The potential of mobile banking, for the realization of ‘anywhere, at anytime’ transactions, is well documented. However, interest is starting to develop regarding a more consumer-orientated vision of what mobile banking and payments can offer. Glenbrook’s Jacqueline Chilton recently published an article in E-Finance & Payments Law & Policy examining the ways mobile banking can develop to increase the value for consumers.

A PDF version of Jacqueline’s article is available here.

E-Finance & Payments Law & Policy magazine provides all those involved in this fast evolving sector with practical information on legal, regulatory and policy developments. E-Finance & Payments Law & Policy focuses on developments within the UK and the EU but includes articles on developments elsewhere, particularly the US.

Glenbrook Payments Views and Payments News readers can sign up for a free trial here: www.e-comlaw.com/trial.htm

Related articles:

1. Mobile Banking 101
2. Will Consumers Prefer Mobile Banking over Online Banking?
3. NACHA & Mobile Banking

Last week we asked readers to help us capture a snapshot of U.S. market contactless/RFID terminalization. We were pleased to get 43 brave souls to respond.

Here are the (admittedly anything but scientific) results:

We also asked respondents to identify themselves by role. Not surprisingly, the average optimism was higher among POS vendors and card networks than among merchant acquirers/ISOs. But merchants themselves were relatively upbeat:

Please share your comments below.

Related articles:

1. Specifications Lead the Way for Contactless Payments
2. Remote Deposit Capture and the Electronic Draft Capture POS Terminal
3. Your Views on Contactless POS Deployments in the USA?

If you’ve been following along, you know that I’m just back from a week in Europe.

Before heading over, I took the extra precaution of calling a couple of my card issuers to let them know I was going to be traveling – in the hopes that my primary debit and credit cards would continue to function over there! (They did!)

But, in thinking about this a bit more, why couldn’t I just inform them about my location in real-time from my iPhone? Why should I have to call them, wasting both my time and theirs – to provide that update – which, frankly, may or may not be helpful to them – or me.

Envision the alternative scenario – my flight lands in Frankfurt. I power up the iPhone and click on my pseudo-FourSquare app that informs the card issuers I care about where I am – using the geolocation information in the phone (suitably “fuzzed up a bit” to provide a bit of personal privacy protection). They update their risk management systems to include this new location awareness metadata – and my cards will work hassle free.

Extending this mobile app a bit more, perhaps it also informs me of other useful things – such as remembering when my cards are due to expire and helping me manage and update subscription relationships, etc.

Related articles:

1. Foursquare’s Location-Awareness and Loyalty at POS
2. NFC vs. Not-NFC, or “Why Put Card Data on the Phone?” A look at Mocapay
3. Payment Systems Fraud Is Not the Same as Data Security!

In a most interesting blog post by Foursquare today, the company’s biz dev team talks about how the location-based app plans to evolve its platform by integrating with “thousands of merchants”.

As MG Siegler writing on TechCrunch noted, down near the end of the blog post under Redemptions is further discussion about how this mobile location-based platform might evolve to make the user experience easier in terms of redeeming offers by Foursquare users. It seems to allude to yet another bar code to POS application on the horizon.

As technology advances and Point of Sale systems get smarter, this responsibility can move from humans to barcode scans, loyalty card integrations and other means, thus reducing the potential friction.

What do you think? Do you use Foursquare and enjoy collecting badges, etc. as you check-in at various locations? Would you participate in loyalty offers from merchants – and want to redeem them quickly at POS?

Related articles:

1. More Musings About Location-based Data and Payment Card Risk Management
2. AT&T Announces a Test of 2D Barcodes for Mobile at Point of Sale
3. Mobile Payments at the Point of Sale [ATM, Debit & Prepaid Forum 2009]

I’m in Europe this week teaching, along with my partner Carol Coye Benson, a private payments workshop. This is the first time we’ve done this in Europe – and we’re looking forward to it!

