and MasterCard, Visa
and AMEX.
Initially, I thought: what's the big deal about prepaid? It's just another
payment type, like credit and debit isn't it?
I don’t write about politics, because I am not a political creature. However,
I felt compelled to write about this subject after Europe’s soul-searching over
its identity since the Irish threw out the EU Treaty.
The fact that the Constitution and the Treaty are unwanted does not
de-stabilise our banking efforts under the Payment Services Directive and SEPA,
or does it?
The fact that citizens do not want more European integration, and
are happy to just have EMU, is fine for those creating the Eurozone, isn't
it?
Intriguing discussions today about the Oyster Card in
London.
This is the contactless card operated by Transport for London (TfL) to
allow everyone to travel across the London public transport system without using
cash. It’s basically a prepaid contactless card, like the Octopus Card in Hong
Kong or the New York Subway Card.
Oyster was launched in 2003, and I love stats so here’s a few from Transport
for London (TfL).
EBAday, or is that days as it is now
2 days, is upon us next week. This is the annual jamboree for the Euro Bankers
Association to celebrate the arrival of SEPA, after much anticipation since EBA
days started three years ago.
This year it is in Helsinki on Wednesday and Thursday of next week, and I
have the honour to chair the plenary session with Werner Steinmüller, Head of
Global Transaction Banking at Deutsche Bank, and Mark Garvin, Chairman of
JPMorgan Treasury & Securities Services International. Coincidentally, these
are the two sponsor firms of EBAday this year.
In planning this plenary session, we have discussed a few ideas and decided
to get away from SEPA specifics, as that’s covered in all the other sessions,
and talk about the big picture. And the big picture focuses upon how the markets
have changed since the last EBAday in Rome last year.
There was a lot of buzz around this year’s Federal Reserve Bank of Chicago’s
Payments Conference, “Payments Fraud: Perception versus Reality”.
First, there’s the sheer numbers involved. For example, it is estimated that
each year $3.5 billion worth of chargeback losses occur in the USA through
fraudulent transactions, according to Orbitz.
Bruce Cundiff of Javelin Research had some particularly interesting stats,
that show identity fraud is on the decline in the USA from 10.1 million cases in
2003 to 8.1 million today, with the cost reducing 12% during this period from
$56 billion to $45 billion. Ouch! $45 billion losses through identity fraud is
still pretty steep, with the average amount defrauded in each case coming in at
just over $5,500.
Last night’s debate, “This house believes our current authentication and
identification methods are good enough” was a healthy one, focusing primarily upon card authentication in retail
transactions.
Today is a day that’s all about authentication, identification and
verification.
First, I have been asked to make a speech at a payments conference all about
how to minimise risk; and, second, we have a meeting of the Financial Services Club this
evening, in the form of an Oxford Society style Debate with the motion: “This house believes our current authentication and
identification systems are good enough”.
I’ll report on the latter topic tomorrow, but thought I would write a summary
of my speech just to see how it plays out.
Front Page of Business Week today: Banks versus Consumers - who wins?
The focus is upon credit cards and debt collections and, with American credit-card debt hitting a record high of $957 billion in Q1 2008, up 8% from the previous year, according to Federal Reserve data, this is a growing market. One of the market leaders in debt collections is the National Arbitration Forum (NAF), used by many banks to chase up
delinquent accounts.
The article then goes into a few statistics:
NAF handled 33,933 collection arbitrations in California, from January 2003
through March, 2007; of the 18,075 that weren't dropped by creditors, otherwise dismissed, or
settled, consumers won just 30, or 0.002%, of these cases;
NAF employs 1,700 freelance arbitrators - mostly moonlighting lawyers and
retired judges - who handle some 200,000 cases a year, most of them concerning
consumer debt; and
NAF’s presentation to clients tells them that, in cases in which an award or
order is granted, 93.7% are decided without consumers ever responding and that
only 0.3% of consumers ask for a hearing (the rest just tussle through the
debate via mail).
