There is a war going on for your wallet. The combatants are credit card companies, banks, and tech companies both established and emerging. Until recently, most of the operations were covert: contracts, alliances, M&A, and other business activities that by and large go unnoticed by the general public.

The war is now spilling onto the streets of Chicago. From cabs to trains to restaurants to bus stops, there are early signs of emerging epayment technology adoption, with plenty of territory where epayment solutions are desperately needed. All the while, the largest epayments players with pockets deep enough for advertising campaigns are battling for public mindshare.

Read the rest of the article in the March issue of Transaction News (p. 5). Much of the article first appeared as Built in Chicago blog posts.

What’s your experience with epayments? Let me know.

MOBILE PAYMENTS: P2P EPayment and Mobile Wallet Ads Battle at the Bus Stops

If you’ve walked up State St. in Chicago’s Loop or along the Magnificent Mile on north Michigan Ave. you’ve likely seen Citi’s ads for Google Wallet. They’re on about every other bus stop.

If you’ve been at the bus stop on the northwest corner of State and Madison, you may have noticed that Chase’s ad for its QuickPay personal-to-personal (P2P) payments faces the inside. . .

while Citi’s ad faces the outside.

If it’s really a battle for mindshare, Citi and Google are ahead through sheer quantity. I have only seen one or two of the Chase ads, compared to dozens of Citi ads.

The approaches are very different as well, as are the applications. Citi’s charges a Citi credit card through Google’s mobile phone wallet technology while Chase’s debits a Chase bank account. Citi’s can be used for purchases at the point-of-sale (if supported) while Chase’s is designed to pay an individuals that have email addresses.

Convenient for consumers and the ability to demonstrate how an approach makes all types of payments easier will, in the end, determine which approach consumers adopt. If the advertising is any indicator, however, Citi-Google will win not only the battle for mindshare but the war for consumer adoption.

For a perspective on how easy, or not, it is to use Google Wallet, read “Tapping Spree: How to Spend $100 With Google Wallet.” For an overview of which company will win the wallet wars and under which conditions, read “The battle for Mr. Costanza’s exploding wallet.”

MOBILE PAYMENTS:  A Chicago Cabbie Collects Credit-Card Fares with Square

Square, a mobile payments firm, became one of last year’s major epayments success stories. I read a lot about the firm, founded by Twitter co-founder Jack Doesey, over the past year, but I had never seen one of the devices in action until a week ago.

I gave my credit card to a Chicago cab driver, as I often do, with some trepidation because cabbies used to hate accepting the cards. This one pulled out his iPhone, fitted with a Square device and app, and swiped my card.

It was before 6 in the morning, and it woke me up. He handed me his phone so I could authorize the transaction, and off I went.

Undoubtedly, he uses Square because he collects his fees and tips faster than he does when he uses the POS device in the cab. Possibly, he also saves a cut to his tips taken by the cab company, as they do in San Francisco.

In any case, it’s a great example of how epayments are increasingly personal and how, yet again, internet and mobile technologies shift power to individuals over institutions.

This photo of the menu at Silver Spoon, the Thai restaurant in Chicago that my wife and I ate at this evening, tells a good bit of the person-to-person (P2P) mobile payment story:

As survey after survey has shown over the past two years, debit cards are the fastest growing means of payments. As fewer people carry much cash, restaurants are faced with multiple debit and credit cards to settle checks.

Sliver Spoon apparently has had enough. Cashless patrons can always handle it the way EPayDb.com writer-researcher James Richter and his buddies do: play credit-card roulette.

Clearly, person-to-person (P2P) payments are a problem waiting for an elegant solution.

The Chicago Transit Authority continues to add payment options, with a vote by its board of directors on Nov. 15 to install an electronic fare-collection system.

The system would accept contactless credit, debit, and prepaid cards, which would be tapped on electronic readers to make the payment. Contactless payments through mobile phones will also be supported. Currently, the CTA supports payments using magnetic stripe cards, contactless cards, and cash.

The board awarded the contract to Cubic Transportation Systems,  San Diego, which operates the current system. Contactless payment systems using both cards and phones are widespread in Europe and Asia.

The new system is expected to be operational in late 2013 and will serve as a model for the RTA and Pace. Transportation authorities in the region were required to build compatible payment systems under a bill signed by Gov. Quinn in July.