Flying over on United Airlines, I couldn’t help but notice the new optical bar code scanners that have been installed at the TSA screening checkpoints at SFO and at the United gates. My printed out boarding pass had a 2D bar code on it – but that wasn’t read in either case. Those devices are apparently primarily intended for use with mobile boarding passes – 2D bar code images displayed from your mobile phone.

I used one of these new mobile boarding passes for the first time on a recent flight on American Airlines. When I checked in online for the flight home, I noticed a mobile boarding pass option – selected it, received an email with an attached image file that I then displayed to a reader at the boarding gate.Why am I mentioning all of this – and what’s it got to do with payments? (I’m actually just trying to stay awake on my first afternoon in Europe – just kidding!)

It’s always fascinated me how the serious adoption of new technology in a seemingly unrelated vertical soon enough bleeds over into another vertical – particularly as equipment is involved. As deployments occur, new things are learned, enhancements and refinements are made and things just generally improve. That ball is now seriously rolling with respect to mobile boarding passes.

Clearly, we’re on the cusp of a serious migration to mobile boarding passes in the US. Travelers will soon be very comfortable displaying their boarding pass to a scanner at the gate – and avoiding the hassles of printing and carrying paper. When will this new way of communicating data simply from the mobile handset jump the rails into new verticals? Are you betting, along with Starbucks and mFoundry – and others, that it’s coming? Seems that the airlines have placed they’re bets!

Related articles:

1. Mobile Payments Threaten Credit/Debit Monopoly
2. Report from CTIA – Mobile Payments Eventually
3. Report from CTIA – Mobile Payments Eventually

While I don’t manage to attend every year, the Federal Reserve Bank of Chicago’s annual payment conference remains one of my favorites. The Chicago Fed has a great payments team that works hard at putting together a timely program, but I like this event because it really is what it purports to be – a conference. With only a few hundred attendees in the room and plenty of Q&A time in the agenda, there is always a spirited, two-way dialogue between the presenters and the audience.

I had the pleasure of moderating a panel on Transformative Technology (lots of focus on the mobile channel in payments), but I greatly enjoyed the other sessions and the opportunity to network with so many payments professionals at the breaks. Below I’ve tried to capture some of the most interesting points from each session.

Keynote, David Evans, Market Platform Dynamics

• A useful review of Evans’ theories on the importance of software platforms (“invisible engines”) and how they are helping to accelerate the pace of innovation in payments

• The presence of network effects means there will never be a lot of platforms in an industry and that will be true for payments

• The platform owner benefits from the network effects, while others can participate by running the rails.  In mobile telecom, Apple owns a platform and AT&T runs the rails. In payments, PayPal is trying to build the platform (by exposing its system to developers through the X platform) while MasterCard and Visa may be left to run the rails.

Panel I – Consumer Choices

• This panel discussed the sometimes confusing and seemingly irrational ways that consumers make choices about financial products

• Victor Stango of UC Davis was the first of several speakers to cast doubt on the value and effectiveness of lengthy disclosure statements

• Attorney Furletti of Ballard Spahr noted that some of his retail bank clients are experiencing rather high (~80%) opt-in rates as they ask their customers if they want to continue to be able to overdraw their accounts in spite of the fees (at least among customers who were regular users of overdraft)

• Piyush Tantia of behavioral economics research firm, Ideas42 outlined several behavioral curiosities including subscription versus a la carte pricing for health clubs, the impact of credit card availability on price bids for basketball tickets, and the effect of the default setting (opt-in or opt-out) on organ donation rates.

Panel II – Innovative Business Strategies

• Dan Schatt of PayPal continued that company’s recent campaign to forge productive relationships with banks in areas like P2P payments and cross-border remittances. He noted that while PayPal is not at all targeting the physical point-of-sale, it is occasionally being brought their by novel applications that are bringing the Internet into the physical world

• Prepaid card pioneer Gary Palmer talked about prepaid cards have evolved from a niche business to a mainstream phenomenon since 1999. He highlighted the different value propositions at play in different segments of the prepaid business, from consumer cards (more convenient than cash and often cheaper than bank accounts) to corporate-issued cards (better branding, memorability, and customer retention than other tender types) to government assistance cards (cheaper than checks)

• Stephanie Swain of BestBuy shared research that indicates consumers are apathetic about their banking relationships which could turn to anger in the wake of the CARD act. BestBuy is enjoying early success with a set of “back to the future” financing innovations including lay-away plans, installment loans, and lease-to-own programs.