As a result NAF is becoming the target of a legal action with
consumers claiming that rather than arbitrating, they are purely acting on
behalf of banks. For example, 1,400 Virginia residents claimed that they had
been promised, in writing, that they could appear at hearings before an NAF
arbitrator but that the law firm representing NAF, Wolpoff & Abramson,
failed to arrange the hearings. The case was settled in favour of the
residents.
As you walk the streets of Rome, you find modern and ancient intertwined. The
streets are full of gorgeous clothes from designers ranging from Salvatore
Ferragano to Versace, Louis Vuitton to Gucci, Prada to Armani. All the names are
here in beautifully presented shops that ooze money.
These shops are squeezed into streets laid with tiles and cobbles that date
back over 2,000 years. The shops and office blocks are often built upon tombs
and temples, where the new Rome sits on top of the old.
These thoughts ran through my head as I sat at the conference this week where
we had a number of presentations about upgrades and releases of core software
systems. The firm hosting the conference produces a new release every year, and
is now on Release 9. They spent hours in the opening keynote discussing the
latest features, capabilities, functions and specifications of the new product.
It is not a product I use, so much of it went over my head, but I was struck by
one thought.
Why do customers need to upgrade to a new release?
The Faster Payments project goes live today after over three years in the
planning, $300 million investment in new systems and some delay - it was meant
to go live in November but required such significant systems redevelopment that
it took six months longer.
It should be good for all, as it means D+0 is finally here with most
standing orders, internet and telephone payments processed end-to-end within two
hours and within 15 seconds for a directly connected processor.
Lightspeed payments for the 21st century ... watch this space to see how it
goes.
You can find out a lot more
background here, and more from APACS here.
This makes clear that standing orders come into play on 6th June, so it's
just internet and telephone payments today.
Barclays, Citi, Clydesdale and Yorkshire Banks, HSBC, Lloyds TSB, Northern
Bank and RBS allow the sending and receiving of payments; Co-op Bank and Abbey
are going to offer this later, but right now only offer receiving; whilst
Alliance and Leicester, HBOS, Nationwide and Northern Rock only receive payments
for the moment.
I'll leave a longer diagnosis after a few days of the system being live.
The European Commission is running a conference this
week about financial inclusion and the unbanked. According to the
Commission, almost half of all of the citizens of the EU10 – Poland, Hungary,
Czech Republic, Slovakia and other recent joiners, but not Bulgaria and Romania
– have no bank account.
According to their research, 47% of the EU10 adult population are unbanked,
compared with only 10% in the EU15 (France, Germany, Italy, Spain, UK …).
The conference is all about establishing rights for citizens to get basic
financial matters covered, such as a "right of all citizens to a transaction
bank account" and "a defined minimum package of transaction bank services".
The SWIFT Annual Report came out last Friday (download it here, 3.4 Megabytes) and makes for some interesting reading, especially as I like numbers. Yes, it does include lots of numbers:
there are 8,332 institutions connected to SWIFT (note: institutions, not banks) across 208 countries and territories;
over 3.5 billion FIN messages exchanged last year (that’s a lot!), up 22% over 2006;
27 SWIFT users process almost half of these FIN messages;
1,800 users send less than 150 messages per day;
all users received a 25% price reduction in 2007 through a 10% reduction in prices for messages, combined with a 15% rebate on messaging traffic;
SWIFT conducted a customer survey at the end of 2007 and gained an overall rating of 8.33 out of 10 for the total SWIFT customer experience (you’re so nice);
64% of respondents cited security as SWIFT’s most valued attribute, rating this capability as 9.1 out of 10;
the SWIFT network delivered 99.9% availability throughout 2007, with just one power outage in March 2007 (what did everyone do?); and
over 5,000 folks are registered on SWIFTCommunity.net. (which is why you're reading this).
There’s a few choice quotes and comments in the report too.
You may not have realised it, but today is Europe Day.