Read more:
Chicago Transit Approves An Open Fare-Collection System (PaymentsSource)

CTA plan would let riders pay fares with credit cards (Chicago Tribune)

When a deal as large and as high profile as Google buying Motorola comes along, especially on a Monday morning, the words and analysis pour forth. Here’s a collection of links to articles on the deal, with an emphasis on epayments.

The American Banker’s payments website PaymentsSource writes on the merger’s implications for Isis, a mobile payment consortium consisting of the major mobile carriers and credit-card providers, in Motorola Unit Buy Could Give Google An Upper Hand Versus Isis.

Karen Webster, who leads the payments experts at Market Platform Dynamics, suggests that the merger could give Google an upper hand when it comes to mobile wallet technology. A direct influence on phone hardware may make a difference, she writes in Analysis: After Google Buys Motorola, What’s Next for the Payments Ecosystem?

One of the main things commentators are writing about, on this site and elsewhere, is Google’s ownership of Motorola’s patent portfolio. Here’s a list of the Motorola payment patents Google is acquiring.

Mobile payments have been in the making at Motorola, as well as the rest of the industry, for quite awhile. Check out this 2006 brochure for Motorola’s M-Wallet.

Control of information and data equates to control of people and markets. Warnings from Milton to Orwell and the ideological struggle between capitalistic and socialistic market approaches increasingly result in greater wealth and freedom.

At Chicago’s  Techweek conference, the evolution toward freedom and away from control  manifested in Friday talks through the benefits of greater access to raw data, whether government data or market data. Information drives democracy and business, and the internet economy is “democratizing” the data required for both. “Data is the rocket fuel of the internet economy,” said Aneesh Chopra chief technology officer of the United States at his Techweek keynote speech.

Tapping the vast trove of government data to create applications can help citizens get more from their government at less cost while making government operations more accountable. “Simple information transparency can reduce costs,” he said.

The City of Chicago and the federal government are both using public challenges for apps and other ideas. “We’re crowdsourcing ways to make the city more efficient by providing raw data feeds,” said John Tolva, chief technology officer of the City of Chicago, in his keynote.

Data feeds are updated regularly by the city and made available to app developers. To see what’s available, check out the City of Chicago’s Data Portal. It contains thousands of datasets, maps, files and documents, charts, etc. Just fascinating.

Federal challenges include Health and Human Services’ Community Health Data Initiative , listed through the Administration’s Open Government Initiative.

Open government and data transparency in the context of the Obama Administration’s healthcare IT innovation initiative were the major themes of Chopra’s talk. “We will democratize government data,” he said. As I expect of a representative of the Obama administration, he’s a terrific orator and inspiring speaker, focusing throughout his talk on success stories of individuals while weaving in details of program initiatives.

One hope is that the private industry will follow suit and release more data.  That appears to be the case with the Blue Button, which allows individuals to download healthcare data. It started in the Veterans Administration and has been adopted by other agencies and private health organizations and companies.

It was apparent to me that there clearly is money in healthcare innovation if you can mine data for insight into how to provide better health for individuals, less costly payment options, and more efficient operations for the whole system.

The theme of transparency, based on increased access to data, continued in the afternoon session on financial innovation. Moderated by Jeff Carter, a co-founder of Hyde Park Angles and former CME board member, the panel featured four entrepreneurs creating trading exchanges and infrastructure to support for new markets.

All of the firms are based on the premise that transparency is critical for efficient markets. Markets are not efficient if they are not transparent, and markets are transparent when sufficient data are available on sellers and trades. The availability of market data itself can lead to the creation of trading in markets that did not exist.

“With transparency comes benefits. One of those benefits is a lower cost of capital,” said Nic Perkin, president, The Receivables Exchange. The firm’s platform requires companies wanting to list receivables for sale on the exchange to provide public cash flow and balance sheet data updated quarterly, something the small and medium sized business rarely need to do. “We bring transparency and standardization to market that typically has not had it.”

The data available on private companies in the internet space, for instance, led to the creation of an investment market for those companies, noted Adam Oliveri, managing director at SecondMarket, “a leading online destination for accessing market data”. You could easily see things like membership growth so the private exchange had information to work with.

The word “democratization” and the importance of increased data cropped up in Friday’s talks from Chopra’s to Craig Newmark’s and again in remarks from the financial innovation panelists.  As Perkin said, “The internet democratizes everything.”

