The Nature of Money

Every now and then it is important to break common knowledge down and examine our preconceived notions of things. When talking about payments systems whether online, mobile or traditional, it can sometimes be helpful to reexamnine the building blocks and ask yourself what is money? Why do we trust banks? David Birch raises these questions in relation to Terry Pratchett's latest DiscWorld novel and it reminds me that other authors have also tackled such questions, most memorably for me Robert A Heinlein in Time Enough for Love.

Asking the Right Questions

Charis over at The Better Banking Blog asks the question "Will PayPal Mobile Checkout Drive More Mobile Banking Activity?". Something that people on this side of the ditch will be monitoring with interest as (presumably) the same technology should be arriving on our shores some time soon.

The most interesting part of this for me will be the growing of the market (for mobile payments systems) that this initiative will hopefully bring. This will hopefully allow more competition and more customer uptake allowing a matutring of the products and services available and more choice for both merchant and customer.

Bring it on

Celent Examines Mobile Banking Technology

Celent have a new report examining mobile banking technology, banks and vendors. At 53 pages long I'd be guessing that its fairly substantial, and its got some cool pictures like this one:

PayPal One Off MasterCard

According to The NZ Herald, PayPal is announcing a deal with asterCard where they offer a one off MasterCard number for use on websites tat accept MasterCard but don't accept PayPal. Clever for PayPal, as its another way of insinuating itself into ecommerce, even when its not actually explicitly accepted.

Bad News is Good News

The NY Times has a blog with a different slant on things: the attitude towards stock prices that high is good, low is bad and stock price increases are good and decreases are bad is not incredibly helpful.

A little late...

Amazon to rent its cash register.

Best news for merchants: more choice in processing payments. Google Checkout, Amazon and PayPal. How long will these three operate as payments processors before they realise they can cut out the credit card companies and offer end to end services?

The future looks good....

Dave Birch on PayPal

Dave Birch from Digital Money Forums

PayPal has pottering along nicely. The steady growth of their off-eBay business means that they are sitting side-by-side with traditional online acceptance brands (Visa, MC, Amex, Discover, et. al.). Competitively, payments companies and their issuers have looked at this as an online phenomenon. Rightly so, as it has been. Online transaction volume is just north of 10 per cent. One of PayPal's new products is their virtual debit card, a response to customer requests that PayPal be accepted at more online merchants. If you want to buy something at a merchant that accepts cards but not PayPal, PayPal will generate a one-off MasterCard number for you. Now in testing, the virtual card is expected to be rolled out in the Unites States by Christmas. They are also steadily putting together other services that may pose a genuine threat to incumbents, according to Aite Group payments analyst Adil Moussa: deferred-payments options and mobile payments. But why? Surely a bank can work out how to offer a good mobile payments service can't it (or, more likely, wait until someone else has worked out how to do it and then buy it, rather as RBS did with WorldPay and Bibit). Why is it considered a threat to banks? Similarly, the deferred-payment option is already provided by banks in some countries, and if customers show that they want deferred-payment options that it doesn't seem wholly implausible that MBNA or HSBC could provide them. In this particular case it's not actually PayPal that provides the underlying instrument, it's GE Money that is delivering the credit behind the deferred payment and since (as a general rule) providing credit is the most profitable part of the payment process for banks, that is why banks might be eyeing PayPal more nervously than before.

I wonder if the next cycle of nervousness might involve other more novel underlying instruments? We've noted before the kerfuffle about virtual currencies in China, for example. These are now far from niche. The "QQ currency" is substantial: while it was created for use on the web, it is being used in other kinds of commerce (which, since I think that stimulating trade is one of the good things that a payment system should do, is probably a good thing overall). The Chinese government had a bit of a crackdown on QQ coins with the predictable (to economists) result: the price of the money went up (in fact it went up by 70% against the Yuan) which clearly indicates that there is a significant unfulfilled consumer demand for the new currency.

Now, QQ may not mean much to consumers in the U.K., but just suppose that eBay or Tesco or Google were to create their own currency for special purposes and then it were to be adopted more widely? I think this might be rather fun. And rather likely, since the marginal cost of the "n+1"th currency in the electronic world is very low. Just because this was tried before and didn't work -- Beenz, Flooz and others -- doesn't mean that what Javelin call the finite-to-universal currency phenomenon couldn't happen in the future especially given the brand and presence of the big web players. Why would they do this? Well, a few years ago, I contributed to an excellent book by Forum friend David Boyle: The Moneychangers. One of the other chapters is by noted lateral thinker Edward de Bono. It's called "The IBM Dollar" and is based on a 1994 pamphlet he wrote for the Centre for the Study of Financial Innovation (CSFI) -- in fact it was the first CFSI pamphlet I read -- and sets out some reasons as to why a company might want to issue its own money. Well worth a read: in fact, I'm going to read it again myself.

Swedish Payments Study

David Birch quoting from a recent report on payments from Sweden:

Consumers pay too little for cash... merchants, on the other hand, pay too much for credit card payments... Swedish banks use their profit from card payments to cross-subsidise cash handling. This situation could be improved if ATM withdrawal fees were introduced and interchange fees were lowered.

Visa and MasterCard: endangered species?

Hannes has an interesting point about Mobile Banking and analysts which got me to thinking. Are any of the payments/banking innovations coming from Visa or MasterCard? Maybe the mobile payments/banking providers and the banks that they service are better at PR, but it strikes me that the monolithic power involved with being the middleman between purchaser and merchant will have to be eroded by the myriad of options available to each party. I'm a strong believer of "adapt or die", so I won't be weeping if they do go under, but I'm trying to see if they are attempting to change with the times or if they will go the way of the recording industry and fail to see that the times they are a changing...

P2P coming soon to NZ

Further to my recent post on P2P lending arriving in Australia, Rob Findlay reports that there IS a New Zealand P2P lending solution on its way, and its not PeerMint which I blogged about in September. This market just got busier.

P2P launches in Australia

P2P (peer to peer) lending arrives in Australia. Recent finance company failures in New Zealand will probably make a rollout in this country a failure as the public is expected to react conservatively to non-bank financing.

Facebook is cool

Facebook is cool. Google wants it, Microsoft got a piece of it and Open Social have allowed other Social Networking sites to effectively use Facebook applications. But as Charis points out, all this information about people that is collected in one place and is publically available leads to the risk of fraud