Payments Views from Glenbrook Partners

Bitcoin, the Two-and-a-Half Party Model, and New Payment Rails

2013-06-16T15:45:58Z

One of the immediate applications for Bitcoin and the math-based currencies that are emerging in its wake is its potential as a new set of payment rails. Rather than the incumbent industry’s reliance on the four party model and its hierarchy of providers, authorization messages, and settlement steps that are necessary to connect the payer and the payee, Bitcoin and other math-based currencies promise a simpler cash-like push payment.

It’s not quite that simple of course but it’s not far off. Call it the two-and-a-half party model. There are, of course, the payer and the payee. The other half provides services such as currency exchanges, cash-in services to purchase bitcoins, trading desk, secure storage, and more.

Bitcoin is all about push payments between two end points. The facilitators of the Bitcoin ecosystem avoid settlement risk because of Bitcoin’s funds push nature. There’s no authorization message and settlement lag. Once value is converted into btc, transactions run over the peer-to-peer communication protocol that provides the payment rails. This works because every device, from the Internet Protocol’s point of view, is more or less equal. Despite our reliance on huge intermediaries like Google and Facebook, the Internet is a peer-to-peer scheme. Bitcoin and other digital currencies are simply using that Internet DNA in value exchange.

Putting aside the “bitcoin as store of value” discussion, payments professionals should consider how these math-based currencies could function as payment rails. As a Mashable article put it, they have the potential to function as the currency equivalent of Esperanto, an intermediate lingua franca in the service of value exchange.

International Remittance Rails

The potential for this approach in international remittance is squarely in the sights of multiple startups, from BitInstant to OpenCoin. While merchant uptake is tiny, use cases are already in the market. Expensify has added an interface supporting bitcoin transfers between its accountholder and independent contractors performing project work. Other than providing the capability, Expensify has no involvement in the transaction. Remember, this is person-to-person payment. And it is a no to very low cost transaction within the Bitcoin ecosystem. What it costs to convert bitcoin to the local fiat currency is another matter.

FX Built-In

A scheme (surprisingly) omitted from the Mashable article is OpenCoin, Inc’s Ripple currency. Ripple’s designers, as with other digital currency builders, have taken more than a few pages from the Bitcoin book but they are all trying to improve on Bitcoin’s limitations. While transaction speed is one (more on that in a later post), Ripple also includes a trading market capability for multiple currencies. Ripple “gateways” or exchanges will need to exist, of course, to move the value across the Ripple network’s border but the protocol allows value to be stored in individual currencies.

Getting Onto the Rails

As a payment vehicle, Bitcoin is largely useless without practical currency exchange capability. For first time Bitcoin participants, performing the currency exchange function is confusing at best if not baffling. Most exchanges ask for one’s banking information, an immediate stopper for most of us.

Using a cash-in facility is one way to begin. LocalBitcoins.com is a market maker that connects buyers and sellers. My nearest contact operates out of a Starbucks about 15 miles away.

Another is BitInstant, an outfit that facilitates transfers among various exchange accounts including Mt. Gox. The firm also offers cash loading services at over 700,000 locations through its affiliation with Zip Zap. You can go to a local CVS and have your purchased bitcoins sent to your public Bitcoin wallet address for a 3.99% fee plus a $3.95 fee to the ZipZap cash loading network. BitInstant has coverage in the US, Turks and Caicos, Puerto Rico, both the U.S. and British Virgin Islands, Cayman Islands, Bahamas, and in the slightly cooler Russian Republic, Kazakhstan, and Ukraine. Not cheap at an 8% FX cost, but it can get you in the Bitcoin game.

Bitcoin’s impact on the foreign exchange market is infinitesimal compared to the nearly $4 trillion in daily spot or cash foreign exchange markets. From that perspective, there’s only upside.

Merchant Transaction Privacy

An intriguing issue and potential downside for using Bitcoin payment rails, given its publicly available transaction ledger, is a merchant’s ability to keep its transaction flow private. If the merchant’s public Bitcoin address is not thoroughly obfuscated (at extra cost), it is possible to determine the transaction volume going into and out of that bitcoin wallet, revealing not only a coffee shop’s customer receipts, for example, but potentially revealing some portion of its supply chain partners. Since a merchant’s supply chain is often a closely held secret that provides no little competitive differentiation, the block chain’s lack of privacy could be a real concern for merchant uptake.

There are ways, of course, to programmatically obfuscate these transactions by breaking them up into random sizes and sending them to programmatically generated wallets belonging to the merchant. Such services already exist in the Bitcoin ecosystem. However, unless the merchant is savvy enough to understand the privacy implications of the block chain, it’s not an obvious step.

There are other concerns about Bitcoin, transaction speed within the Bitcoin ecosystem is among them that we will address in an upcoming post. In the meantime, we continue to evaluate the potential for what some consider to be an open source payment gateway that speaks Esperanto. We look forward to your questions and comments.

We’re using the emerging convention of capitalizing the Bitcoin ecosystem and leaving the currency bitcoin in lowercase. The currency is abbreviated as btc.

How many payments professionals does it take to hire a bike? Three! (A story of Chip & PIN)

2013-06-12T21:10:36Z

Bicycles are my preferred form of transportation so I was eager to explore London using the Barclay’s-sponsored bike share program. Unfortunately, you need a Chip & PIN card to rent a bike using the automated stands and all I have are U.S. issued mag stripe cards. I was foiled:

After I tweeted about my disappointment (above) a number of payment geek friends offered to help me out (including Frank Mastrangelo at Bancorp who offered to issue everyone at Glenbrook a Chip & PIN prepaid card for travel).

Locally, here in London Dave Birch of Consult Hyperion (payments professional #2) came to the rescue and gave me a prepaid card of his own, kindly loaded with a bicycle budget. But when I went to use it I realized that I didn’t ask Dave for the PIN (or if he told me I promptly forgot it!).

Luckily I was with Chris Jones of PSE (payments professional #3) and he has an annual membership in the bicycle scheme. So he simply inserted his little key fob and off I went:

After a flurry of emails with Dave I did eventually get the PIN for his card and was able to hire a bike to get to my meetings in the City of London later in the afternoon.

This little cycling fable illustrates a troubling breakdown of the International card brand promise, something we’ve explored previously on Payments Views (here). And it wasn’t just bicycle hires – I wound up getting cash from the ATM and using it to buy tube tickets and train tickets (rather than wait in the long queues at Waterloo to pay a person at the counter with my mag stripe card). As a result I now have a huge handful of very heavy British coins that I received as change from the ticket machines.

I realize that the US is planning to move to EMV. But when we do eventually shift over to EMV, we’ll be using a combination of Chip & PIN and Chip & Signature (it’s up to the Issuers) so I am not entirely sure that this problem will be resolved. Just in case, I’m going to take Frank at Bancorp up on his offer.

The Future of B2B Payments – And Suggestions on How We Might Get There

2013-06-11T12:32:00Z

I am in London this morning, where I had an opportunity to present a vision for the future of business payments at Experian‘s Payments Strategy Conference 2013. Acknowledging that it is always dangerous to make predictions, this is what I envision for the future of B2B payments:

Interoperability – I expect the future of business payments will be dominated by an ecosystem of interoperable solutions, across ERP and accounting platforms, supplier networks, and payment schemes, so that data flows freely between counterparties and their preferred vendors.

Track and Trace — As a result of that interoperability there will be transparency so that suppliers understand when they will be paid, and can plan accordingly. From our B2B payments work here at Glenbrook, we’ve heard time and time again that predictability is more important than speed.

Rational Transaction Pricing — And finally, in the future, B2B transaction pricing will be determined not by the payment method (wire, bank transfer, check, card) but by a combination of factors including: urgency, finality, transaction value, and the manner in which remittance data is delivered (PDF, via a web portal, or in a system-digestible format).

That sounds good doesn’t it? Interoperability, predictability and value based pricing, what’s not to like?

How on earth do we get there? I have six suggestions for you:

1. Shift focus to match changing business demographics
As an industry, we need to re-align our focus to match the changing nature of business. Manufacturing is no longer the powerful economic force that it once was – at least in developed markets. Distribution is growing and increasingly relying on the Internet, replacing costly sales teams, and creating opportunities for electronification. Services are booming and companies in the service sector often sell to both consumers and other businesses. They are far more likely to have embraced card payments. Recurring transactions are evolving as an important, underserved need of services businesses.

An important related trend is the movement from a traditional employee model to using more contractors, individuals acting as businesses, particularly as economic recovery continues to be weak and businesses are reluctant to take on full time employees.

The consequence of trend is that businesses must deal with more unknown counterparties. Counterparties are more likely to be small businesses or even individuals and these smaller, growing businesses are often less well served by banks because their needs fall between retail and enterprise platforms.

2. Mimic consumer technology
Successful enterprise solutions will mimic consumer technology. They will endeavor to make solutions easy to use, provide customization and immediacy, and mask complexity. Consumerization creates a sense that things “just work.”

As you develop next generation tools for your business customers, look toward examples such as these:

And not this:

3. Embrace technology to mask complexity
While it is important to make things look good and be easy to use, even more important is technology that overcomes the inherent complexity of overlapping solutions in the B2B ecosystem. APIs make it much, much easier for various cloud-based solutions to develop interfaces. And as more and more enterprise solutions move to the cloud, and businesses of all sizes gradually adopt them, this becomes a key driver of interoperability.

So you, Buyer, use your system, and as a Supplier, I’ll use mine but eventually they will talk to each other, so neither of us winds up hand-keying invoice and payment information into our accounting software. Back office bliss.

4. Resist network fantasies
But in order to achieve interoperability we, as an industry, are going to have to give up our network fantasies. What’s a network fantasy, you may ask? Solutions have to work for BOTH buyers and suppliers in order to achieve critical mass. The network effect is very, very powerful, but it is also very hard to achieve. [More on network fantasies here.] Beyond the card networks and PayPal very few payments network fantasies have been realized.

Glenbrook estimates that no more than 5% of B2B spend is through B2B networks. If B2B networks that currently compete with one another for scale would play nice with one another, and be interoperable, then perhaps the pie would grow larger.

eInvoicing is on the rise. Largely through mandates – Mexico recently made an announcement, Brazil has established requirements, Northern Europeans have been at this for awhile, and leaders in the space. How can we leverage the movement toward delivery of eInvoices to drive electronic payment? Is there an opportunity to facilitate broader participation and interoperability as a result of eInvoicing mandates? Can we utilize these platforms to pass the critical remittance info (“What’s this payment for?”) from buyer to supplier?

5. Recognize that there are many ways to pay and be paid
Let’s ponder for a moment the variety of methods that businesses use today to make payments (figure below, via gtnews and AFP). What’s striking here is the persistence of checks – they are listed twice (cut by you, cut by your bank)!

Providers that hope to capture 100% of a company’s payment flows, whether making payments via AP or receiving payments via AR, are setting themselves (and their investors) up for disappointment.

6. Choose a sustainable business model
One reason that payment solutions or schemes aren’t gaining traction with business buyers and suppliers is that they may not have a sustainable business model. Adoption is predicated on the fact that the person, or company, paying the provider is doing so gladly for benefits received. Consider two examples:

The payer may not be aware they are paying: the FX that businesses pay for their nuisance cross-border transactions because they are so focused on fees, not spreads.
If payer is begrudgingly paying: suppliers accepting purchase cards for invoiced transactions that have historically been paid via check or ACH.