It’s hard not to read about Groupon, currently the most mediafied of Chicago companies. It’s got a What’s Hot tab on TechCrunch. It’s national burger weekend deals made Crain’s and other media, and it’s one of several pre-IPO companies cited as examples of a new tech bubble. Groupon brings a lot of tech start-up luster to Chicago.

All that attention–along with discussing innovation at last week’s MIT Enterprise Forum Chicago Whiteboard Challenge and reading Malcom Gladwell’s May 16 New Yorker piece on the story of creativity and innovation at Apple Computer and Xerox PARC–got me thinking about Groupon and its Chicago location.

Chicago is not technology like Silicon Valley or Boston. There is not the mass of high tech here out there. The mass of innovation in Chicago spans a much wider range of industries, as shown by winners of the Chicago Innovation Awards, now in their 10th year.

Chicago is manufacturing (food, healthcare, drugs), finance (economic thought and trading products), and media-entertainment (Oprah and improvisational comedy).

And retailing.

It’s retailing and advertising that I think of when I think of Groupon.

Like Chicago retailer innovators Sears, Wards, and Spiegel, Groupon is a retail sales organization. Like the old catalogs of those retailers, Groupon relies on a clever copywriting style for its pitches (not without its critics). It also relies on a savvy sales force (akin to buyers) to source and sell local deals. It’s a direct-response sales organization using email rather than postal mail.

Where else would Groupon be? Not the technology garages of Silicon Valley but the old Wards warehouse in Chicago. As Gladwell suggests with innovation, the new Chicago spirit of progress is a new incarnation of the old.

Mobile commerce is still an emerging market in search of itself, with both the boosters and skeptics commenting in recent weeks. The swirl of news and surveys illustrates the tensions between tradition and innovation that mark the new-technology dance of entrepreneur demand creation and consumer desire fulfillment.

A Big, Fat Cloud
In a study that articulates demand for mobile phone payments, Accenture says that 45% of the most active mobile device users would pay for goods and services using their mobile phone. “Mobile commerce—which encompasses mobile banking, such as checking balances or paying bills over a mobile phone, plus coupons, promotions, redeemable gift cards, loyalty points, and more—is poised to drive huge changes in the way we shop and pay for goods and services,” said Andy Zimmerman, Global Managing Director, Accenture Mobility.

At the same time, 73% of the active mobile device users surveyed “expressed significant privacy and identity theft concerns,” according to Zimmerman. Accenture put a good face on the consumer counterpoint of desire and fear, as Zimmerman continued that “While the survey indicates there are issues to address in terms of privacy and security, these findings are good news for mobile network operators because consumers have requirements they look to operators, technology vendors, or financial institutions to address.”

The commercial conundrum within the counterpoint of desire and fear is nicely articulated by Yankee Group analyst Nick Holland, “Every silver lining comes with a big, fat cloud, and the much-hyped and even more anticipated mobile transactions explosion is much the same.” Although usage of mobile devices for payment, commerce, banking, and couponing transactions is increasing, “when consumers are asked to pay for such services, the answer is still a resounding no.”

Upper and Emerging Market Appeals
It appears that mobile banking and payments markets will develop to serve both sides of such oppositions. Mobile banking and digital banking and payments will appeal to both the upper-end U.S. consumer and unbanked emerging-market customer, predicted Citi Chairman Vikram Pandit, speaking at the Feb. 17 meeting of The Executives’ Club of Chicago.

For emerging and unbanked markets, “Mobile banking is a way to address ‘financial exclusion’ and provide greater access to banking to a broader number of people at reduced costs,” Pandit said. For the upper-end consumer, mobile banking provides additional convenience and efficiency to busy lifestyles.

The inevitable and much-needed hype warnings continued on March 1, as Art Gillis, an IT and security consultant specializing in banking, wrote in Bank Technology News:

“Mobile banking, in my opinion, is a little bit of a good thing. The press attention it has received is, in my opinion, over the top. Google Alerts sends me articles daily that were published all over the world with headlines that are hard to believe. Every investor I work for is aware of mobile banking as the hottest new technology, and investors expect it to be the proverbial shot in the arm for bank tech vendors. That’s a little bit like 10% ethanol in my gas tank will solve the global warming problem.”

Mobile is the shot in the arm for any number of organizations battling over ownership of the transactional turf. The Accenture survey, in keeping with its customer base, weighs in on the debate over which kind of organization will profit from mobile payments.

