Personalising your cards

Originally published on Billing Views.

Payments guru Dave Birch recently commented on his frustrations at receiving new credit cards that still have magnetic stripes, embossed numbers and names on them - all throwbacks to old technology. These features are still present to keep compatibility with non Chip and PIN use (e.g. USA) and manual ‘zip zap’ transactions. As Dave correctly points out, it was thanks to these features his last card was compromised and its thanks to these his next will be compromised!

Whilst the banks seem to be concerned about handing out cards to customers that aren’t compatible with every point of sale on Earth, they don’t seem to be taking the same care to make it harder for cards to be compromised. If the banks are not willing to remove these features from all cards (features that are redundant for the majority of customers) then they could at least allow customers to make the choice themselves. 

I should be able to log on to my bank’s website, select my card and choose the features it supports:

• So if I don’t want to use it outside the UK, I can have a card without a mag stripe and accept that if Chip and PIN fails for some reason I won’t be able to use the card but the card is much safer. 
• If I have a card I don’t want to use online I can request that all 'card not present' transactions are declined (and it doesn’t have a CV2 number).
• I only want my debit card card to work in ATMs and be declined if it’s used in a shop.

Maybe the ability to have certain types of transactions declined could be switched on and off at the customer’s convenience?

As well as being anti fraud this is all about product personalisation - being able to build the product that suits me. It’s time that the banks embraced this concept across a whole range of products. 

Consumer choice in banking

Originally published on Billing Views.

Last week the news was full of comments from a certain politician about UK banks being forced to reduce their market share by selling branches. However this idea sadly misses the point about how best to increase competition in the banking market.

If the banks are forced to dispose of branches they will likely want to lose their least profitable branches, thereby creating a pool of poor quality branches that no one will want to buy and that would not be sustainable on their own. If government intervention chooses the branches they will dispose of then that means the banks have lost all control over their business. To quote Dave Birch, politicians tend to think along the lines of ‘we must do something, this is something, therefore we must do it’.

Branch disposals force customers to become customers of a different bank whether they want to or not. In my case, despite the well publicised systems problems at NatWest (which to be fair have never affected me) I quite like the bank and the products I use (as far as they go). I would not be impressed if government diktat told me I was now a customer of a new bank. 

Forcing customers into new banks misses the point of creating competition and giving customers choice. What we need are new banks with new banking models. Take Moven in the US; Brett King has created a new, mobile centric banking model that is predicated on banking products that put the customer in control through empowering them with information that allows them to make informed decisions. That is creating competition; not hiving off a bundle of branches that offer me-too products to customers who don’t want them.

Banks should of course be allowed to close branches without government interference - it’s great news for them as it reduces their cost base.

What we need in the UK is a white label banking model that allows innovators and brands to create banking products without the problems of getting banking licences and the ongoing regulatory overheads. Licensing and regulation are the responsibility of the bank providing the innovators and brands with their products. One lonely example here in the UK is M&S Bank which combines the Marks & Spencer brand with HSBC provided banking; although that example is unfortunately still predicated on an in-store branch centric model. However, are banks ready to move to a white label model? The mobile operators did it with MVNOs so maybe the banks will.

Recent research from YouGov suggests that consumers want new engagement channels like online and mobile, not branches. The last attempt at creating online only banks in the UK failed, with providers like Cahoot, IF, Egg and Lloyds (scrapped before launch) failing to make much impact; however that was before fixed and mobile broadband became ubiquitous and consumers started to transact from mobile devices. This time around adoption would look very different. Mobile devices are everywhere and if consumers feel empowered by their apps they will use them. Technology will determine the future of the banks - it’s up to the banks to embrace it and the politicians to let them.

Will consumers Zapp?

Originally published on Billing Views.

This week Zapp announced the confirmed support from five UK banks and building societies  - HSBC, First Direct, Metro Bank, Santander, Nationwide. I've been following Zapp for a while now and this support from leading UK banks takes it beyond the concept stage and starts to make it a reality.

Zapp will allow consumers to pay in store or online, using their mobile phone and without the need for cash or cards. What makes it unique is that it operates outside the card schemes’ payment rails and it has the backing of major financial institutions who already have customers using their mobile apps. Because Zapp is part of VocaLink, the organisation that manages inter bank payments in the UK, it always looked likely to be   a mobile POS scheme that would get some market traction.

However the big question is will significant numbers of consumers start using Zapp? Will they make the jump from using cards to using phones? Whether you pay with Zapp or with a debit card, the funds come out of the same account. Debit card transactions are typically free to the consumer and Zapp transactions will presumably also be free. The banks will likely try to incentivise stores and online merchants to promote Zapp by making it a cheaper form of payment to accept (no card scheme interchange fee to be paid), however no one should ever underestimate consumer inertia.

The key factor to making it a success will be the consumer experience - any friction and a card will feel like a simpler option. One advantage phone based payments have over cards is the ability to provide a consumer with information at the point of purchase; that can be transaction based information, e.g. this month you’ve spent £50 so far in Caffe Nero, or promotional, e.g. there’s a half price croissant in-store today if you buy a coffee. However because Zapp will be integrated into the banks’ own mobile apps, rather than being a separate app, it will be up to individual banks to consolidate and provide that sort of information and do they have the systems to do it? Being part of a banking app will help adoption from customers (like me!) who make extensive use of banking apps but alone it won’t be enough. Zapp claims the payment process is more secure than existing methods because customer credentials are tokenised and not shared with the retailer in the way a card number is. Whether this will resonate with consumers remains to be seen - I suspect ease of use is what will make or break Zapp as far as consumers are concerned.

And of course, what about RBS NatWest, Barclays, Lloyds and TSB? Will they jump on board?