In neither of these cases is the entity paying for the payment solution delighted. Delighted customers are dependable customers, delighted customers migrate transactions to your solution, delighted customers happily accept your payment method and encourage their customers to use it, too.

Very recently Ariba announced that it is going to partner with Discover to offer a payment solution [more here]. We have many, many open questions – but what we do know is that this is potentially a large-scale experiment with value based B2B transaction pricing.

I’m eager to hear whether your vision for the future of business payments resembles mine — reach out if you’d like to discuss.

Considering Bitcoin’s Role in Value Transfer

2013-06-09T16:56:58Z

Now that the recent fever of Bitcoin speculation that swept up both a worried global constituency and a hype-hungry media has subsided, it’s time for Glenbrook to examine the Bitcoin ecosystem in particular and math-based currencies in general. While there is still no end of open questions, certainties have emerged as well. This Payments View post addresses a few of them. It is also the first of a series by Glenbrook on Bitcoin’s role in value transfer. While the Bitcoin currency has strong commodity-like characteristics—gold does come to mind—it is the potential of Bitcoin in value transfer of all kinds and payments in particular that has caught our imagination.

We’re not alone. Scores if not hundreds of Bitcoin start-ups are seeking funds from the smallest of angels as well as the VC archangels on Sand Hill Road, NYC, Boston, and almost everywhere else.

Now that Bitcoin has survived at least two major crashes and the accompanying media hype cycle has subsided (see the Google Trends chart below), it’s time to get real on the topic. Let’s begin with a few things we know.

In Bitcoin, Some Trust

Bitcoin is a resilient currency because of the trust a broad set of users have in it and that’s despite recent history that’s tested that faith.

Bitcoin’s been through several wild rides, not the least of which took place in April. That ride was fueled by a number of factors, including:

The media hype cycle (see the previous chart). While non-state, fiat currencies deserve thoughtful examination by economists and regulators, there was a lot of hype. But not even close to iPhone levels. (Just to keep this in perspective, check this version of the chart).
Well founded concerns for currency value and availability in places like Cyprus and Argentina
The organic spread of interest in Bitcoin as investment and currency
Manipulation of exchanges. A look at the chart of Bitcoin value and volume (below) is revealing. Immediately after btc peaked at $230 on April 9, a precipitous drop began, fueled by DDoS attacks on dominant exchange Mt. Gox. Panicked Bitcoin holders fled, driving the price down by 70% in a week. And then btc trading volume spiked once more.

Since the April ride, the dollar value of btc has fluctuated between $100 and $150, settling down in this week’s range at just over $120. Homeland Security’s investigation of Mr. Gox as an unlicensed money transmitter didn’t affect price at all. Indeed, it’s risen since then.

It’s this price stability that is significant. It’s proof that there are some (unknown number of) hundreds of thousands who believe in Bitcoin.

In Dollar Terms, Not a Big Deal. Yet.

Bitcoin is proof we love shiny new things, excitement, and a bit of mystery. But the numbers tell a modest little story about an experimental new currency that’s getting some traction. A little perspective is in order:

At the current range of value of $125 / btc and 11.249 million btc mined, the total dollar value of all that btc is just over$1.4B. Not bad at all for an experiment but, for example, Bitcoin’s “market cap” is less than half the annual sales of California grocery chain Raley’s, which occupies the number 100 spot on the NRF’s 2012 Top 100 Retailer list.

In other words, we’re not talking Big Money here. Yet. It’s the “yet,” of course, that’s gotten our attention.

It’s Still Amateur Hour

While angels, archangels, some nefarious types, and just plain miners evaluate their options, entrepreneurs by the hundreds have been brainstorming new ways to make money in Bitcoin. As a programmable platform, it has endless potential (more on that topic later).

But simple development of the transactional infrastructure around the Bitcoin core has been a first order of business because a functional Bitcoin ecosystem requires currency exchanges, trading platforms, wallets for individual uses, and vaults, among others. Exchanges and wallets, in particular, have been the focus of early entrepreneurial effort and the results have been, from a security point of view, mixed.

Multiple exchanges have been hacked via the standard toolkit of social engineering, phishing for malware delivery, and other tricks. Some of these breaches were childishly simple. While actually doing something with stolen btc appears to be quite difficult, it’s hard to be confident in such weak operations.

Of more concern is the market concentration of exchange functions in Mt. Gox. With some 70% of the overall volume, over reliance on its services cannot be healthy.

Given the panic sown by the DDoS attacks against Mt. Gox, Bitcoin needs more redundancy at exchange points and better run exchanges at that. To that, the FinCEN’s classification of miners selling bitcoin for profit and exchanges as money transmitters could be a very healthy stimulant to professionalizing the ecosystem. Acquisition of money transmittal licenses is a fiscally non-trivial activity, requiring $1 million and more in legal fees, licenses, and effort to cover the US. If investment follows talent and has an ounce of prudence, then stronger operators should emerge, fuelled by smarter money, to create more reliable, secure services for the Bitcoin community.

Bitcoin Will Be Hard to Kill

Internet history demonstrates that once a new capability is introduced that gains user traction it is hard to dislodge. This is particularly true for services that operate at multiple levels. Bitcoin operates as a P2P network that has its own API. Bitcoins can be programmed via its transaction scripting language, a powerful way to define novel, flexible transactions. Its JSON-RPC APIs expose services valuable to client-facing wallet and other user applications.

Open source, decentralized tools have legs. The star-stable Internet is growing another leg. Whether or not it becomes the native means for programming money on the Internet won’t be decided for years. Even if governments regulate it into the shadows, Bitcoin will be very hard to kill.

Glenbrook has assembled a practice around math-based currencies for two constituencies: first, for members of today’s payments industry trying to discern opportunity in the Bitcoin ecosystem and for Bitcoin entrepreneurs confronted by the incumbent payment industry’s rules and complexities. We’re looking forward to exploring the potential of what looks certain to become a permanent component of internet infrastructure. Let us know what you think!

[Editor's Note: Follow Bitcoin news on our PaymentsNews.com daily news blog!]

Is AribaPay a Game Changer for B2B Payments? Maybe. For now we have more questions than answers.

2013-05-24T15:46:41Z

Recently Ariba/SAP and Discover announced that they intend to “transform” commercial payments. AribaPay is either the most significant B2B payments news in decades or just one more courageous entrant into the discouraging battlefield of B2B payments networks.

We’re optimistic, and encouraged to see two strong players enter the fray. We hope they will tackle head-on some of the obstacles that have suppressed the adoption of electronic B2B payments. But it all depends on what AribaPay actually is.

Who Are the Players?

Ariba is a procurement network – engineered to help enterprises improve the efficiency of their processes. Ariba is the largest of the B2B supplier networks – largely because it is focused on non-strategic spend, the stuff that all businesses buy, regardless of industry. This enables them to reach a wider range of suppliers than networks that are focused on industries with tight supply chains (e.g. chemicals, semi-conductors, automotive, transportation, etc.). There are now nearly 1 million participants in the Ariba network.

Today, Ariba focuses on all but the “pay” part of procure-to-pay, enabling the procurement and AP departments of large buyers to streamline the process for conducting RFPs, issuing purchase orders, reviewing incoming invoices, matching against purchase orders and approving payment. The end result are files of payments transactions, variously submitted to check printers (internal or external), or to banks (for ACH or wires).

Ariba’s customers are an impressive set of large enterprises, and its close relationships with these firms are undoubtedly part of what drove SAP to acquire Ariba in 2012.

Discover, of course, is the “other card network”, and the only major network that has historically not had much B2B focus. But this may actually be in AribaPay’s favor, as Discover is thereby unconstrained by the dominant B2B card business model. Unlike the other card networks, Discover doesn’t have a lot of stake in commercial card interchange. Discover has also recently demonstrated commitment to opening the card rails to innovators such as PayPal. This most recent announcement clearly indicates Discover’s desire to capture value from the disjointed B2B payment value chain.

Before we continue, a brief tangent to explore The B2B Challenge:
Business supplier payments from corporate buyers to their vendors are an enormous opportunity for paper-to-electronic conversion. To this day, however, checks are still the primary method used for these payments – particularly to the “long tail” of less strategic suppliers that most enterprises have to cope with. The payments industry has tried for years to come up with solutions that scale – and has failed repeatedly. See Glenbrook’s post on “The Problems with B2B Payments” – published in 2009, sadly it is still an accurate view today.

AribaPay – What We Know

AribaPay is clearly the new SAP/Ariba’s effort to enter the “pay” piece of the procurement value chain. This has been long expected (pre-dating the acquisition), so we were fascinated to see it come to life.

As we understand it, in the new AribaPay scenario, approved payments would sent to Ariba, who, in partnership with Discover, would determine their handling. The buyer will determine the payment timing – according to the terms it has negotiated with suppliers or according to its cash flow needs – and Ariba will maintain a cross-reference table mapping each supplier’s ANID (Ariba Network Identifier) and the supplier’s merchant ID on the Discover network. The buyer’s bank account is debited, crediting a clearing account at Discover, who in turn credits the supplier based on the merchant ID. The supplier receives funds in their bank account via ACH or FedWire, just as merchants do when they are funded for purchases made from them with Discover cards.

AribaPay is NOT a card payment, as the product’s FAQs make abundantly clear: “AribaPay is not a commercial card, p-card, buyer-initiated card, or any other version of card product” and Discover’s Roger Hochschild emphasized when we spoke. Suppliers will not have to establish a merchant account with Discover to accept payments via AribaPay. But presumably AribaPay will take advantage of the size of the existing Ariba supplier base.

Remittance data (which explains to the supplier what the payment is for), will be conveyed from the buyer to supplier in a variety of formats. Obviously the supplier can log into the Ariba network to find it, but Peter Lugli at Ariba explained that there will be options to request information in XML, EDI, the short-form EDI STP 820, or CSV. The extent to which the AribaPay solution integrates with supplier accounting and ERP solutions to facilitate receipt of remittance information is unclear. But presumably, it will be very easy for SAP suppliers to integrate with AribaPay. And, of course, the supplier can elect to receive an email with the remittance data attached.

AribaPay – What We Don’t Know

What’s the pricing model?

Pricing for the service has not been announced yet. If Ariba and Discover are taking such pains to make it clear that AribaPay transactions are not card payments, then perhaps we can presume they will not involve card-like merchant discount fees. The market seems to have settled on a 50-cent fee for eChecks in the SMB market (via Intuit PaymentNetwork, PayPal’s pilot B2B pricing, solutions like Bill.com), while large corporates are accustomed to paying mere pennies to originate an ACH. So, relative to existing solutions, there isn’t a lot of room for significant per transaction revenue.

The real question is whether there will be an “ad valorem” (percent of value) fee model. Cards have it, ACH and checks don’t. What will AribaPay do? In our view, a better way to earn ad valorem revenue on these transactions would come from offering early payment terms to suppliers in need of working capital financing. So far, the description AribaPay hasn’t mentioned this – we think it is an area of opportunity.

What exactly is Discover doing?

Ariba already has a network of suppliers, and the technology and systems to route procurement and payment information between suppliers and buyers. What does Discover add? Here are some possibilities:

Discover card-accepting merchants are automatically enrolled as suppliers on the Ariba network. (Discover indicated that it will use its network rules to ensure that the top acquirers, who account for much of Discover’s coverage of merchants, accept this “new transaction type” – but it is not clear what this means.)
Discover takes over the message routing and handling between buyer and Ariba, specifically handling the crediting of supplier/merchant accounts via ACH
Discover merchants are auto-enrolled as buyers in the Ariba network (we know, that is far fetched – but possible)

What about current Ariba network suppliers?