Reports an eMarketer article on the Yankee and Accenture surveys, “Respondents to the Accenture survey expected credit card companies to play a big role in facilitating mobile payments, at 59%. Nearly as many, 54%, thought mobile network operators would help enable mobile payments, and 52% thought software companies like Apple and Google would play a role.”

Apple and Google’s “Me Too” Strategy
I have heard it said, fervently yet naively, that banks and mobile operators ought to watch out for Google and Apple, as they move into payments, both on the web and through mobile access. This shows confusion about the payments mechanisms through the financial system and the payments process at the point of sale.

The artisans at Apple and engineers at Google both have been in the payments news lately, with their announcements of new content payments models. Apple’s has higher fees to content providers while Google’s is considered more of an open and equitable solution, as reported in Information Week.

Writing in the TechCrunch blog, Ohad Samet, payments fraud and risk management expert, provides a cogent commentary on the prospects of Google and Apple in the payments business and why any assumption of their massive success in payments does not take into account the nuances of the business. “Dominating payments requires much more than having the most users with credit cards or a huge take rate on digital content. . . . Creating yet another network based on existing methods is a ‘me too’ strategy that doesn’t provide real incentive for merchants to switch beyond the very specific uses Google and Apple provide today.”

Even so, the continuing focus on payments lies in the ongoing opportunities for innovation and disruption, which Citi’s Pandit believes lies in the vast international population of people without bank accounts and Samet believes lies in disruptive applications for payroll and short-term credit. The market for digital payments remains as vast as the number of traditional analog payments. As the Federal Reserve’s 2010 Payments Survey states, “With 27.5 billion checks still being written, almost half of which are consumer-to-business transactions, much opportunity lies ahead.”

One of the most controversial—or at least most recently mediafied—portions of last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act was built in Illinois, if not Chicago itself. The “Durbin Amendment,” introduced by our own Senator Richard Durbin (D-IL), has raised more recent rancor in the banking industry than just about any other provision of the massive reform bill.

The Durbin Amendment directs the Federal Reserve to limit fees paid on debit card transactions. The limits are scheduled to go into effect in July, unless the banking industry is successful in seeking a delay.

Listening to banks, you would think that the amendment brings about the end of the payments system as we know it. The industry puts the cost to banks of the amendment’s caps on debit fees at some $12 billion a year.

Merchants, however, stand to gain margin from the lower fees. The fees merchants pay on debit- and credit-card fees (the more expensive of the two) have been a long-standing source of resentment to retailers.

[Digital Transactions reported on May 12 that the Durbin ­amendment will go into effect, though perhaps a little later. Its report also contains interesting commentary from former U.S. Senate Banking Committee chairman Christopher J. Dodd, who now heads the Motion Picture Association of America.]

Not a Bad Thing
The Durbin Amendment may well be the beginning of the end of the payments ecosystem as we know it, and that’s not a bad thing. Durbin can also be seen as the regulatory harbinger of a coming shift in power in the payments area, as traditional money and banking transitions to digital money and banking.

It’s a continuation of the power shift in business to internet-based ecommerce, where the power of the traditional players is waning in favor of alternate digital payment providers, which very roughly fall into the overlapping categories of mobile, person-to-person, “electronic wallet,” and digital cash.

The darlings of digital business—Apple, Facebook, Google and others—also play a role in the shift. Some in the digital banking constituency believes that the banking industry should worry about their ability to capture payments revenue. As one of my favorite banking writers, Chris Skinner, wrote in BAI’s Banking Strategies, banks should worry about companies such as Google, Facebook and Amazon because “they are all now pointing their information leadership at money.”

So you may think that Apple, Google, and Facebook would be all for something that could put them on the digital high ground, where consumers supposedly rule. You would be wrong. Those companies are concerned that payments networks, seeking to cut costs, will route traffic through less secure networks. (For the sake of completeness, PayPal’s take on the Durbin rules is that they will have a neutral effect on its business, which mostly generates revenue from higher credit-card fees.)

Payments Power Shift
Power in digital payments is shifting away from banks and toward alternate payments providers, at least for the moment. The shift will not look like it has in the publishing, music, or media businesses, as banks guard the coveted entry to the payments system, regulated by the Federal Reserve, which is more a friend to its member banks than a foe.

Anything else would be too risky. Even as it is, the risk of fraud in emerging and alternative payments schemes is one of the major barriers to adoption—and opportunities for digital entrepreneurs.