In the UK, we took especial notice of Europe Day by not mentioning it in the
news, not talking about it on TV, not referring to it on the radio and avoiding
any reference to it in the newspapers.
However, there are some things in Europe we should be proud of: not just a flag, a motto and an anthem, but a globally recognised
financial unification program that is becoming the envy of all.
If payments is just transferring a file electronically between a sender and a
recipient these days, why is it so darned complicated?
Bearing in mind, the internet connects everyone and everything
electronically, how come we have so many disparate payments infrastructures?
From retail to wholesale payments, clearing and settlement, we do have a bit of
a worldwide mesh.
The DTCC, Chips, Fedwire, Vocalink, Equens, STEP2, TARGET2,
Euroclear, Clearstream, LCH.Clearnet, BOJ-NET, CLS, MasterCard, Visa ... now I
know I’m mixing up a lot of stuff in that line but it's far from exhaustive.
There are literally hundreds of processors involved in our payments processes
but surely we should be moving towards a single,standardised pipe around the
world for payments, clearing and settlement?
That's what we have today as a baseline platform for technology, the
internet, so why not for payments?
There are few examples of global processors today. I guess the ones that
immediately come to mind would be CLS, SWIFT, Visa, MasterCard and PayPal.
Most banks, citizens and corporates can pretty much hook up to one of those
somewhere around the world and make a payment to the other side of the world.
But why is the rest of our payments processing, clearing and settlement
structures so fragmented?
This was a comment I made during a panel at the ACT Conference in Edinburgh, where I joined esteemed
speakers in a BBC Question Time style debate, chaired by Andrew Neil,
the political journalist and writer.
The other speakers on the panel were:
Angela Knight CBE, CEO, British Bankers’ Association;
Robert Waugh, Head of UK Equities, Scottish Widows;
Sahar Hashemi, Co-Founder, Coffee Republic; and
Trevor Williams, Chief Economist, Lloyds TSB.
Questions included:
“Are
business ready for stagflation – the nightmare of low growth and high
inflation?”
“Should
the UK take advantage of the weakness of sterling today and join the euro?”
“Dubai,
Mumbai, Shanghai, Goodbye? Will China and other economies offset recession
in the USA?”
“After
China’s success, which countries would you look to invest in next?”
“Will
the turmoil in the credit markets spread to the equities markets?”
“Can
the panel name any organisation or institution that they think is responsible
for this crisis?”
“Can
anyone on the panel name one bank product that they wish had never been
invented?”
I’ve been reading a range of articles about the next generation internet, or
the semantic web as it is called by those in the trade.
Semantic is a method of looking for the meaning and relationships between
things, and the semantic web effectively moves us away from files and downloads
to databases and integration. In practice, this means that rather than going on
to the internet to pull things out and push emails and files around, the
internet continually monitors you and your tastes and finds things to push at
you which match your electronic lifestyle. In other words, it makes everything
online much more relevant to you as an individual, and moves us away from having
to search because the semantic web will find for you.
Unlike some of the sceptics about SEPA, I believe we are finally
getting there. There’s still a long road ahead – the SEPA Direct Debits (SDD),
the Payment Services Directive, effective card schemes using the SEPA Card
Framework (SCF), D+1 and more still need to be implemented – but we are heading
in the right direction.
This was confirmed the other day at the Eurofinance conference in Miami where
we did another audience poll around SEPA. Again, using interactive voting of
around one hundred or so US, Canadian and Latin American bankers and treasurers,
I thought these results would be interesting as SEPA is thought of as a very
European thing.
The first question was to gauge their familiarity with SEPA ...
With Faster Payments
going live on 27th May, the question the banks are really struggling with is how
to make money.
FPS means that banks no longer make money on their float, as we are talking
D. Not D+1, 2 or 3 or more. Just D, as in Just Do It and Do It Now. FPS means that payments are processed in fifteen
seconds by the processor, and the end-to-end cycle to process a
payment from origination to receipt and confirmation will average around
two hours.