Will current Ariba suppliers have to opt-in to AribaPay or will they be auto-enrolled and receive a “you’ve got money” message? This would be similar to PayPal where the supplier would simply have to log in to provide instructions on where to deposit the funds.

Requiring suppliers to sign up can creates an enormous amount of friction. On the positive side, we believe Discover will be viewed by suppliers as a relatively reliable and secure place to have sensitive bank account data stored, perhaps more secure than having customers store this information directly.

We’ll be watching closely. In the meantime, you can learn more about AribaPay here:

The Bill from Ipanema: A Foundation for Brazilian Mobile Payments

2013-05-24T15:09:46Z

I’m just back from a trip to Brazil and while I was there, the government introduced long-awaited legislation on mobile payments. This is an important task as Brazil now has 265 million mobile subscribers – more than 1 per inhabitant. Needless to say, the machinations of politics kicked off immediately and there will undoubtedly be many amendments before the bills passes through Congress. Nevertheless, the core legislation presented by the government is worth noting.

First of all, the bill is not limited to mobile payments. It represents the latest in a series of payment system reforms in Brazil that will have significant impact on the overall financial services landscape.

The key provision of the bill is the definition of a new category of “payments institutions” that will fall under central bank supervision. This broad definition will encompass a range of providers, including mobile money providers (including Telco’s, but only if they are involved in the payment process), digital wallet providers and, significantly, card companies and merchant acquirers. These rules also apply to banks that want to offer mobile payments. This is a bold step that will significantly shape how and who can establish payments schemes. This provision follows the general direction that Europe has taken – a direction that the U.S. has not (yet) chosen to follow.

The bill also requires interoperability of payments schemes. Mobile payment interoperability is also a bold goal in a country where simple telephone interoperability doesn’t work that well: within Brazil it is costly to reach a mobile number on a carrier other than your own. Performance across carriers is also relevant for mobile payments. Case in point: a colleague in Brazil noted that it had taken five hours for his SMS to reach someone on another carrier. There are also many instances where people have multiple cell phones (or SIM cards) on different carriers to minimize costs. (This explains why there are more mobile subscribers than Brazilians.)

Jumping ahead to mobile, the delays between mobile operators might be okay for a P2P payment but certainly won’t make the cut for in-store transactions in Brazil or anywhere else in the world. Can mobile payments catalyze improvements in the quality and cost of cellular transmission? The issue of, “Shall I pay you with your digital wallet or mine?”, is another huge barrier. Let’s see if Brazil can achieve something that we are far from achieving here in the U.S. Even as it may take some time to achieve interoperability, digital wallets in Brazil will no doubt proliferate in Brazil as they have here in the U.S. and establishing a roadmap will be a key ingredient for success. Goooooooooool Brasil!

The Brazilian bill clearly states that one of its goals is financial inclusion. Although it does not go so far as to define funds stored on a mobile device as an account, it does require that the funds be maintained separately from the funds of the mobile payment provider. While Brazil has achieved a greater degree of bank account usage and financial inclusion than many other countries – ensuring that mobile payments are secure and accessible will go a long way to help the 45% of the population that still doesn’t have access to formal financial services.

We’ll be following this as it goes forward. The central bank has 180 days to provide the framework and rules to make all this happen. This will be especially timely for the first wave of mobile providers like Zuum, a partnership between MasterCard and Telefonica (called Vivo in Brazil), that was launched as a pilot within the past two weeks. Stay tuned …

Think Big: What Could Change Our Industry

2013-05-25T17:04:05Z

Here are some thoughts on big actions that industry incumbents could take to strengthen their positions and the U.S. payments industry. What do these ideas have in common? First of all, they are infrastructural or market-wide. Secondly, they all ask one or more incumbent constituencies to bite the bullet – and accept some reduction of current revenue (aka “cannibalization”) in order to secure a stronger future position. Can they do it? Christenson talked about “The Innovator’s Dilemma” – maybe this is the “Incumbent’s Challenge”.

Rethink CNP

The card networks could issue new rules specifying secure “card not present” transactions, with liability protections and interchange close to point-of-sale parameters. Could apply to cloud wallets but also to “card on file” transactions which meet certain card-network-specified standards.

Dongles for All

Card issuers – credit and debit – could distribute mobile card acceptance “dongles” broadly to their customer bases. After all, it’s just a way of getting deposits in, right? Card networks could support with rules and interchange structures to support P2P and other domain usage.

Commercial Card Economics

The card networks are getting shut out of the serious B2B opportunity – particularly in cross-border payments – with unrealistic interchange levels. Drastically lower (and capped!) rates could open up much larger opportunities.

UPIC for All

Banks in the United States could support a universal account-aliasing system that would be used for all domains (B2B, P2P, C2B, etc.). The Clearing House’s old “UPIC” scheme is a good example – Australia’s BPAY system is even smarter.

Faster Payments

Banks could create a real-time, broadly used system similar to systems in place or in implementation around the world. Faster, better, cheaper – more of my thoughts here.

Dollar Chip?

Speaking of incumbents, maybe the Federal government could issue digital money? Canada’s already thinking about it (see: MintChip).

What do you think? Let us know.

Live Blogging Finovate Spring 2013 San Francisco

2013-05-25T17:48:01Z

It’s Spring in San Francisco, so it must be time for the annual Finovate conference. Once again, Eric and Jim have pulled together an impressive group of companies and all my favorite payments geeks are in attendance, eagerly awaiting the start. Up on stage for the kick off Eric tells us this is the biggest Finovate ever; it feels like it! [Learned later that there were 1250 attendees]

For the un-initiated, Finovate is a two-day marathon of financial tech demos from start-ups launching new solutions as well as incumbents showing off new products and features. Each company gets 7 minutes and there is no PowerPoint allowed – as I type this there are a number of people making offerings to the demo gods.

This is one big long post and will be updated over the course of the conference. The demo schedule is listed below. You can use the links immediately below the schedule to jump ahead by session. I tried to keep my editorial commentary [in brackets]… pls forgive typos, incomplete sentences, etc.. Presenters, do not hesitate to contact me to clarify/correct any mistakes as appropriate.

Jump ahead by session:

Session #1
Session #2
Session #3
Session #4
Session #5
Session #6
Session #7
Session #8
Best of Show

SESSION #1

EyeVerify

Demonstrating how hard it is to log into mobile banking from your phone – fat fingering, etc.
A safe, simple and secure replacement for outdated authentication – using camera on the phone; actually the video at 30 frames a second; process in under 1 second
Pattern-match blood vessels on your eyeball – apparently unique and stable over time
Q: what if my eyes are bloodshot (I’ve been drinking, my allergies are horrible) A: the pattern stays the same, even if your
Requires at least a 2 megapixel camera, supports iOS and Android
Claim better than voice, less issues with background noise. Supposedly less socially ackward than speaking to your phone [I don't buy this]
[This Q&A is too contrived... ]

Leaf

Easy for small and medium biz to jump on mobile bandwagon, get rid of all the junk on their sales counter. World’s very first built-for-business tablet for business; with “Leaf Friend” to help you get setup
Payment agnostic “Payment Switzerland” – support 30 major processors, gift card wallets, etc.
Accepts mag stripe or Chip & PIN
Demonstrating check out with PayPal mobile wallet – quick and easy
Also demonstrating website where business can configure
Tailor functionality for different verticals < apps to revolutionize small and medium businesses, the typical and not so typical
But wait, they are platform, too: Leaf app store for developers to layer on top of Leaf < he admits that this all sounds like “delusions of grandeur” and that “VCs don’t like this”
Announced a reseller network, and a set of tools that reseller partners can use to onboard merchants, configure etc. in order to deploy a whole army of “Leaf Friends” to build the ecosystem

TrustEgg

Friends and family can contribute to a trust for children, each contribution can be accompanied by a note and picture
Funds invested in a money-market account
Social network integration makes it
7.5 yrs ago, neice just born, accountant at a bank, we should save for her future! Family said: you are an accountant, you work at a bank: figure it out
Market: parents save 1.3 Trillion for their kids
Even lower income families have accumulated $14,000 saved for kids when they turn 18, but often in a low interest rate savings account
Alternative are 529 plans, gov’t tax advantaged – but only 3% of families are using – too complicated, too many choices,
TrustEgg, simpler, earns market rate of return, easy for friends and family to contribute
1000 users so far, sent on average 1.8 invitations, average account balance $150 after two months, majority of funds from someone other than the parents
Partnering with banks and institutions, first partner 1to1fund.org that provides matching funds for low income fa
Co-founder is the Ben Bernake of virtual currencies – used to manage second life’s economy

Narrative Science

“Human insight at Machine Scale” = platform that takes data, figures out what it means, and writes a narrative that explains it in natural language
Not by calculating, interpreting but by simply reading data in narrative format
can be used for business process data, educational data, gov’t policy, sports, real estate, etc.
A few financial services applications: investment research, attribute reporting, client portfolio review
Highly personalized reporting
Example: ratings analysis on 1000s of equities, but only so many customers have means (tools, analysts, etc.) to analyze data, but larger market for readable, narrative version – sample, eight page historical perspective, industry analysis, pretty format, and ready to go in PDF
I don’t think this replaces a CFA with human judgment but it would provide them something to work from
Probably better for client statements
Speaking of which… working with Personal Capital, showing examples of “stories” each for “an audience of one”

Quantopian

The world’s first algorithmic trading platform in your browser! [I can barely type algorithmic, need more coffee]
Demo’ing development environment, creating rule to track price of IBM and if price goes above moving average…
Test using tools provided by Quantopian — back test against ten years of data to check performance of your algorithm
Test how you do in live trading; then deploy with one button [this is actually pretty cool]
In just minutes develop an investment theory and deploy
Showing previous trade — history,
And of course you can check in from your phone on the go
Choose huge cross-section of stocks; use social data, public filings, gov’t data, any other info on the web
Algorithms are private and members retain intellectual capital — although many users share and mimic others to learn and improve
Check it out and apply for a live trader demo account

FIS

Paydiant + FIS illustrating bank wallet experience
“Banks should not concede wallets to anyone else!” all about bank brand and bank control of the customer experience, designed to integrate with existing applications like mobile banking
Either a reference app or tools that you can build into your solution on a white label basis
Demo, logging in using 4 digit passcode (not your eyeballs),
Load any card, not just those from your bank; aggregate offers (from various sources, or create your own); full digital receipts
Nice big green pay button, scan barcode presented by the POS terminal – no card data revealed to the merchant POS
Now demonstrating pay at the table in restaurants, receipt has a bar code that you scan using the app, ties in coupon that he demo’d
Now demonstrating online bill pay using bank mobile wallet, scanning QR code off the bill / statement. Can change the date of the payment before schedulging. Also registers the payee biller as one of your payees in online banking for future use
Now we are pre-setting up a withdrawal from checking account, then visiting ATM and getting money that much faster [is this really necessary?]