• Gray Taylor of the National Association of Convenience Stores articulated a long set of issues being encountered by his small merchant members. He was optimistic about private label ACH cards, which allow merchants to use their own loyalty programs rather than funding generic rewards programs run by open loop card issuers. He noted that PCI compliance has been a significant burden, costing an average of $20,000 for merchants that average only $32,000 in pretax profits; they will gravitate to solutions that reduce PCI scope (tokenization, point-to-point encryption, etc.).

Panel III – Transformation Technology

• This panel focused largely on the newest developments in mobile channel, which has enjoyed tremendous growth in spite of the recession and is playing a role in most every domain of payments

• Jeff Semenchuk of Citigroup Growth Ventures outlined the multiple attributes of the simple credit card (payment vehicle, short-term loan, network access tool, currency conversion instrument) and noted the success Citi had had in assembling a mobile payment trial in Bangalore with favorable economics for all the participants.

• John Brady of USAA chronicled the development of the mobile channel at USAA, highlighting its critical importance to his bank’s highly dispersed membership base. Its most recent and popular mobile application is a consumer remote check deposit function which utilizes the camera of a mobile smartphone.

• Wences Casares described how his company, BlingNation, is helping smaller banks return to a more central role in payments by enabling their consumers and merchants with a contactless payment solution targeted at small, local communities. He claims that his solution has superior economics compared to the global card networks for both small merchants and small bank issuers.

Panel IV – Security and Risk

• Moderator Peter Burns, an adviser to Heartland Payments, noted that the multi-channel payment environment we maintain is creating a growing set of opportunities for criminals and that a multi-pronged approach will be necessary to keep fraud under control.

• Mike Urban of FICO illustrated that message by detailing the range of solutions that are being deployed to detect and prevent financial crimes. These tools include traditional neural net models, self-calibrating profiles, adaptive models, outlier models and customer and compromise scores.

• Ellen Richey of Visa depicted the risk created by the very large number of diverse parties who handle sensitive credentials in our existing payments infrastructure. In spite of these risks, a focus on fraud has actually driven down fraud rates in recent years, though gaps remain across the global system (e.g., “Steal data in a non-PCI country and use it in a non-EMV country”). She sees a need for dynamic data to be used to authenticate both the device and the user and upon questioning, took a somewhat negative view of more widespread use of static PINs.

• NACHA CEO Jan Estep pointed out that unauthorized ACH debits have declined in absolute terms of late thanks to the introduction of fines for excess returned items and better identification of the party initiating these transactions. On the other hand, there is increasingly evidence of fraud in ACH credit transactions, which will require greater diligence, particularly by smaller organizations that are often not meeting best practice guidelines for security.

Panel V – Where We Are Headed

• The conference concluded with a freewheeling discussion of current regulation and future directions among a panel of law professors (Ronald Mann of Columbia and Omri Ben-Shahar and Richard Epstein of the University of Chicago) and a Wall Street stock analyst (Glenn Fodor of Morgan Stanley).

• Reviews of the current legislative and regulatory initiatives came in for significant criticism, with some active questioning of whether the concerns being addressed were mainly theoretical. Several of the panelists seemed to favor the notion of having consumers seek “buy side assistance” (i.e., independent advice) rather than having them depend on “sell side regulation”

• Panelists found it difficult to predict how all of the current regulatory activity would impact payment system participants, but the implications appear negative for many retail banks. As Professor Mann put it, “Buy stock in check cashers.”

Many thanks again to the Chicago Fed for putting on such an interesting conference. Try to get to the Windy City next May for a high quality event.