Like SEPA, it means a massive investment for
negative returns for most banks. The reason I say that it is like SEPA is that
Eurozone banks will no longer be making margin on cross-border processing.
Then there was the news yesterday that UK banks have lost
their test case on overdraft charging. It is already estimated that UK banks
have returned over £750 million in “unfair charges” to retail customers. This
announcement may not only result in billions more being returned, but also
fundamentally challenges the fee structures for UK banking.
Add on to this the fact that banks no longer claim to be making money from
the spread of buy and sell prices due to MiFID’s transparency of trade reporting
and best execution*, and you have to ask yourself: how is a bank to make money
these days?
I was honoured today to join a panel at the Digital Money Forum
of global bloggers, all of whom I think deliver great value to our industry.
First was Dave Birch of Consult Hyperion. Dave runs the Digital Money
Forum and the Digital Money Blog. He’s a regular blogger on new payment systems,
especially areas such as contactless payments, mobile payments, internet
payments and related disruptive stuff.
Second was Aneace
Haddad of Welcome Real-Time of France and Aneace’s Blog. Aneace is now
domiciled in Singapore and is another really insightful person who seems to
spend most of the time talking about card fees and, with MasterCard being told
their model of interchange fees is now illegal, has a blog that has more
relevance today than ever before.
Third, we were joined by Scott Loftness. Scott manages Payments News, an American blog
with a global reach which, if you have not registered for their daily email, is
the one email I read every single day as it gives you the most wide-ranging
knowledge of what's going on in the payments world.
Last, but not least, was Colin Henderson of Bankwatch. Colin is a Scottish ex-banker
living in Toronto who has a different way of thinking about retail banking with
his wry views. Another great thinker on banking, and well worth following.
This question occurs to me because it's top of mind with Charlie McCreevy,
the European Commission and also many of the discussions taking place today in
Paris at a tradeshow focused upon investment banking. Buy and sell side firms have gathered to
debate algorithmic trading, dark pools of liquidity, multilateral trading
facilities (MTFs), smart order routing, the credit crisis, low latency and
more.
To set the context, we begin by talking about technology and it amazes me how
blasé we have become about technology. For example, the investment banks talk
about low latency, but what does it mean in practice?
Well, the new equities exchange Chi-x claim to process a trade in two
milliseconds. How fast is two milliseconds? A human blink is meant to take 200
milliseconds – don’t ask me who measured that one – and therefore Chi-x
processes orders in a hundredth of the time it takes you to blink your eyes.
Reading the PayPal blog is worthwhile, particularly as this item appeared the other day. It’s all about stamping out
phishing with Michael Barrett, chief information security officer, blogging
about the ways in which PayPal were attacking this issue. As PayPal and eBay are
the target of three-quarters of all phishing attacks, according to Sophos in
July 2006, they should know what they are talking about.
The reason why Michael’s blog is relevant to you, me and all the bankers and
citizens of the world, is that he thinks they have found a way to stamp out
phishing losses. Between July 2006 and July 2007, the phishing rate targeting
PayPal and eBay dropped from peak rates of over 80% to under 10%.
Apparently,
Frontier blame First Data because they demanded a sudden jump in
collateral, due to the credit crunch, and started taking a large slice
of the 70% of Frontier's revenues which they controlled; the other 30%
is from cash, cheques, AMEX and Discover.
On April 8th, First
Data not only told Frontier that they wanted to raise Frontier's
collateral from $55 million to $130 million, but allegedly claimed
withholdings would rise from 45% to 100% by May 1st in order to build
this up.
As a result, Frontier declared bankruptcy on April 10th.
First Data ... how could you?
Aha ... First Data were as surprised as everyone else by this announcement.
Sounds like it could be a bit of brinkmanship between a customer and their processor, especially as Chapter 11 in the USA just means that you don't pay your suppliers for a while. And you can still book seats on the flights ...
...
even so, declaring bankruptcy is a bit radical just because your card
processor has kicked you in the collaterals so to speak.