P2Binvestor

I want to “fund your brains out” - Lending Club meets receivables funding
Growing, thriving businesses that can’t get sufficient capital to grow
Leverage receivables at a more affordable cost – extend lines of credit to business, pay crowd funders, 7-9% APR passive investment; 60 day liquidity
Crowdfunding lowers cost of capital, using technology to make it easy
Currently only open to accredited investors, view dashboard to start, get updates on your investments, and upcoming releases. Portfolio, transaction history, etc.
Load funds into your account, using Dwolla [really?]
Buying a proportionate percentage of every invoice in the portfolio [remember, receivables financing, so you are lending against the small businesses pending payments from larger customers that are more secure]

Microstrategy

Usher the first mobile identify network
Establish identity that replaces plastic credit cards, tokens, passwords, etc.
Application presents one time QR code, good only for a few seconds — scan with Usher app, access is granted, screen refreshes automatically; nothing passes between the website and the phone
Demo – calling customer service rep, asks for current Usher passcode, read out to rep to validate you are who you say you are
Can lock down that the identify with voice recognition
Can use it to pay for things, POS system presents QR code, scan with Usher app, then select preloaded credit card.
Not a payment solution, work with various partners, payment methods
Usher can scan POS, or POS can scan Usher presented QR code [this is very similar to Paydiant, previous demo]
Sign a check with eSignature and Usher stamp [I am unclear on how this is working], then scan and deposit
Also replace physical keys and
Audit trail for all interactions

OpenCoin

Chris Larson, of OpenCoin, formerly of Prosper and eLoan
Second generation of the Bitcoin concept
New global, math-based currency called Ripple
Global payment network that allows anyone to send any currency, irrevocably, for free “enabler of a new global payment system”
Ripple is a distributed open sourced protocol, wallets integrate,
Multi-currency — using Ripple as the native currency, a currency like Bitcoin that is without geographic source or central authority — that can be traded at established rates for other currencies. Can have Bitcoin in Ripple wallet, can use it to send Bitcoin to someone else.
Goes through a process of “consensus” to send via distributed currency exchange. Anyone can put out a bid/ask with any other Ripple member, thus creating “pathways” to send funds. Appears to send much more quickly than sending Bitcoin.
Q. What if I want to send dollars? You can store multiple currencies in your Ripple wallet.
[Graphics of the live network, demonstrating "trust paths" are really cool, I'll grant him that]
“Federates networks,” enabling transfer of funds between networks without “trust paths” between them
Open protocol, no fees, no licensing, free to use — inviting developers

We’re on break for 3o min… off to find coffee. More later.

SESSION #2

Wallaby Financial

Mission to help consumers get more out of their credit cards and make the most of financial services products
Existing: Wallaby Wallet and Wallaby Card
Existing: Uee the Wallaby App to look up the right card to use in any given transactional situation
New: But now, moving beyond POS, to Wallet Boost – launching today
Leveraging Intuit to connect with banks
[ugh, demo gods didn't like their offering]
Want a new bank? Go through a few questions (e.g. approx credit score, location, favorite hotels, whether pay or revolve balance, ever use a balance xfer?)
Figure out what kinds of cards you already have, new ones you should get to save even more, last 90 days transactions, then faciliate application for new credit card

GoodApril

First online tax planning solution for consumers, unlike Intuit, H&R Block offers year round tax guidance [now I get the "April" in their name!]
Good April tax check up — finds tax saving opportunities for YOU
Analyzes new tax rules and determines how they are going to effect YOU
Sign up with user name and password, upload PDF of your most recent tax return, runs algorithums and creates a easy to interpret report
Margina and effective tax rates, how much you are likely to pay
Impact of new rules; how you can save money this year
but wait, there’s more… how much can you really save? One in three of us are throwing away $450 each year by not
Real time monitoring of finances to suggest how you can make changes now to impact this year’s taxes

AuthenticID

[This guy gets the best voice award; he sounds like an old-school radio announcer]
Validate identify in face to face situations
Demo: Get this, we are going to attempt to take over Jamie Dimon’s account – do some googling, provide enough info that makes it appear that we are Jamie. Provide a fake NY State ID (not that hard to come by) with our picture, not Jamie’s. Banks are using public record data to evaluate potentially fraud, so are we the fraudsters. So match, and we get a credit card in Jamie’s name and off we go…
But AuthenticID “Paradigm” shift, that provides absolute confirmation that the person is who they say they are. Using private data sets, not public records. Use ID that prospective customer provides, scan it (use any scanning device) and go against NY DMV to verify info ont eh front of the ID, but there is a big problem, picture doesn’t match. Thwarts account takeover.
Prevent 65% of Identify Fraud today, more to come

NICE Systems

Demo of Nice Mobile Reach – converging self-service with customer service
Within app, pop up offering “do you need assistance” and connect with a sales representative via voice
Customer service rep sees what consumer is trying to do, talks consumer through taking out a short term loan, sign with finger right in app on pop up screen,
[This is a good demo -- fun, made it seem like personal bank xfer issue interrupted the demo, we can see customer service rep screen and consumer app side by side.]
Real time engagment with customer via mobile app, text interface, and voice simultaneously
At the end, pop up to get real time feedback on customer service experience
[This is the kind of thing my favorite branch-less bank USAA would dig.]

Kabbage

Partnering with Intuit, with 4+ million small business customers on QuickBooks
Kabbage using QuickBooks data to underwrite small businesses
Demo: small business that does weddings and events, tries out QuickBooks financing
enter basic info (doesn’t Quickbooks already know that?), credit score, which industry, how much she’d like to borrow, and how quickly she needs it, and what loan will be used for
Attempt to match to potential lenders, including Kabbage
And now we switch over to Kabbage part of the demo, using eBay, PayPal, Authorize account, etc to evaluate credit-worthiness of small businesss. Now adding QuickBooks as a data source to view open
Using Intuit API, to share QuickBooks info with customer approval, with partners like Kabbage
So much rich data in Quickbooks! Are expenses spread across multiple projects? Does small business use a number of vendors, dependent on multiple sources or just one,
Facilitate application
Can elect to borrow less than amount approved, come back for more later
Repayment plan laid out clearly
[so, is loan automatically created as a liability in QuickBooks, are repayment transacions automatically scheduled in QuickBooks? That'd be cool.]

Lodo Software

D3 product = data driven banking, across various devices, solution for banks and credit unions
Pretty dashboard to view bank accounts, other assets (e.g. house)
PFM services with ability to split transactions, view check images, budgeting tool pre-populates based on past transactions and income, set goals, etc.
More to come for small business cash management, wealth management, etc.
All services and data rendered appropriately for iPad, iPhone, etc. – easy for FI to deploy
Personalize for individual customers, using D3 Management dashboard for FI, view whole portfolio, create campaigns to track specific customers based on their transaction patterns, usage behavior, etc.
Demo: campaign focusing on retirement savers, those with credit card debt they have to pay off, or mortgage with high rate that is optimal for refinancing; can target based on income you see coming in via direct deposit
Demonstrate value to customer (e.g. save $ by refinancing)
Maximum flexibility via APIs, built on data analytics

OneID

Secure digital identity without usernames and passwords,
Avoids shared secrets, more convenient for users, more secure and customization for the FI
Uses encryption, like a safe deposit box, two keys – two factor authentication that complies
Quick fill: user only has to click twice and tap once
Digitally sign transaction, provides nonrepudiation for FI
[Demo with an old school AT&T princess phone, haven't seen one of those in ages.]
Q. What happens if you lose your phone? A. Can lock devices
Partnership with MyVest, provider of wealth management solutions to FIs. Customize to provide both simple and more secure two factor authentication for regular uses and administrators respectively.

Yandex.Money

Twym: use Twitter to send money using Yandex money (the dominant online wallet in Russia)
Link Twitter account to Yandex account
Demo: Start up founder uses Twitter and ask for support, links account and then sends Tweet asking for funds
Followers elect to fund, and the fact that they have supported the start up is shared, using viral reach of Twitter

Palo Alto Software

Demonstrating with MasterCard
Small businesses are a huge opportunity, 75% of businesses in the U.S.
MasterCard business network enables small businesses to gain buying leverage that larger businesses usually enjoy. Discounts, free shipping, etc.
LivePlan partnering with MasterCard, adding business planning capabilities to MasterCard business network
Allowing small business owner to develop plan
Financial forecasting (revenue, personnel, expenses), cash flow forecasting,
Walk small business owner through the process, providing accurate calcuations behind the scenes
Scoreboard to track progress against the plan
Use Intuit APIs to connect into QuickBooks, recognizing that small business owner likely relies on bookkeeper to manage dayto day finances, import data regularly, allowing entrepreneur to use actuals to measure against plan
[Much, much friendlier than the meager budgeting tools within QuickBooks]
Also relationships with Barclay’s, NatWest, and [I think she said Blackrock?]

SESSION #3

Corduro

Omni-channel — connect online, in-store and mobile transactions between consumer and merchants
Corduro register in App store – can use it with Star receipt printer and cash drawer, lower fees by 30%, but that’s not what they are here to talk about
Allow individual to make payments for a variety of organizations on one device, not merchant specific
Least cost routing — avoid credit cards, unless of course it is a store issued card
Seem to be focusing on healthcare
As a non-profit board member I like the donation features
[I am unclear what distinguishes this from every other wallet out there]

Banno

Tailored advertisements on bank website, adapt messaging as consumer clicks on various parts of FI website
e.g. if click on Merchant Services, drop consumer oriented banners, and instead offer small business products
Nice dashboard to monitor campaign effectiveness; individual users that interact with the site are logged, info linked to more info on that customer [I think that's what he said?]
If consumer does product research and doesn’t complete an auto loan application, each time they revisit the banks site theywill be encouraged to finish the application, regardless of whether they are on mobile, tablet or desktop. Can send nagging txt messages to consumer, reminding them to finish that loan app, too.
Integrate with digital channels
I think the product is called “Kernal”

Virtual Piggy

Two things you care most about: your money and your kids
Virtual Piggy wallet for youth (under 18) market
Parents set boundaries/spending thresholds for children
Child typically interacts via ever-present smart phone
Wallet includes targeted offers
Location enabled, shows retail locations near by that my parents will let me buy things from
Child wants to buy something, but doesn’t have a credit card or bank account. But merchant accepts Virtual Piggy wallet. Child places order, but order is actually funded via parents credit card (presuming it is within rules established in advance)
Also supports gift cards, so friends and family can fund teenager’s wallet
Not just about spending, child can track savings against goals (e.g. cool new shoes, car)
[I really wish the theoretical girl user was buying a soccer ball rather than a sparkly hairband thing]
Can use NFC or work within existing payment rails, integrate with majority of retailers existing POS within 5-6 weeks

Internet Biometric Security Systems

Patented four-factor authentication tool
First, gather personal data, verify to ensure it is still valid (vs. FI only doing verifiation when account is first setup)
Combination of biometric tools: voice and face
Demo using voice to access bank account
Once within FI site, initiate live video chat with bank representative [with a green marble fireplace in the background!]
Demo secure email with biometric authentication

Moven

Addressing money anxiety issues for Gen Y, under and unemployed, less job security
Need to invest more in themselves, be more mindful about money < not getting a lot of support from industry
And of course everyone hates budgeting
Three tools: Money Pulse, Money Path, and [missed it] for when you Spend, Live, Save
MoneyPulse – spend this month, vs. monthly average – need to slow down! Gives suggestions on categories where you should cut back (e.g. eating out, clothes)
Money Path – shows that if you adjust and spend less for the next # days, then you’ll be back on track by the weekend
Money Track and filter transactions
Oh, and you can pay your Facebook friends, too.
Moven account, using card or contactless sticker, provides real time spending assistance on any purchase. How much I spend, how much I’ve spent on this category this month, and whether or not I am over budget in this category [might have been more helpful to alert you BEFORE you made that purchase]