Related articles:

1. Glenbrook’s Carol Coye Benson Reports on Chicago Fed’s Payments 2007 Conference
2. Field Report from NACHA’s Payments 2008 Conference
3. Heading to Chicago for Payments 2007

Today, AT&T announces a test of 2D barcodes for mobile at the point of sale (POS). This pilot will be watched with interest.  If it works, couponing/loyalty applications on the phone will no longer need to wait for chipset or hardware development to interact with the point of sale.  From Glenbrook’s perspective, the most interesting implication is that retailers and marketing services companies can develop applications for point of sale.  AT&T is wise to stay in front of this development.  AT&T will use technology from Mobile Tag Inc., a provider of universal bar code reader technology.

According to the announcement AT&T is selecting up to 12 enterprise customers to participate in its charter program across key sectors including consumer packaged goods, retail, hospitality and financial services. The consumer barcode technology can be used across a variety of mediums including indoor and outdoor signage, packaging, catalogs, television, the internet, as well as traditional print and mail advertising.

Other examples of 2D barcodes and mobile couponing:

• The Starbucks/mFoundry launch that creates a prepaid card management tool with a 2D barcode that can be read from the phone at point of sale. The hope had been that this required no infrastructure changes, but unfortunately, it seems Starbucks is adding to their traditional POS devices to read the new bar codes. (See more on the mFoundry website here)
• JCPenny and Cellfire are also involved in this area with announcements last September, 2009. (CellFire page here)

For additional information on mobile couponing on visit the archives of our sister blog Payments News here.

Related articles:

1. Mobile Payments at the Point of Sale [ATM, Debit & Prepaid Forum 2009]
2. Mobile Payments Needs a Match…
3. The Evolution from Mobile Banking to Mobile Payments

I am just returned from the 25^th anniversary International CTIA Wireless conference Las Vegas.  An estimated 40,000 people were expected to attend and from the look of things, that number seemed right.

It was encouraging seeing companies willing to travel for a conference and presenting new innovations in the mobile space.  The conference is focused on carriers with new handsets, bandwidth solutions, and partner announcements.  Wireless innovations in energy, healthcare, education, entertainment, retail and transportation all accentuated the need for speed and theme of 4G investment and broadband conservation/management.  For those of us in payments, there was a whole day at the beginning of the conference dedicated to Money over Mobile (organized by Kate Kingberger, CTIA & Javelin’s Jim Van Dyke as MC) in addition to many payments vendor booths and educational sessions.

Over the four-day conference, it was apparent that a framework is needed to untangle the confused conversation when it comes to mobile payments.  People were talking apples and oranges at times and a little clarity of language goes a long way. Glenbrook Partners has separated mobile payments into Payment Domains: Point of Sale (POS), eCommerce, Person-to-Person, Bill Payment and B2B.   (For those of you interested in the future of mobile payments at the point of sale check out the upcoming Glenbrook Partners webinar Mobile at the POS in the U.S. – Scenario Analysis)

These are the major payments themes I observed at CTIA 2010:

Carrier Billing Payment Solutions

Carriers are taking further steps to use the customer bill to fund digital download ecommerce payments.   Dollar thresholds for these payments limit the risk for the carrier.  Generally, although the ticket is low, high margins can be achieved. Richard Borenstein from Zong (more from Payments Views on Zong here) spoke on monetizing gaming and tapping into carrier billing.  Most gaming customers know their cell phone number but not their card number. Also representing carrier billing payment solutions, Ron Hirson from Boku (more from Payments Views on Boku here) spoke during Monday’s Money over Mobile sessions on applications.   Verizon and Danal announced Monday their BilltoMobile payment service. Verizon Wireless customers will be able to pay for online content downloaded from Danal’s network of participating e-commerce merchants up to a monthly limit of $25.  (See the article Will Verizon Move Bring Momentum to Mobile Transactions also on Payments News).  Wireless carriers payment solutions have typically charged fees equal to 20 – 50% of the transaction value. The new Danal / Verizon BilltoMobile service charges a combined total fee of 15% and it is unclear if other carrier payment models will follow this pricing or defend their value in the market place.