Still, the Durbin battle is the largest public battle of the in a shift in which payments power moves to the benefit of merchants and consumers. However it ends, the digital banking war will wage on for some time to come.

More Information
For more of the basics on the Durbin Amendment, see “The P2P Key to Recapturing Revenue ‘Lost’ to Durbin” from Payment Pathways (a Canright client).

As an example of how far the Durbin Amendment has permeated into public discussion, National Public Radio aired a consumer introduction this week, positioning the debate as a battle between banks and retailers.

The payment experts at Glenbrook Partners provide a more detailed industry analysis of Durbin.

As for Dodd-Frank itself, the law firm of Morrison & Foerster has produced an excellent Dodd-Frank Cheat Sheet.

Recent economic reports present a mixture of disregard, denial, and disinterest. The Bureau of Economic Analysis reported GDP growth of 1.8%. The Economist wrote about how debt problems are constantly explained away and asked on its April 28, 2011 cover, “What’s wrong with America’s economy?” The Chairman of the Federal Reserve held a first-ever press conference that one writer tagged as “the message was the medium.”

Unemployment levels have apparently bottomed out, as have suburban home prices, and the markets are doing well. One boutique retailer we visited the week of April 25 reports an “awesome” spring, while a home remodeler we visited the same week sees 2011 so far as its worst start ever, largely a result the weather. A manufacturer we know had its bank loan called after missing a payment of some $2,500 by a day, likely a casualty of being on the wrong side of the transaction when successor banks take on the customers of failed banks.

A Long, Slow Recovery

The rate of recovery is agonizingly slow and highly unpredictable, noted Professor Martin Eichenbaum, Ethel and John Lindgren Professor of Economics at Northwestern University READ MORE>>

In February 2011, economists told us that the Great Recession is receding, if not over. If many consumers—and their banks—still feel mired in that same recession, at least the fiscal crisis of 2008 is history. The markets are stable, business profits are up, employment is improving, and it looks like the free fall in real estate values for homes, office buildings, hotels, and shopping centers has finally ended. Prices are not likely to climb much in the next few years, but at least real estate markets will probably be stable soon.

It looks like the worst is over for the banking community, too. More banks will struggle with troubled commercial real estate loans, and some will fail. Yet little has changed with the commercial real estate (CRE) loan situation.

How Serious is the CRE Risk?

Last year, reports on the safety and stability of commercial real estate (CRE) loan were grim. “The greatest exposures faced by community banks may relate to construction loans and other CRE loans,” said FDIC Chairman Sheila Bair in October 2009. “These loans made up over 43% of community bank portfolios, and the average ratio of CRE loans to total capital was above 280%.”

In its February 2010 report, the Congressional Oversight Panel (COP), created o oversee the government’s massive financial-crisis intervention programs and defunct as of April 3, 2011, reported that some $1.4 trillion in CRE loans need to be refinanced between 2011 and 2014. Nearly half of them are “underwater,” where the mortgage-holders owe more than what the underlying property is worth. The COP’s February report warned that “a wave of commercial real estate loan failures could threaten America’s already-weakened financial system” over the next few years.

As of April 2011, some 3,000 community banks were still in trouble, mostly because of their CRE loan portfolios. At the end of the third quarter 2010, about $3.2 trillion of this real estate debt was outstanding, and about $1.6 trillion was held by community banks, so they faced great risk from default and foreclosure.

A glut of office and retail space and too many hotel rooms due to READ MORE >>

Inflation is the top economic concern of the Chinese government, said Kok-Chi Tsim, Managing Director and Senior Relationship Executive at JPMorgan Chase Bank, Chicago. He spoke March 30 at the monthly luncheon of the Economic Development Council of Chicago on “China’s Economic and Business Environment.”

The concern for inflation flows from one underlying economic fact: “China is a rich country with still a lot of very poor people,” with large differences between the coastal and the western inner provinces. Inflation is a concern because the hyperinflation of the 1940s led, in part to the ousting of Chaing Kai-shek in 1949 in favor of Mao Zedong and the communist state. The current government does not want to risk creating the same situation, especially when a portion of the population would suffer greatly should its income be eroded by inflation.

Inflation is running at 11% annually. Labor costs are also increasing. The minimum wage will increase by 15% this year. Last year, wages in major cities increased by 21%.

“That raised a lot of red flags among the Chinese government,” Mr. Tsim said. “Fighting inflation is the Chinese government’s top priority.”