TSYS

TSYS has a commercial card product, Spend Control, enables companies to spend employees that they may not have provided purchase cards to otherwise
Today, demo’ing a similar product for consumers
[I am loving the teenager-demo interruption, Frank's daughter via Facetime wanting Dad to provide a new debit card ]
Use app to suspend the lost debit card; look up where kid is (using geolocation capabilities of her cell phone), pick a CVS nearby, set up budget for this card by merchant category (e.g. $500 for hotel, $100 food, etc.)
Pick up a spare card at a retail location, right now (anywhere you can buy a gift card)
FI can charge for it or not, their choice
Demoing daughter’s experience, first notification that first card was suspended. Then use app to scan barcode on the prepaid card she just picked up at CVS. Card activated and linked to her account, right there in store.
TSYS pays merchant commission.
Using NetSpend, which TSYS acquired for $1.4 billion back in February

Better ATM Services

ATM dispensing gift cards
Q. How did the ATM do it? Software upgrade and tiny little hardware module
Durable plastic card that ATM can dispense it
Three pieces: 1. payment card (snaps off), 2. customer info, and 3. finally coupon, promotion, or incentive
Largest card distribution planet on the planet
A. why would you get a prepaid card at the ATM rather than cash? Q. Because they want and need a prepaid card
[This is actually a very useful means to promote financial inclusion and deliver P2P remittance payments to unbanked consumers overseas, as opposed to visiting a bank or other agent of the money transmitter.]
Of course, FI fee revenue for the issuer.
ATM becomes an income source for the FI

Realty Mogul

Crowdfunding for real estate
Limited marketing, thus far, waiting for jobs bill to be finalized
Accredited investors only, provide info system det
Browse investment opportunities
Two types of investment 1. loans backed by real estate assets, 2. equity interest in commercial property (residential, offices, retail)
Already realized 10% annualized return on beta investments
Data for research info on location, property itself, investment metrics, management team (integrating LinkedIn) and includes project financials – equity breakdown, etc.
Invest as individual, through retirement account (self directed IRA)
once confirm investment, all necessary documents are created, with secure document signing online 24/7
Integrated with an ACH provider to accept payment
Investor dashboard, to watch performance of investments
Facilitate cashflow, send distributions to investors on a monthly basis on loads, quarterly for equity investments
[This takes crowdfunding to a whole new level...]

GoBank (by Green Dot Corporation)

Real bank account issued by Green Dot Bank, in beta since January of this year
Going live, available to consumers as of July 4 in honor of independence day (become independent of your traditional FI!)
Claim that its an all new “super fast, delightful experience”
More personal, you design your own debit card, integrate
One click to ATM finder (network of 42,000 ATMs, twice as many of BofA or Chase)
Budgeting features, call it your “vault”
Fortune teller app, provides feedback on potential purchases (mascot is a dog)
[Hey, that's what I was asking for a few demos ago]
Easy to send money, too. Recipient can get a GoBank account on the spot, funds receive money right away
Choose your own fee – simple slider on the app, from $0-$9 a month
Using social media to generate awareness, buzz
Partner with retailers, marketing partners and even reality TV shows

SESSION #4

Expensify

A Finovate veteran: “Expense reports that don’t suck”
Latest realization: invoices and expense reports are really similar
Expensify users asking for invoice capabilities, integration with Freshbooks and QuickBooks, simply sending their Expensify expense reports to their clients instead of invoices
Expense reports are a precursor to invoicing, so now Expensify can do the whole thing
Categorize your expenses just like you would normally do, then strip away the stuff clients don’t need to see, add your logo, a due date for the payment, and send it to your client
Similarly, your expense report is a bill that your client needs to pay. So interface for your client to review and pay the invoice, with PayPal (or even Bitcoin)
1.5 million users, 250,000 companies
But your client isn’t necessarily an Expensify user can use the client portal to store, manage, and pay other bills (not just your invoice); counting on enthusiastic Expensify users to promote Expensify to decision makers within your clients AP department…
[Whoa, serious network fantasies]

Escardgot

Start up from Sacramento, CA seeking investors
Tapping into mobile wallet confusion
Using bluetooth, not NFC, to pair card (a “Helix” card) with mobile for data link
Associate various credit cards with the one Helix card, and carry just one
Somehow merchants can digitally provision a card to their consumer to be virtually loaded into the Helix card
[I'm confused]

MoneyDesktop - BEST OF SHOW

[This is the first company to get a whoop cat-call as they took the stage]
PFM provider to FIs and online banking providers that serve them, very slick user interface that has earned them many “Best of Show” awards
Claim 440%, signed half of online banking providers, [more accomplishments I missed]
New today: Debts App, NetWorth and a Money Desktop PFM API
Insight analytics tool for FI customers, see who their consumer clients use for auto loans, etc. using iPad – super easy to manipulate, drill down, filter, etc.
Enable FI to easily create ads, targeted to financial context based on consumer transaction data and existing FI relationships, products
[These guys are really, really good at analytics and visual display but I am so over PFM.]

Trusted Knight

Solves “the most threatening challenge in the FI community: stealth malware”
Protect all browser entered data from key stoke logging and other malware
Simple to install, causes no performance degradation
Malware variants are released more frequently than antivirus products can keep up
But Trusted Knight Protector Software keeps up [at least that is what they are implying]
Top 10 bank customer claims that fraud has been reduced to 0% in those customers that have elected to install Protector software
[These guys got buzzed, but are still talking... where's the hook?]

Braintree / Venmo

[Braintree bought Venmo last August]
Venmo is a P2P payment play
Braintree is a payment platform, that enables developers to integrate payments into their solutions, think Airb2b, Uber, Hotel Tonight, etc.
Braintree apps process $8 billion annually, about 25% on mobile which is growing faster than online
Recognize that phone is a single user device, connects apps, mail, social media etc.
Venmo Touch: When using an app that uses Braintree/Venmo and entering card for the first time, elect to allow other apps on phone to access the same credit card number without having to enter card info again
[Convenient!]

Jemstep

Majority of Americans don’t have enough money for retirement because they don’t have access to high quality investment advice
[Isn't it because they don't have enough money and/or elect to spend today rather than save for tomorrow?]
Jemstep provides portfolio management that is unbiased
Average user linking 4 different investment accounts, with average portfolio value in excess of $600,000 [Not your average American]
Perform analytics and make recommendations to improve portfolio – looking at asset allocation, risk of individual holdings within portfolio, capital gains implications, etc. but shield the user from the complexity
Creates an action plan, telling user what to buy/sell/hold in order to achieve better performance
Very simple to follow the trade instructions
Average user seeing a benefit of $300,000 more to spend over the duration of their retirement

Aside: this afternoon #Finovate is supposedly trending higher on Twitter than Angelina Jolie. A first for payments.

CardFlight

Not just another payments dongle solution!
Unlike PayPal, Square, etc. — not an all in one solution (App, hardware, etc.)
Provide developer with a secure dongle for card swipe, an SDK so you can create your own payments solution, and integrate with all the major processors
Solution providers focused on healthcare, event ticketing, etc.
Claim you can integrate within 30 seconds
Tools to track payments, add merchant accounts, reverse transactions when the need arises
App developers are creating solutions to solve specific pain points for niche applications, they are not payments professionals! CardFlight is there to help
In private demo for the time being

FamZoo - BEST OF SHOW

Custom banking for your kids
Family pack of prepaid cards that work together, tied to one funding card
Family banking app, provide kids with a prepaid card and a budget
Parents also allocate costs against funds in account (charge them for their portion of the family phone plan)
Parents pay them allowance, etc.
Kids can establish goals
Parents can also pay interest to kids on their savings
Parents can also ding kids for not doing their chores!
[I think this is lost on me because I don't have any kids]

invoiceASAP

Easy mobile invoicing – because invoicing sucks!
120,000 business users, adding 300 business accounts each day
Fast and easy to use
Handles cloud integration with accounting – demo of QuickBooks integration
Pull customers, products, servies and pricing from QuickBooks so users out in the field can create ACCURATE estimates and invoices
Eliminates double entry of invoicing later by syncing
[This is a serious problem -- the number one reason businesses are paid late or short paid is because their invoices are inaccurate. A lot more often than you'd think.]
Can attach a photo to the invoice to prove that work is complete (e.g. landscaping, repair job, etc.) or of product that has been delivered [I love this feature!]
Can accept payment at the time (via credit card) or grant trade terms for customer to pay later
Partnering with SparkPay for mobile payment, sync back to QuickBooks
Announcing today, integration with Zebra [?] for printing on the go

End of Day One… off to network! Back tomorrow morning at 9am Pacific

Good morning, Finovate! I woke up with a hoarse, croaky voice from all that Finovate socializing last night. Fun to see everyone. We’re caffeinated and ready to go for Day #2.

SESSION #5

Finovera

Finovera, addressing the paper pile that accumulates in each household: bills and financial statements
A digital file cabinet instead
Demo showing easy look up of various billers, FIs. etc., then inbox with 20+ accounts, providers, etc.
Bills are delivered automatically, consumer does not have to log in to various biller sties to view/download; easy to view, browse from page to page
Compare, via charts this month’s activity
Pay, via single sign on to your FI to its online banking solution, to initiate payments to billers
Some basic analytics on your investment holdings
Dashboard – show bank balance vs. total outstanding bills – help consumers by generating alerts
Nice little folders to organize in your virtual file cabinet
[How is this different than Doxo?]

Signifyd

Small and medium sized businesses moving from brick and mortar to online, accept payments much more easily using Stripe, Braintree, etc.
But chargebacks much higher, and more problematic, because for CNP transactions, merchant is on the hook rather than card issuer
First non-payment gateway to protect sellers – insurance for eCommerce
Demo: International plane ticket, person paying different than person traveling, seems suspicious
Manual review of transaction is a lot of work – doing reverse look up of traveler and payer on Lexis-Nexis, etc. Google the people, see what you can find out about them, including looking up their phone numbers, IP addresses, LinkedIn and Facebook. Might take 20-30 min.
Instead, Signifyd automates the whole process of validating the transaction, reporting back on various attributes including people accounts, phone,s physical locations, organizations (employers) and network/IP and provide a score that merchant can use to
If Signifyd makes a mistake it takes the liability.

Finect

Help advisors, asset managers, utilize social networks yet still maintain compliance
50,000 users, mostly in Europe thus far
Demo: analyst that wants to engage with potential customers… LinkedIn not focused enough
Finect verifies the analyst and indicates that they are who they are, and then creates a aggregator to view and post social media content from LinkedIn, Facebook, Twitter, etc.
Can create private groups, e.g. “free advice friday” for clients to do Q&A
All posts are backed up for compliance audits, etc.
[I am unclear if Finect is attempting to create its own network, or is simply providing a tool for engaging via existing networks]
Second demo: An equity analyst now. Appears to be enabling customers to view snapshots of individual stocks with charts, relevant Twitter chatter, etc.
Third demo component: the compliance officer has dashboard to view posts, responses, shares, etc. that employees create

LICUOS

First payment platform to help businesses reduce debt, from Spain, where business debt is a huge issue
Businesses from all industries, of all sizes
Netting is core feature – enabling
Payments – both traditional supplier payments, from buyer to its vendors, on Licuos open payment platform
Funding – means of obtaining financing from non-banking third parties
Dashboard shows over all position, drill down to individual invoices - integrated with ERP/Accounting or invoicing system
Algorithmic suggestions of the best means to make payments
Using netting to pay off accounts receivable to pay off accounts payable (what is owed to you to pay what you owe). Enables customers to manage cash flow more effectively
Can fund payment via wire, or credit card, or gain supplier financing via a third party – corporate investors and family offices investing in fund

Fiserv

New feature on mobility mobile banking platform
Snap to Tag – snap picutre of a receipt or invoice and tag it to attach it to a line item
View banking transactions, many have an icon to demonstrate that a receipt is embedded
How do the receipts get there? Two options: 1. Manual: The consumer takes pictures of their receipts using the online banking app [really?]
Option 2: this option is more automated [not sure how]
[This is an example of retrofitting an old school solution with modern innovative features -- mobile wallets promise to include deep POS integration, including full line item detail in native electronic format from the retailer, flowing to consumer. This is the work around for the time being.]
Rationale 1: consumer market research indicates anxiety about losing important research
Rationale 2: keep FI brand front and center.