Mobile Banking Is More Than Online Banking On The Phone

On Monday, I moderated a panel with Sarah Overcash from SunTrust Bank, Peter Ho from Wells Fargo, Tim Ruhe from FiServ and Rebecca Loevenguth from Western Union to discuss the banks’ perspective on mobile payments.  The panelists identified the features of mobile banking that appealed to customers and discussed the convenience test of new mobile services.   “Place the phone beside your computer and decide – which device would I use to perform this task.”

Bringing Western Union to the panel was an interesting choice but one intended to remind us that the target for mobile bank services extends beyond typical online banking customers.  SunTrust who is targeting their offline as well as online customers with new mobile banking services echoed this point.  See the article on the session “Wells Fargo, Western Union: Mobile financial services all about convenience” in Mobile Commerce Daily.  Convenience leading to loyalty was another key sentiment echoed by Walmart’s Aaron Kribs in a subsequent panel. (Walmart exec at CTIA: Mobile commerce all about convenience, trust)

Related announcements/articles:

• SunTrust announced Fiserv as their new mobile platform provider
• Wells Fargo announced new Visa credit card alerts

Mobile Phone Card Acceptance – A Growth Opportunity

The ability to accept payments via a wireless device has been available from point of sale providers for a long time.  What has changed is that developers are now enabling that capability on a device you already own (not lease) and allow you to accept payments anywhere.  Intuit was at CTIA with its well-positioned GoPayment solution.  Many expect mobile phone card acceptance to target small businesses and reduce their potential point of sale costs.  Intuit’s access to small businesses and back office integration through QuickBooks makes it a strong player in this market.  (Other players can be found in the Washington Post coverage that describes Verifone’s  PAYware mobile for iPhone and mobile startup Square. TSYS has also launched MobilePASS for Blackberry in October 2009.)

Unattended Terminals Are Growing

In addition to the phone as a mobile card-accepting device, several other mobile point of sale devices were on display.  New technologies taking advantage of Machine-to-Machine (M2M) communication provided a glimpse of the changes in unmanned terminals and cashless vending.  (See the Teli/USA Technologies announcement here)

Point Of Sale – Sharing The Revenues

This is a big topic to summarize so quickly, but here goes. In the area of NFC and point of sale mobile payments there has been talk about consortium negotiations, and even government involvement, to share payment revenues between the banks, service providers and carriers.  The discussion at CTIA this week demonstrated that it’s unlikely to be about splitting 1-2% in fees for card payments at the point of sale unless the carriers are willing to take on the credit risk. Attendees talked more about incremental value the carrier/phone provides in location-based services, coupons, loyalty and customer knowledge. These new services will deliver carrier revenue.

Alcatel-Lucent announced their Mobile Wallet Service targeting the mobile networks operators and providing them control of the both the payment applications and business rules in the wallet.  The Alcatel-Lucent offering is a hosted service with a variety of potential payment applications including person-to-person, remote ticketing, loyalty or coupons, mobile ecommerce and proximity payment at the point of sale with NFC (with or without stickers).  (See Business Week article here) Control of the business rules in the mobile wallet in the hands of the Mobile Network Operators – now we can talk about sharing revenue!

Attorney Dax Hansen from Perkins Coie moderated a panel on international perspectives for Money over Mobile.  Dax was particularly interested at CTIA in the prospects of adding location based phone capabilities to the carrier side of potential point of sale payment services.  See the article “Mobile LBS blowing up but monetization is a challenge”.   We enjoyed a brief but lively chat on the topic of “revenue sharing versus value-added services” between banks and carriers that echoed a discussion at the Money 101 panel.  See more on the panel discussion – “MasterCard, PayPal reveal conflicting views of mobile financial services” which also included perspectives from Clairmail, First Data and Qualcom’s Firethorn.  The question is one of risk and value.

That’s all for today – more to come.  (In the meantime, refer to previous mobile payments posts on Payments Views here and see Glenbrook Partner Carol Coye Benson’s Mobile Musings here).