To combat inflation, the Chinese government has allowed its currency, the renminbi (RMB), typically referred to as the yuan, to appreciate. This makes exports more expensive, which is a risk for the Chinese because the economy is driven by inexpensive exports.

For details and information on China’s desire to see the RMB become a global trade and reserve currency like the dollar, see Mr. Tsim’s webinar, “China: Internationalization of Renminbi (RMB).” This development is good for U.S. companies doing business in China, as it opens other payment options, given that RMB denominated accounts are now available in Hong Kong.

Other interesting facts and analysis from Mr. Tsim included:

• The Chinese government does not have many tools for monetary control. The major method the government uses to control the money supply is putting quotas on bank loans. It’s difficult, however, because bank loans are the only source of financing in the country. Chinese do not invest in local stock because Chinese companies do not follow standards of corporate governance like western companies and are riskier investments as a result. Instead, they invest in real estate, with its boom-and-bust bubbles.

• The largest pollution problem in China is not air pollution, as you may expect from the reports and reality of poor air quality in Beijing. It’s water pollution. The Chinese government is expected to spend hundreds of billions on water infrastructure in the coming years.

• Overseas direct investments by China are increasing. “Access to natural resources, including agriculture, is the biggest challenge facing Chinese growth,” Mr. Tsim said.

• The major hindrance to Chinese investments here is the U.S. government’s restrictions on the import of high-performance computer technologies. Given rising labor costs in China, productivity increases are critical, as they have been in every major industrial country. “Automation is absolutely necessary. That’s where U.S. companies can help.”

• In response to a question on Chicago Mayor Daley’s trips to China and their influence, Mr. Tsim smiled and said, “You want me to be quite honest? I don’t think there’s much impact.”

—Collin Canright

Mobile commerce is still an emerging market in search of itself, with both the boosters and skeptics commenting in recent weeks. The swirl of news and surveys illustrates the tensions between tradition and innovation that mark the new-technology dance of entrepreneur demand creation and consumer desire fulfillment.

A Big, Fat Cloud
In a study that articulates demand for mobile phone payments, Accenture says that 45% of the most active mobile device users would pay for goods and services using their mobile phone. “Mobile commerce—which encompasses mobile banking, such as checking balances or paying bills over a mobile phone, plus coupons, promotions, redeemable gift cards, loyalty points, and more—is poised to drive huge changes in the way we shop and pay for goods and services,” said Andy Zimmerman, Global Managing Director, Accenture Mobility.

At the same time, 73% of the active mobile device users surveyed “expressed significant privacy and identity theft concerns,” according to Zimmerman. Accenture put a good face on the consumer counterpoint of desire and fear, as Zimmerman continued that “While the survey indicates there are issues to address in terms of privacy and security, these findings are good news for mobile network operators because consumers have requirements they look to operators, technology vendors, or financial institutions to address.”

The commercial conundrum within the counterpoint of desire and fear is nicely articulated by Yankee Group analyst Nick Holland, “Every silver lining comes with a big, fat cloud, and the much-hyped and even more anticipated mobile transactions explosion is much the same.” Although usage of mobile devices for payment, commerce, banking, and couponing transactions is increasing, “when consumers are asked to pay for such services, the answer is still a resounding no.”

Upper and Emerging Market Appeals
It appears that mobile banking and payments markets will develop to serve both sides of such oppositions. Mobile banking and digital banking and payments will appeal to both the upper-end U.S. consumer and unbanked emerging-market customer, predicted Citi Chairman Vikram Pandit, speaking at the Feb. 17 meeting of The Executives’ Club of Chicago.

For emerging and unbanked markets, “Mobile banking is a way to address ‘financial exclusion’ and provide greater access to banking to a broader number of people at reduced costs,” Pandit said. For the upper-end consumer, mobile banking provides additional convenience and efficiency to busy lifestyles.

The inevitable and much-needed hype warnings continued on March 1, as Art Gillis, an IT and security consultant specializing in banking, wrote in Bank Technology News:

“Mobile banking, in my opinion, is a little bit of a good thing. The press attention it has received is, in my opinion, over the top. Google Alerts sends me articles daily that were published all over the world with headlines that are hard to believe. Every investor I work for is aware of mobile banking as the hottest new technology, and investors expect it to be the proverbial shot in the arm for bank tech vendors. That’s a little bit like 10% ethanol in my gas tank will solve the global warming problem.”