Encap

From Norway – security solution from “highly innovative” northern european banking industry
Make it easy for FI to implement two factor authentication
Status quo: Bad user experience, traditionally, particularly on a mobile and susceptible to man in the middle attacks and are expensive to deploy
Immediately recognize smart device as first factor, PIN as second factor, and optionally biometrics as third factor
Embed secure mobile banking app from bank website (after signing in)
Link mobile device to online banking
Uses keypad biometrics – how consumer interacts with the mobile device touchscreen [that's cool]
Banking grade – in fact only way that consumers in the Nordics can access their online banking
Now showing eRetail example, purchasing online and pushing funds from bank account to merchant, authenticating with mobile [for those that aren't familiar with eCommerce in other parts of the world, this is a very common payment method in Northern Europe, rather than using credit cards]

Kofax

Reduce dropout rates of customers via mobile, get new account holders via mobile channel
Demo: Campaign to attract student customers, mobile app to complete account application. Rather than enter data, student just takes picture of drivers license – used for two purposes, 1. identity verification and 2. provides name, address info without having to type
Capture both front and back of the license, 41 [47?] states have barcodes on the back with all the data embedded < 100% accuracy
Student confirms info, accepts Terms & Conditions, enters SS# to enable credit bureau look up
Then presented with services: types of accounts available to the consumer
Now, need some additional info, ask student to provide proof of residency, by taking a picture of utility bill
Consumer doesn’t have to visit branch, can apply for and setup bank account at their convenience

FlexScore (formerly LeapScore)

Rebranded from LeapScore to Flexscore
Mom with a home based business, needs advice to better manage her money
“Financial Advice for the Rest of Us” from Valley Wealth (Modesto, CA)
Actual, real financial advice from boots on the ground financial advisors
Enter some basic info: age, where you live, your dependents, etc.
Link accounts to data aggregation tool
Score across 14 categories, and in aggregate – rank against peers, locally and nationally based on age and income
Let you know if your goals are realistic, and get advice that is tailored to you: specific action steps
Would have to have several hundred thousand dollars to get one:one advice from a traditional advisor

BBC Easy

Commercial lending made simple: believe that borrows and lenders should be able to work effortlessly together, without tedious paperwork
Both during loan application process and ongoing loan monitoring
Rather than coming to branch and dropping off a ton of info, that bankers enter
Instead, small business completes online application, banker views dashboard with application data and risk indicators
Charted accounts receivable trends for small business applicant, make judgement; view ratios across a wide range of business measurements
Pre-qualify SMB within a few minutes
Solution integrates with small business accounting package (top 10 U.S. accounting systems) to gather data — no need to actually enter the data [that's the best part]
Dashboard allows SMB to upload business financial data from accounting for Borrowing Base Certificate easily in order to draw down line of credit

SESSION #6

Yseop

Enterprise software based on artificial intelligence
Use case: Tool to complement bank CRM to compile relevant info to help bank personnel prepare for client meetings in a friendly format
Also provides targeted suggestions for cross-sell
Largest customer using today with 12,500 employees, with significant productivity increases
Use case: narrative reports automatically generated from data, “utilizing synonyms and variations in sentence structure just like a human being”
Data stays on the FI server
Use case: consumer fills out questionnaire online, receives customized advice immediately

Balance Financial

Financial servies, are naturally collaborative. Client collaboration is critical to success, but tools aren’t very helpful
Balance is a digital office for financial professionals
Create a “workspace” to share with client
Demo: working with a customer on a new loan,
Need to include a wide array of different constituents: internal colleagues, client, family members of client, other service providers supporting consumer (e.g. estate planner, attorney, accountant)
Needs to be very targeted: don’t want to overwhelm the client with information, focus — minimize clutter
Tasks, ability to upload files, chat, etc. and also has a cool Evernote-like web clipping tool, with means to comment, ask questions, etc.
Integrate data: partner with Yodlee to aggregate account info
Use cases include financial advisers, asset managers, loan officers, etc.
Fill gap between back office technologies – CRM, Portfolio analytics – and consumer facing tools e.g. PFM
Platform live for 18 months
Can create a number of different templates for bookkeepers, advisors, trust officers
Available as SaaS solution, 1200 users and starting to work with large enterprises to suppor their teams

TipRanks - BEST OF SHOW

“Know who to trust”
More than a hundred million people visiting financial news sites each day — overwhelming amount of advice out there from reporters, analysts, etc.
How to distinguish those that consistently outperform the markets, vs the rest
Co-founder decided to analyze performance of tips of a well known tech analyst, for his own purposes. Determined he’d been taking advice from teh wrong guy. Why not create a service for others, to understand?
Cloud based, scans internet, measures accuracy and accountability of those providing sell side advice [I love this]
Browser add on, with pop up to show an accuracy report with graphical elements [omigod, I totally love this]
Tiny little pop up window has tab with rating history of this analyst
Compares this analyst to the top three analysts following this stock
Tipranks is a technology company, not offering advice, but letting you know the experts with the best track record
Can also search TipRanks for a given stock (rather than starting with an analyst); find analysts, drill down to specific articles
Tracking recommendations as they are being released

Intuit Financial Services

“When Mint came into our home our home got nicer” < husband and wife fighting less about money
Reduce financial stress and save money for even more consumers
How? Offer through FIs and also offer to small businesses
Reach the 20 million Americans who have complicated their lives by starting a small business [there is vast need out there among sole proprietors that are likely co-mingling business and personal, making things a complete nightmare at tax time]
Power of Mint on front page of online banking
Bring them offers, or personal content relevant to their personal situation
Categorize (and even split) transactions between personal and business
Business categories based on Schedule C IRS forms
All other Mint features have split between business and personal, easy to toggle between
Can also track mileage from phone app
Mint autocategorizes transactions throughout the year
Tax tips along they way
Can export to Excel to accountant or directly to TurboTax

GoNow

Smartphone based eWallet usage very low, but now GoNow programmable card will ignite the eWallet
Easily add any card to your wallet, gift card, credit card, debit card
Card has a secure element, that can be used to complement or replace secure element on phone or in the cloud
Without any changes to retailer POS
Case for phone, app on phone, and special GoNow card itself
Demo’ing app with loyalty cards, credit cards, gift card – consumer can elect to have one card as “top of wallet” and then slides GoNow card into sled case on phone, which automagically programs the GoNow card to emulate your top of wallet card. The GoNow card blinks to confirm it worked.
Now using dongle to enter card data into the eWallet and provide a security code associated with the card, saving it to the secure element on the GoNow (card? app?)
[Speechless]

Credit Sesame

Credit and loan expert
Personalized financial analysis, monitoring credit score, offering targeted advice, all for free for consumer
Expanded mission to identify best credit and loan options for consumers
Over 2 million users of Credit Sesame, now have a mobile option
Consumer uses app to add goals (e.g. buy car, save downpayment for a house, protect credit)
Dashboard of financial profile on phone app – credit score, total debit, home value, advice, and credit monitoring alerts
Helps consumer understand how much they can realistically borrow
Mortgage map graphically presents loan options, tap to view details on loan
One quick tap to reach out to prospective lender, submit inquiry (Credit Sesame auto populates with consumer info from profile)
Now integrated real estate listings, too < integrating Trulia, so consumer doesn’t have to bother to open another app on their phone

IntelliResponse

Vitual agents that extend reach of financial institution customer service team: social, mobile, and web virtual agent (an avatar)
6/12 largest banks in No America use the solution
Demo’ing natural language interactivity, via Q&A with a virtual agent of RBS, complete with a bowler hat
Now contrast with Citi (without IntelliResponse) and same search on Citi website results in 2300 hits, none of which really address the question
Increases self-service success, preventing calls to customer service rep
Treat the customer the way they want to be treated, wherever or however they want to interact with their bank
Now demo’ing mobile – voice recognition, “where is the closest ATM?” “what is my bank balance”
Now demo’ing on Facebook – get advice via Facebook app
Dashboard for FI rep to visualize questions, test marketing campaigns, etc. [cool visuals]

Refundo

Millions of consumers are unbanked or underbanked
Receive IRS mailed check, take to check casher, pay fees unnecessarily
Refundo has been enabling tax professional to open account on behalf of consumer to receive IRS refund [I missed whether it was a prepaid account or an actual bank account]
Now offering mobile app
Show balance remaining in account, easy look up of routing and account number, make transfers to other people in the Refundo network – instantly and for free
Loading money into Refundo account via any one of its Western Union agent locations, or deposit a check by taking photo of it
Create alerts to notify consumer when they reach a specific (low) balance
[If you have any doubt that there is a need for this type of service, consider the AmEx + Walmart collaboration Bluebird]
focused on underserved community, work with tax professionals that have a level of trust and speak language of their customers
all four major banks have mobile apps, none of those apps are in Spanish
We are insiders looking out, we come from this world – presenter from QUeens, grew up unbanked, then was underbanked, supporting his community

Placecast

Location based offers via Visa platform
[Visa disclosures in legalese, via powerpoint and read aloud, good grief]
Real time redemption of merchant offers at POS
Merchant, enabled by acquirer, can create offers using Placecast campaign management system
Can be a txt offer, or graphical offers
Select location parameters, geofence around the store location
Start and stop times
Add Visa POS redemption – links consumer card to the offer
Create a bid price, like Google offers, that merchant pays
Cardholder enrolls their card
At the point when the consumer uses app to “clip” the offer
Placecast sends redemption to Visa in real time, offer discount applied in real time as transaction is processed – charge is net the discount
Merchant staff doesn’t have to do anything
Consumer doesn’t have to have an offer code or do anything
Visa notifies Placecast when offer is redeemed and in turn Placecast sends notification to the store
Redemption data is included in the authorization stream and is included on the receipt printed by the POS system, including promo code and telephone number to call with questions

SESSION #7

Curaxian

Every year merchants lose an estimated 10-20 billion to eCommerce fraud
Software service that analyses payments data
Reduce fraud, and the cost of managing fraud
How to achieve the same over all protection, but only have to review a smaller subset of the transactions
Definitely understands the market and the problem; probably way too in depth for most of this audience
This is really a back office solution, and the UI doesn’t hold up to the slick consumer facing UIs, but it shouldn’t have to
Finding fraud is realtively easy, stopping fraud without eliminating good transactions is much harder!