Related articles:

1. Glenbrook Partners at CTIA in Las Vegas, March 22-25
2. Report from CTIA – Mobile Payments Eventually
3. Report from CTIA – Mobile Payments Eventually

Are you planning on attending International CTIA WIRELESS 2010 March 22-25 at the Las Vegas Convention Center?  Jacqueline Chilton will be moderating a panel and meeting with vendors and industry leaders. We’d enjoy talking to you so please reach out.

Glenbrook’s Jacqueline Chilton will moderate Bank Perspectives, a session on innovation and consumer uptake of mobile within the SIS – Money Over Mobile track on Monday morning March 22.  Jacqueline will be joined by leaders from the wireless industry representing Wells Fargo, Fiserv, SunTrust and Western Union.

Mobile banking has become an essential channel for banks in offering electronic services to their clients but is it a revenue generator? Hearing about innovation and adoption from this panel will help banks and their vendors differentiate the hype from actual impact on consumer behavior and the bottom line.

“Mobile innovation continues to drive rapid change for business and personal interaction, and this spring’s CTIA educational program will address next generation technologies, new players and emerging opportunities,” said Robert Mesirow, vice president and show director for CTIA. “We are delighted that Glenbrook Partners’ Jacqueline Chilton will be contributing to the discussion.”

About CTIA

Celebrating 25 years as the premier global mobile marketplace, International CTIA WIRELESS 2010 brings together all industries advanced by wireless technology for three days of intense business, learning and networking in Las Vegas, March 23-25. International CTIA WIRELESS IT&E 2010 takes place in San Francisco, October 6-8. Visit www.ctiashow.com.

CTIA-The Wireless Association is the international association for the wireless telecommunications industry, representing carriers, manufacturers and wireless Internet providers. For more association information, visit www.ctia.org.

Related articles:

1. Report from CTIA – Mobile Payments Eventually
2. Mobile Payment Themes from CTIA
3. M-banking in the US and UK and the Necessity of a Consumer Focus

Glenbrook’s Erin McCune is in Orlando for BAI’s Payments Connect conference.

John Stewart of Digital Transaction News moderated an open discussion exploring the most pressing issues in e-payments. It picked up on the list of 10 pressing themes raised in the November issue (pgs. 26-32). The panelists were:

Aaron Fine, Oliver Wyman
David C Stewart, McKinsey
Andrew Frisbie, First Manhattan Consulting Group

The audience fielded questions and the panelists, moderator, and even other audience members chimed in. Highlights are as follows:

On merchant interchange:

Dave Stewart questioned the strategy of merchants positioning interchange as a consumer issue, as a jobs issue. Would merchants really lower prices or hire additional people if interchange was reduced? John Stewart raised the Australia example to illustrate how interchange was cut drastically yet merchants did not pass on savings to consumers.

On cash usage:

Cash usage is increasing. As a result of consumer deleveraging – cash and debit are perceived to be good budgeting tools. Dave Stewart observed that the single biggest growth opportunity for the banking industry is to take on cash usage (offering more carrots than sticks).

Andrew Frisbie commented that many debit users, recognizing the risk of overdrawing their account and getting hit with fines, continue to do so. It isn’t as effective a budgeting tool as perceived.

Aaron Fine shared that he rarely pays with cash anymore. Yet Dave Stewart wondered how much easily displaceable cash is there? From his personal experience, knowing the merchant perspective, he feels guilty charging $5 for a taxi. Until micropayment pricing schemes gain traction, consumer guilt may inhibit widespread use of cards for what are currently cash transactions today – for instance in a taxi. Can banks offer sufficient incentives to make consumers less concerned about merchant value proposition?

On mobile:

Dave Stewart indicated that NFC in the U.S. is still a long way out.

Aaron Fine onbserved that if you are a bank, the opportunity to increase transaction volume via mobile payments is relatively modest. But if you are a non bank – carrier or Apple for instance – payments are incremental business, and an exciting opportunity.

Andrew Frisbie remarked that from a customer perspective, who is interested in trying all these new channels? Those interested in new means of interacting with the bank (depending on the era, ATM, IVR, debit, mobile… ) are some of the least attractive customers from a profit perspective.