Mobile is the shot in the arm for any number of organizations battling over ownership of the transactional turf. The Accenture survey, in keeping with its customer base, weighs in on the debate over which kind of organization will profit from mobile payments.

Reports an eMarketer article on the Yankee and Accenture surveys, “Respondents to the Accenture survey expected credit card companies to play a big role in facilitating mobile payments, at 59%. Nearly as many, 54%, thought mobile network operators would help enable mobile payments, and 52% thought software companies like Apple and Google would play a role.”

Apple and Google’s “Me Too” Strategy
I have heard it said, fervently yet naively, that banks and mobile operators ought to watch out for Google and Apple, as they move into payments, both on the web and through mobile access. This shows confusion about the payments mechanisms through the financial system and the payments process at the point of sale.

The artisans at Apple and engineers at Google both have been in the payments news lately, with their announcements of new content payments models. Apple’s has higher fees to content providers while Google’s is considered more of an open and equitable solution, as reported in Information Week.

Writing in the TechCrunch blog, Ohad Samet, payments fraud and risk management expert, provides a cogent commentary on the prospects of Google and Apple in the payments business and why any assumption of their massive success in payments does not take into account the nuances of the business. “Dominating payments requires much more than having the most users with credit cards or a huge take rate on digital content. . . . Creating yet another network based on existing methods is a ‘me too’ strategy that doesn’t provide real incentive for merchants to switch beyond the very specific uses Google and Apple provide today.”

Even so, the continuing focus on payments lies in the ongoing opportunities for innovation and disruption, which Citi’s Pandit believes lies in the vast international population of people without bank accounts and Samet believes lies in disruptive applications for payroll and short-term credit. The market for digital payments remains as vast as the number of traditional analog payments. As the Federal Reserve’s 2010 Payments Survey states, “With 27.5 billion checks still being written, almost half of which are consumer-to-business transactions, much opportunity lies ahead.”
—Collin Canright
collin@canrightcommunications.com

This post was written for the Chicago Payments Information Exchange (CPIX), a group within the Built in Chicago community, serves as a focal point for payments-

related businesses in Chicago, with an emphasis on innovators, news, and trends in payments and banking.

The purpose of the group is to build on Chicago’s history of innovation in payments in order to create greater visibility for this financial-technology market in Chicago. CPIX is moderated by long-time treasury, banking, and payments writer and communications consultant Collin Canright.

Built in Chicago is fast-growing community that serves as a “resource for digital professionals working to build great web and mobile businesses.”

To join Built in Chicago, visit www.builtinchicago.org. For details, read this interview with founder Matt Moog: http://bit.ly/fWrnlp (links to Crain’s Chicago Business’ Enterprise City blog).

To view CPIX group content, visit www.builtinchicago.org/group/payments

The Chicago Payments Information Exchange (CPIX) is live on the Built in Chicago. The group’s purpose is to build on Chicago’s history of innovation in payments and create greater visibility for this financial technology market.

Built in Chicago is a fast-growing community that serves as a “resource for digital professionals working to build great web and mobile businesses and mind-blowing user experiences.” For details, read this interview with founder Matt Moog: http://bit.ly/fWrnlp (links to Crain’s Chicago Business’ Enterprise City blog).

CPIX is moderated by long-time treasury, banking, and payments writer and communications consultant Collin Canright The group is intended to build a network of financial institutions, payments processors, software firms, and consultants in order to strengthen this niche in Chicago’s technology community through collaborative communication and to help propel its future success.

To join Built in Chicago, visit: www.builtinchicago.org

To view CPIX group content, visit www.builtinchicago.org/group/payments

For more information, contact:

Collin Canright
Principal
Canright Communications
www.canrightcommunications.com

773 248-8935 ext. 9404 (office)
773 426-7000 (mobile)

Collin Canright’s overview report on the Sibos 2010 European financial and payments conference appears in the current issue of AFP Exchange, published by the Association for Financial Professionals. The article focuses on regulatory reform.

Download the Sibos Overview PDF.

Standards for payments and reporting tend to ignite passions and controversy, and the Single European Payment Agreement (SEPA) proved the point at the Sibos 2010 conference, held in Amsterdam in late October. European banks, companies, and other interested organizations seek and end-date on SEPA adoption, which thus far has fallen far short of expectations.