PayNearMe - BEST OF SHOW

Remote deposit for cash, turn currency into
Cash isn’t going anywhere – in fact the use of cash is increasing
But handling cash is risky and expensive
Working with a range of
Turning retail stores into deposit locations – make a payment at 7-Eleven. PayNearMe is integrated with the retail POS for real time updates to the merchant back office
[I am so sorry that those of you reading this can't see the visuals -- you must watch the video when it becomes available]
Any small business can contact PayNearMe and sign up to receive cash payments at retail locations
When this became possible, fin tech providers and banks became interested, so now all PayNearMe products are being made available to FIs
Demo: Property manager signing up at bank to enable cash payments, enter manually or upload customer listing; can either print out a pay slip that customer can use to pay or send an electronic voucher
Go to 7-Eleven, scan voucher on consumer’s phone, pay cash. 7-Eleven POS updates the merchant (via its bank).
[PayNearMe rocked it]

Arxan Technologies

Application integrity protection for the app economy
Showing message alerts at FI/enterprise when consumer attempts log in to app via phone
In demo: phone is stolen, alert says “jailbreak
[Oh no, this is way too technical for my taste... we are watching them edit binary code, as they say things like hexadecimal. They lost me and everyone on the Twitter stream, and probably most of the audience, too.]

SeedInvest

As a result of the Jobs Act as much as $300 billion will go to small businesses and startups
Working with angels and VCs to syndicate investments
Features catered to investors
Never writing a check, signing
Live streaming due-diligence sessions
Investing in a start up as easy as investing in a stock
Start ups looking to raise capital increasing 40%+ month over month
Accredited investors on site have $35 million to invest
Demo: profile of companies, financial data, legal documentation related to offering
Virtual meeting with video and shared presentation [funny, the SeedInvest team is online live with us from New York; a bunch of young guys giggling]
Click big “invest” button, sign documentation electronically, third party ACH authorization partner verifies transaction and voila!

Allied Payment Network

Product is “picturepay” for mobile bill pay
Camera becoming central to mobile banking (think mobile check deposit)
Next use: bill pay – easy for user, and ability to make a payment even faster
30% higher adoption than traditional bill pay on mobile banking, after only three months
Demo: Use app, select make payment, take a picture of the bill (the coupon portion you would return in an envelope with your check), submit the image, then enter date and amount [better than the biller having to print a QR code on the bill]
Made the payment AND added the payee to online banking
Demo: now making a payment using voice recognition “Pay Comcast $25 on Monday”
[Okay, we're getting silly here.]

Mortgage Harmony

Addressing mortgage paperwork nightmare
[This is the first patent shown on screen at Finovate]
Loan retention software for correspondent lenders, who meet with builders, real estate agents/brokers, etc.
This is specific to loans that reset, that the lender maintains rather than selling
Tools for the lender and their channel sales as well as consumer to manage the loan and easily with one button “click to reset”
Refi process reduced from 60 days to 30 seconds
Paperwork distributed to all parties, as appropriate
Ability to cross-sell additional products to the consumer [the demo literally says "but wait" there's more]

Cymonz

Currency exchange solution that every bank and credit union can offer
For individuals and business clients to
SaaS solution makes it easy for FI to implement, yet also cusotmize
Back office solution for the FI, plus customer facing website
Consumer can see their favorite currency trades at top of dashboard, current rates (refreshed every 30 seconds) and history
Purchas ecurrency and [ay to multiple or one beneficiary
Indicates rate, fees, when recipient will receive funds - all done within 30 seconds
Has limit orders -- customer can set a rate that is better than the current rate, enter a pending transaction that will automatically be initiated if the rate falls below customer target
Manage beneficiaries [that's payment recipients to the rest of us]
White-labeled for FIs and their partners (correspondents), primary FI can establish rev share with partners
Back office screens enable FI to
Deal rate, where FI actually purchases currency if they don’t have their own trading desk – Cymonz can provide potential liquidity partners
[This is cool, so many small banks are dependent on bigger banks as their correspondent provider - this could be a nice option, but competing with the likes of Western Union trying to sell FX solutions to smaller banks]

ValidSoft

Fraud solution for mobile paradigm
Demo how to securely activate and protect a mobile wallet with voice biometrics
In band voice biometrics and out of band [something i missed]
In band, so no phone call, no friction due to signal quality
Prevent false negatives by falling back to non-biometric authentication as necessary
Demo: consumer is prompted to speak specific phrase “activate application”
Receive a phone call, told to enter a specific number to confirm
gain access to the wallet (only have to do that the first time) because using fingerprinting, checked against blacklists, and done some geo-fence
Now, demo’ing how consumer would authenticate to wallet on an ongoing basis by saying “activate application”

Bright Funds

90% of American’s give to charities, a lot of it
Helps donors manage their charitable giving, with same ease and impact as investment managemetn
Build a portfolio, based on interests e.g. causes, use sliders to adjust allocation accros causes (e.g. Education, Fighting Poverty, Environment)
Invite non-profits to be part of funds, based on impact and how well the organization is run
CARE and Oxfam America are participants
Combine nonprofits in funds to create holistic approach, e
Can pick your own favorite non-profits, too to create a complete look at portfolio
Fund in three ways: 1. Credit Card 2. Through employer through payroll deduction, 3. from investment portfolio proceeds
Measure results, via “impact timeline” – AND share via social media
[I want to get the non-profits that I am on the board of in a Bright Fund!]
One click tax reporting
Three announcements today: 1) out of beta, and live at brightfunds.org 2) go live at first two workplace partners 3) will partner with financial services providers
[I love this]

SESSION #8

Persint

ACcount analytics and peer data – where do we stand, what’s next?
What is missing from PFM? Context. Aggregated data has no meaning without reference to other households, individuals
Within just 5 clicks, matched to one of 120 peer groups – categorized based on age, marital status, education, whether or not they own a home, if they have children and even where they live
Financial performance is a reflection of demographics, location, and opportunities
Interpretation: first a Status Check, net worth, cash flow, risk management – scored, and compared to peer group
[Nice clean interface]
What’s next – includes both opportunities (e.g. switch providers) or actions (e.g. reduce debt)

Micronotes

Enterprise marketing company, help FIs deepen relationships with existing customers and improve cross-sell
Kudos to this company, getting their customer to do the demo for them = US Alliance (a credit union)
Pretty good at cross-selling in the branch or on the phone, but not so well online; banner ads useless
“Amazing engagement levels via micronotes”
Listen, educate, and advise — also follow up on loan applications in progress — via “Quick Advisor” dialogue box
“Go to tool for building relationship with members online”
Leads, follow up and fulfillment – automatic email to FI employee to follow up with customers about prospective new products
Lead reports for managing follow up
Build relationships with customers that no longer visit the branch

Tradeslide Ventures

Another Spanish company
“Discover your trading talent” a thousand amateurs out there for every professional trader on Wall Street
Commitment and a guiding hand to help traders
Whoa, serious analytics on trading activity, easy to zoom, view individual trades
Logged via broker, automatically, documented < so the day trader can use his track record to apply for a job at Goldman Sachs
Benchmark individual traders against other amateur traders, earn badges
Goal is to become an investable trader (that someone else might trust with their money)
Provides contextual help – a crowdsourced “investopedia”
Leaderboard of top traders
[This is cool, they have gameified day trading]

Gremln

Another secure social media solution [I didn't realize compliance was such a big deal for FIs; makes sense, I just never thought about it]
Posts, likes, images all have to be monitored in order to ensure social media compliance
Facebook, LinkedIn and Twitter
Manage what customers are saying about you and your brand, monitor your industyr and competitors
Also generate leads, demo’ing a search for people within 30 miles
Message portal, create post and send to various social networks; immediately or scheduled for some time in the future
Settings that enable compliance officer to allow some users to post instantly, others need to have their social media activity reviewed/moderated by another employee
Now demo’ing moderation queue enabling approval (thumbs up, naturally) or decline (thumbs down); can provide feedback on why an individual post may have been declined

LendUp - BEST OF SHOW

“You deserve a better loan”
Focus on small dollar loans, enabling consumers to prove credit worthiness over time and avoid payday loans
Instant loan decision and money transmitted instantly
Debut this feature here at Finovate: instantly depositing funds into recipients bank account [unclear on how they are actually doing this]
Slider: customer chooses loan amount, fees recalculate based on amount borrowed
Sign agreement directly on phone
Approval message communicated directly
Don’t have to fill out payday loan application, don’t have to fill out retail loan application (e.g. compliance) or need an emergency loan to repair car so they can go to work the next day < at reasonable rate so customer is not trapped in debt
LendUp Ladder” is credit rehabilitation; get points for paying on time, taking education classes online, earn better rates, ability to earn more money
Reporting to credit bureaus so that consumer can gain conventional credit in time
[Thoroughly charmed by young presenter so excited when demo transaction finally succeeded "sweet!"]

Adobe

Adobe solution for FI digital management – focusing on creative for website, mobile app etc. E.g. logos, files, images
Anyone using “creative cloud” can seamlessly exchange assets with Adobe “marketing cloud”
Add images, etc. to libraries
Workflows to resize images to match kiosk, ATM screen, website, mobile, iPad, etc.
Preview graphic how it will look live in app or on web
Create campaigns and measure impact (e.g. A / B testing of this particular graphic, vs. that one)
Get ideas out there and fail fast… see what works
“Focus on marketing not system integration”

Zooz

From Israel
Consumer driven payment platform for mobile apps and sites
Demo: banner ad in a weather app “Tall Cappuccino for $1.99″
Click on the ad, payment methods stored in app eWallet, select the one you want to use (International brands, PayPal, Dwolla, Klarna, Qiwi < choices relevant to where you live)
In “Ad” payment, not in “app”
New business model for apps
What’s consumer driven about it? APIs are great for the developer, but how do you know that the developer will create an easy to use UI?
Instead offer a complete check out experience, provide an SDK library to merchants for iOS, Android, website
Everything they need, including the UI for the payment screens
Constantly improving based on feedback
Merchants reporting up to 50% increase in conversion rates

Plastyc

Three E of prepaid card customer management:
Enrolling the customers, Engage with them, Enhancing the system
Provision prepaid card into content management system
Graphics (demo is creating a Finovate branded card)
Create a promotion, generate code linking Finovate website to the campaign for tracking effectiveness
A few months down the road, want to Engage with the cardholders
Send a message to their smartphones, have templates that can be adapted
Decide when/how to distribute (e.g. only Android phones)
Can also manage what customers see when they log in to view their account balance, etc. – redact portions, add content, etc.

Prestadero

A debut, from Mexico
First legally compliant, operational P2P lending platform in Mexico
Credit card APRs in Mexico go up to 90%; average 50%
Fixed income securities offered by banks minimal 2.5%
Inflation 3.7%
Mexicans typically only hold funds in the bank for transactional purposes (not for saving)
Loans that Prestadero are targeting are growing at 1% a month
Demo dashboard – showing
Diversification index, particularly for novice investors to understand their exposure
Value, funds available to invest, loan status, and performance
Delve into more detail to manage in more detail
Tools to analyze portfolio, make investments automatically
Personal, unsecured loans at 8% per year
Net annualized returns for investors of 17% (25% return in dollars)
Only allow 1 in 20 consumers loan request, debit borrowers directly, therefore delinquency rate very low [I think he said 1%]

Phew. Thanks for reading! I’ve clocked just shy of 10,000 words in this post (9941 to be exact!)

BEST OF SHOW (Audience vote)

Apparently 90% of the presenters received double-digit Best of Show votes, demonstrating the variety. But here are the winners: (in no particular order)

FamZoo
LendUp
Money Desktop
PayNearMe
TipRanks

ATM Cash-outs, Security, and the Coming Authentication Battles

2013-05-10T19:22:32Z

The arrest of eight in New York who participated in a global $45 million ATM cash-out attack revealed, once again, some hard truths about the cyber security posture of financial systems and the enterprises that operate essential payment infrastructure.