There were a couple of fascinating discussions during this
conference on cash and treasury – been here all week if you haven't
been reading this blog – about CFO's. The best of these was a panel chaired by Julia Homer, editor-in-chief of CFO Magazine, with a discussion of CFO's major priorities. The discussion was based upon a survey that CFO magazine produces on a regular basis with Duke University in the USA.
CFO priorities are obviously important to banks and their providers, as
these are the guys driving the decisions that corporations make,
influencing their banking demands and the technology interconnections
that support this financial decision-making supply chain.
So getting
inside the head of CFOs is important. And what's inside those heads?
The fourth Foresee
online financial services survey came out today, benchmarking banking
websites for their engagement and satisfaction with the user.
What
it finds is that online banking websites score 82 in overall
satisfaction, a 12% improvement since 2003, and the best of the
websites for financial services available online. This is a great
score, as e-retailers only benchmark at 83. According to the report,
online banks are getting the balance just right between convenience,
value, information and transactions.
Apparently, where
customers are ‘highly satisfied’ in their banking experiences, 31% are
more likely to purchase more, and 57% are more likely to use the
website as their primary channel for the bank.
Whilst the banking websites get a rating of 82, investment and credit card websites score 75.
Highly
satisfied investment website users are 68% more likely than others to
recommend the investment service to their friends. Similarly, highly
satisfied online credit card users are 47% more likely to use this card
as their primary credit card and 66% more likely to recommend the card
to others.
The headline I keep coming back however is that 12% improvement to a benchmark of 82. The
fact that banks have improved 12% in five years to be on a par with the
Amazon’s, iTunes and eBay’s of this world is definitely saying
something. You can download the full report here.
You do wonder about the extremes here though. After all, you can
have highly satisfied customers online, but what about all the other
surveys that come out every day saying that people are fearful of
online finance, such as this one saying that 1 in 5 Americans have had their account details compromised online.
I guess the balance between online bank lovers and internet financial haters is about 50:50?
Except that the survey from Gemalto is actually a big PR gaff as 1
in 5 Americans compromised would mean 60 million Americans have had
their internet accounts accessed by hackers. That is far and away more
than the numbers reported anywhere else.
Therefore, Bank Technology News
chased up and discovered the numbers were a bit 'jumbled' ... in other
words, wrong. The actual number of Americans who have had issues is
about 27 million or 11% ... and their issues have been some form of
loss of personal data, not banking data.
I’m in Miami at this cash and treasury show, and chaired a panel focused upon SWIFT and why is SWIFT
relevant to corporates?
Here’s the blurb about the panel:
“SWIFT – It May Be Time You Connected
“Companies can use the SWIFT network for a number of transactions
including payment initiation. The options for participating in the
SWIFT community are increasing, but what is the difference in those
methods, particularly in terms of cost? Also, is it even cost effective
to use SWIFT for payment initiation? Recent research showed a
reluctance of American companies to utilize SWIFT. This session will
look at the nitty gritty of determining if it can bring benefits to
your business.”
The research is from a Eurofinance Survey
at the end of 2007 which found SWIFT was the lowest priority on
treasury’s agenda. The top priorities were Liquidity Management and FX
Risk Management.
Equally, the survey found that less than only 9% of corporates had a
connection to SWIFT, with 40% turning down connectivity because the
cost benefit didn’t stack up.
So this was the premise for our conversation of an hour and a half.
Earlier this week I attended the launch of a new book, the Future of finance after SEPA.
I edited this book and was asked to present a summary of the views
provided by the contributors. Bearing in mind that there are over
thirty contributors to this book, ranging from the European Commission
to the EBA, from the European Payments Council through to SWIFT, from
JPMorgan to Nordea and from Vocalink to Sterling Commerce and more,
there were a lot of views to summarise. But here goes ...
There are three views of SEPA, not forgetting the Payment Services
Directive (PSD) and the Euro. These views may be summarised as the
Good, the Bad and the Ugly.