While Europe struggles toward a unified payments system, the United States puts what it can into practice, building in compatibility with international standards. The Federal Reserve Banks, for instance, announced its new international ACH payments product and reported in a Sibos session on its initiative to provide extended remittance information in Fedwire transfers.

Implementation of extended remittance information has been delayed a year, to November 19, 2011, so that banks can make the systems changes needed to support the data. Fedwire’s new remittance information is structured using ISO 20022. “We thought the need was unique to the U.S. but are seeing worldwide need for more remittance data in payment structures,” said Lauren Hargraves, senior vice president at the Federal Reserve Banks.

Indeed, the drivers of payments standards and initiatives likely will be large corporations making payments to suppliers around the globe, noted Jeremy Kidd, IT and business manager in the global treasury and insurance section of Cargill, the international food and agricultural concern. Cargill structures its financial information using ISO 20022 so that all data can move through the entire financial chain, from the initial payment through bank account reconciliation.

This “superstructure of information,” as Kidd called it, allows each entity along the way to have access to whatever information it needs for automated processing, without requiring any one entity or supplier to process or accept anything unless they choose to. The exception, however, is that every entity in the financial supply chain must accept and pass through all of the formatted data, whether they need it.

“The biggest problem we face is that some links in the [payments] channel can’t handle all of the information we send,” Kidd said. “With payments to Europe, all of the XML information is lost in the clearing system, so it isn’t available [to receivers] on the other end of the pipe. . . . It only works to its full extent if everyone supports it, and if everyone doesn’t support it, it isn’t a standard.”

Michael Knoor, managing director at Citibank, agreed. “There needs to be structured information transported through a common channel.”

China and India remain high on the financial and banking agenda, with attendees at SWIFT’s Sibos 2010 conference packing the room for a session called “India and China: How Do You Choose?” The rise of China especially, in both currency and trade, played as a theme through Sibos, the annual financial and banking conference held in Amsterdam this October.

Many U.S. and Europeans are not aware of how significant both countries and their rapidly growing economies are, said Gerard Lyons, chief economist and group head of research, Standard Chartered Bank. China is looking to move into emerging markets and plans to do the kind of business development that corporations in the United States and Western Europe generally consider their purview.

That means developing and marketing new products as well as providing inexpensive manufacturing facilities for other companies. As Lyons explained the Chinese expansion imperative, “You can’t rely on selling cheap goods to Westerners up to their eyeballs in debt.”

Chinese banks are planning to expand and were exhibiting with the best of them at Sibos 2010. The Bank of China plans to open a few branches in Europe next year. “We are going global,” said Hong Zhong, Director, strategic development, Bank of China.

For their part, the Indian panelists acknowledged that they and their banks are busy on their home turf, which is difficult for U.S. and European banks to enter. The Central Bank of India now has more than 28 million retail customers across 5,400 branches, with 57% growth in the small and medium business sector last year, said S. Sridhar, the bank’s chairman and managing director.

“In our growth strategy for the bank, the domestic economy plays a huge role,” said Om Prakash Bhatt, chairman of both the Indian Banks’ Association and the State Bank of India, in a Sibos session focused on the regulatory environment. Indian banks will go abroad as their customer do business abroad, and they will need to restructure in order to meet the needs of international corporations.

Session moderator Emmanuel Daniel, CEO and founder of The Asian Banker asked the Indian panelists about another serious issue: the income disparity between the rich and the poor, with little acknowledgement of the problem. “The inability of India to distill its wealth throughout its economy remains a problem,” Daniel said, “and its capacity to address this issue remains to be seen.”

The growth of both emerging and established industrial economies in Asia may depend on it.

Indeed, one Japanese attendee suggested that the so-called “lost decade” in Japan—a reference to low growth, high debt, and deflation after the country’s real estate bubble burst in the 1990s—may become a lost 20 years. He hoped it would not be a beacon of things to come for the United States economy, as Japan’s quality-based manufacturing techniques were in the 1980s.

The Japanese appear to be looking toward increased trade within Asia for growth. “Intra-region­al trade is mainly intermediary goods,” said Shinichi Hayashida, director and deputy head of the interna­tional banking unit at Sumitomo Mit­sui Banking Corporation. Increasing income and consumption within the rising Asian economies would be a welcome change.

Read Going Global, the version of the article posted on ChinaForum.com

For other recent news on China, see:
China’s ‘Quality Not Quantity’ Strategy Yields Results
The Economist: A Special Report on China’s Place in the World