First, the organization and sophistication of the attackers continues to improve. These are global organizations peopled by professionals with the resources, talents, and patience to identify and compromise high value targets in the financial ecosystem. In this case, the targets were a pair of prepaid card processors, one in India, and the other in the U.S.

Prepaid processors are particularly valuable targets. If you can spearphish your way into a prepaid processor by identifying key individuals and emailing them with malware-laden messages, you can remove usage controls and reset prepaid purse balances to massive amounts. Who needs a debit card tied to a real bank account when you can top-up a prepaid card account on a grand scale?

In advance of those arrests, two weeks ago, at MasterCard’s Global Risk Management Conference in San Diego, two sessions addressed the ATM cash-out scam. The message was consistent. The attacker is resourceful, sophisticated and patient, skilled in exploiting both human fallibility via phishing and making the most of technical weaknesses.

While the forensics of the Great ATM cash out of 2013 (so far) have not been revealed, I surmise, based on remarks at the MasterCard event, that some combination of the following was in play:

Spearphishing opened the door using social media data, targeting the specific individuals most likely to have access credentials to the processing platform. Malware-carrying email was the vector.
Once the malware was installed, the attackers carefully mapped the processor network. One of the favorite files to search for is the victim’s own network map diagram.
Tools are uploaded to examine how applications and data are organized. Anti-virus software is disabled. Files and databases containing user names and passwords are sought. Card track data and the holy grail of PIN data, if it’s stored, are compromised. PIN data values are reset.
Once the attack is underway, the hack operators, still in control of the processing platform, monitor the progress in realtime of the cash-out operation, refilling prepaid purse values as needed.
In some cases, the attacker carefully resets purse balances to pre-attack values and cleans up as many footprints as possible. Other attackers, confident of their invisibility, don’t steal everything at once, just small amounts over a long period of time.

The pity of all of this is, according to the forensics experts, is that attacks like these succeed because target companies fail to follow basic security protocols. The list of classic weaknesses has hardly changed in a decade: unpatched database software vulnerable to SQL injection, misconfigured web servers, out of rev software (Windows 2000 Service Pack 4), weak access controls to sensitive data, decryption software located next to the encrypted database, the famously insecure Unix telnet remote login utility still enabled.

One of the recommendations from the MasterCard security event was real-time monitoring for events such as unusual prepaid balance and PIN resets, never mind network egress activity. But that only works if someone’s there to react to the alarms. Both attacks took place at night, one over the Saturday night of a holiday weekend. Even security people have to sleep! Post-breach forensics are made harder because event logging is either disabled or the log files are over-written too frequently.

Wider EMV deployment will make this kind of attack harder but the magstripe will be with us for at least another decade or two. If hackers can remove security controls at the network level even EMV controls are weakened. Perfection at the payment perimeter is a long way off.

With so many points of failure, perimeter defenses are not enough. One of the speakers at the recent MasterCard event, Shawn Henry, president of CrowdStrike Services and a former Executive Assistant Director at the FBI, emphatically made the point that chief information security officers (CISO) have to assume hackers have already penetrated their defenses and focus on controlling the damage through monitoring network egress points and tightening internal controls to enterprise resources.

Internal controls that require stronger authentication, as well as broader encryption of data assets, have to be on the agenda for CISOs as well as global internet-scale operators like Google and PayPal. Both companies are attempting to replace user IDs and passwords with far stronger authentication methods. At this week’s Internet Identity Workshop Conference, Google unveiled a new five-year plan that is anchored by greater reliance on the smartphone as both an identity attribute provider and an active participant in authentication processes.

If “identity is the new money” then stronger authentication will be one way that money is made as it protects the old money we already have. We are going to see competitive, vendor-specific authentication schemes that will both compete and cooperate with more open approaches from the likes of the FIDO Alliance. The appeal of federating authentication includes the sharing of deployment and operational costs across more users and more use cases. That economically rational approach will run into the real security requirements of particular applications and the desire to gather data if not exert outright control.

Now that everyone recognizes the failure of the password-based model, authentication technology is entering a new phase of innovation that will have a major impact on payments. Even though the U.S. is just getting around to deploying nineties-era EMV technology, it is time to build the next generation if we hope to further expand e-commerce and mobile payments.

Authentication, and the cost of authentication services, is a key focus area at Glenbrook so check back for more on this subject or contact me directly.

The Geeks Weigh In: Immediate Funds Transfers Are Happening!

2013-05-01T18:02:14Z

Are you a payments geek? You might be interested to hear what your peers think about immediate funds transfer (IFT).

The recent 2013 NACHA Payments Conference was full of interesting conversations and panels and the hottest topic was (IFT). I counted no fewer than four panels on the subject, including the one I organized with fascinating contributions from Bankgirot in Sweden, KIR in Poland, VocaLink in the U.K. and the Banco de México. We packed a lot into the panel – see the presentations here.

What We’re Talking About

Processing cycles for IFT in each of these countries all take place within a matter of seconds. Three of the four countries settle those payments in central bank money. Based on the number of puzzled looks among the audience, it seemed to me that there was some disbelief about this possibility. Is it possible that the failed vote to move the U.S. ACH to a same day processing and settlement (Expedited Processing and Settlement) option makes us doubt that other countries are already making immediate – and by this I mean almost instant – funds transfers? If so, we should keep in mind that the global card networks already run quasi-IFT systems: the authorizations are immediate, even if the settlement lags.

Glenbrook Survey on IFT

Glenbrook conducted an online quick survey about IFT prior to the conference, polling our audience of payments professionals. First, a big thank you to everyone who took the time to complete the survey and comment. There were 89 responses from payments industry practitioners around the world. Yes, that’s a relatively small sample and everyone who responded has a vested interested in some type of payment activity. At the same time, the responses were diverse and worthy of comment and reflection. Click here for the complete responses.

Survey Results: What do payments geeks think?

How fast is fast enough?

Nearly half (49%) responded that IFT should have immediate messaging and settlement, just over a third (36%) said immediate messaging and batched settlement several times a day was fast enough while 15% said immediate messaging with next day settlement would do just fine. Clearly faster is better.

If you’re wondering, respondents based in the U.S. and Canada were more or less in agreement with this result. So those may not have been puzzled looks in the NACHA audience but more a reflection of my need to get new glasses…but too bad we didn’t ask a specific question about the ideal migration path. Should countries take measured steps (a la EPS) toward IFT or move immediately to the end state? Let us know your thoughts in the comments.

As expected, there was general agreement that person-to-person payments (domestic) should have same day settlement (68%). However, it was notable to me that 58% thought business to consumer (payroll and reimbursements) and business-to-business payments (53%) should have same day settlement but only 40% thought consumer to business/government (bill or tax payment) should. To me, IFT will only be truly valuable to the consumer (and his or her payee) if a bill can be paid immediately and consumer perception of value may be one of – if not the most important – variable in a transition (more on that below).

My expectations were met in the responses to how important faster payments are for growth in the different payment domains. Person-to-person got the most responses (74%) but, notably, respondents felt that IFT was similarly important for growth in Point of Sale (70%) payments and Remote payments (69%) like e-commerce. On the other hand, only 41% of respondents felt that faster payments was important to bill payment.

Now the really thorny questions

What’s the most important obstacle to implementing faster payments? Only a handful (5%) said consumer or enterprise lack of interest. The lion’s share of respondents (67%) thought financial institution opposition due to operational issues/demands was the most important obstacle while others responded that financial institution opposition due to cannibalization of existing revenues (28%) was the key obstacle.

This one is really though provoking and makes me wish we could have taken more of everyone’s time and asked more probing questions. While those living in the US or Canada were more likely than respondents in other geographies to note cannibalization of existing revenues (33%), most respondents, by far, named the cost of an additional payment system as the principle obstacle. Some additional questions could have been to guesstimate the cost but also to guesstimate the cost of not implementing some sort of faster payments? By the way, does anyone remember the last time that financial institutions supported operational change?

Another thorny question was how important is faster payment processing and settlement for the payment system where respondents live? Nine percent said not so important – there are many more important issues. One quarter (25%) said extremely important – it’s the most important issue for keeping the payment system relevant and competitive. However, the majority response was more measured. Forty percent said faster payments are somewhat important – among the top demands.

If you’re wondering what US and Canadian respondents said: 31% said it was the most important issue and 46% said it was somewhat important. Another 11% said it was not so important and the remainder said they already have IFT. They’ve got to be referring to wires or a private exchange example… but we did suggest that faster payments be defined as what are typically thought of as retail payments with deferred settlement.

While nearly two-thirds (65%) said faster payment processing and settlement was either extremely or somewhat important, I think it is a fair and considered result that most said it was one among many needs facing their payment system. There are many needs and we have to determine where the real bang for the buck lies across cost, risk reduction, and user satisfaction.

Finally, another quarter (26%) said they already have immediate payments – which included respondents from all the geographic categories (not broken out by country).

Some final observations

Among those who provided additional comments, many noted that the survey did not include the cost of moving to IFT. Would the responses have been different if systemic costs were factored in? Certainly most IFT implementations have been in response to policy directives. Would respondents feel differently if they had to pay to pay? Maybe so. The most recent implementation among our four countries in the NACHA panel was Poland and an IFT payment there, depending on the bank, can cost between USD $1-$6!

While I can’t imagine a lot of people in the US opting to make a basic payment for a $5 fee, let’s consider the context. Poland’s IFT system does not yet have interoperability with all its banks and is still very new. If all banks were included, the price would likely decrease. Banks there do not charge for slower payments. In the UK example, banks don’t charge consumers for Faster Payments and the transfer limit is quite high. In the US, while many people routinely pay around $3 to a money transfer company to make a bill payment, banks on the other hand, have never really figured out how to charge consumers for payments. Wires are an exception but then again consumers don’t use wires in the normal course of business.

One thoughtful US-based respondent (you’ll soon see how I know this) provided a lengthy comment on the issue of pricing.

No ACH network inter-bank compensation mechanism exists today that would facilitate RDFIs recovering costs from the Originator/ODFIs, who will primarily benefit from this service. For that matter RDFIs have limited options to recover costs resulting from any new value-add service added to the network. Would propose FIs are not against payments innovation/IFT, but expecting FIs will be able to increase customer pricing to recover new RDFI costs in today’s commoditized ACH payments environment is not realistic. Current network pricing approach has not changed since inception…should be revisited as changes like IFT are considered.

Translation of this US-based ACH lingo isn’t really required as it’s clear what the comment is about. The current model in the US is broken when it comes to payments innovation – certainly for consumer payment innovation and quite possibly for business payments. (Okay, perhaps I added in some personal commentary there.)

Don’t get me wrong, I love the ACH (and many of you know I previously spent a decade working to expand it’s use to cross-border payments). The ACH is what most consumers really have in mind when they think about making payments or paying for payments (i.e., no fee). My sense is that the ACH itself could certainly process more and faster than it does today but faster settlement may be an entirely different issue. Even so, the fundamental issue in the US is not the technology but the business model of payments in the banking sector. Non-bank challengers charge customers a modest fee for a payment transaction but the banks chose to not charge or have not been able to gain customer acceptance for fees. This is a much larger and more complex issue that better or faster payments alone cannot overcome.

IFT around the world will be a continuing focus for Glenbrook and, based on the responses, for PaymentsViews readers as well. Let’s keep the dialogue going.