Aaron Fine observed that the carriers and a big retailer such as Wal-Mart together form a formidable threat to the banks, rather than retailers or carriers acting alone.

Dave Stewart reminded everyone that even those micropayment charges that are charged to the carrier bills are ultimately paid by a banking product often a credit or debit card.

Andrew Frisbie observed that as more and more electronic transactions are linked to DDA bank accounts (as recurring ACH debits, funding of a PayPal account, etc.) it makes it harder and harder consumers to switch banks.

On banks as incumbents:

Picking up on the general session that immediately preceded the session, one audience member observed that banks are in a very defensive position with a lot to lose, versus new providers with very little to lose and a lot to gain.

“Buy ‘em and run ‘em into the ground” quipped one of the panelists with a laugh. But in all seriousness, this is the nature of being an incumbent. You ride cash cow and meanwhile, have your innovative “tiger” team focus on new stuff and be ready to roll it out as customer need dictates. Someone is going to address the need, if the need really exists, so be ready.

Dave Stewart suggested that there is actually a “ton of innovation going on at banks” right now – more than in a decade. Largely due to regulation addressing overdraft fee and threatening to address interchange. New products and functionality enhancements are giving some banks a clear competitive advantage. Investment in credit card act compliance, new payment hubs, and enterprise- wide risk management give banks an opportunity differentiate. He cites the Chase blueprint card as an example of , innovation blurring lines between credit and debit. What it takes to actually change the processing for a given transaction behind the scenes is really remarkable from an operations perspective.

Andrew Frisbie, picking up on a topic from the Digital Transaction News article noted that bank product managers have needed to innovate for the first time in a decade due to Reg E, CARD Act, etc., and they will be demanding innovation from partners as well, including Visa and MasterCard.

John Stewart observed that the best thing that ever happened to innovation in a bank is the iPhone.

Aaron Fine observed that the marketplace evolving in a way that makes the core assets of the bank less valuable than they used to be. It’s not a case of innovation as usual, or innovation accelerated. It’s more drastic.

Andrew Frisbie observed that there has been considerable payment innovation outside the U.S. and that U.S. banks could derive their innovation playbook for the next five years by emulating some of the solutions overseas.

John Stewart notes that both NACHA and BAI have played a role in fostering innovation.

Dave Stewart wondered whether it is appropriate for NACHA to take strong stance on innovation, versus rule making. An audience member noted that “utility based innovation” is ideally appropriate for NACHA, delivering core, common functionality to the industry and allowing banks to do product development. [As an aside, NACHA’s supplier directory ambition ss an example of utility innovation to serve the industry.]

On EMV/Chip & PIN deployment in the US:

An audience member suggested prepaid cards with Chip & PIN that could be sold to tourists and business people in airports for US travelers heading overseas. [Note: it was unclear whether the audience member had actually seen this product or was suggesting it as an industry opportunity – Glenbrook is in favor of this idea, given the popularity and number of comments we received on our posts highlighting the frustration of using US mag stripe cards in Europe.]

Dave Stewart noted that while EMV introduces card security that doesn’t exist today in the US, what are the incentives for banks to implement it?  Thus far card issuers have not seen a compelling reason.

Aaron Fine notes that the business case isn’t strong enough, that  fraud reductions are not great enough.

On the impact of social networking:

Dave Stewart notes that social networks are a good opportunity to get customer feedback. They may also provide more touch points for consumers to purchase. But he doesn’t see a provider of social networking being a big player in payments.

Andrew Frisbie notes that here is a big cultural barrier – hard to imagine Facebook thinking like NACHA or a bank. But social networks are a highly effective channel for branding, customer service, etc.

Aaron Fine notes that the flow of information available via social networks is amazing, but that the social networks are not ready to build a payments network accessing the information flow, despite the desire to monetize it.

Related articles:

1. Social Networking & Banking at NEACH on Monday – Great Event
2. Customer Engagement Through PFMs [ATM, Debit & Prepaid Forum 2009]
3. Mobile Payments at the Point of Sale [ATM, Debit & Prepaid Forum 2009]