Posts Tagged ‘Innovations’

Pursuing Quality Innovation in the Prepaid Card Industry

March 19th, 2014
Compass Advisory Note on Prepaid Quality Innovation

The Center for Financial Services Innovation has just published its Compass Advisory Note about pursuing quality in prepaid cards. It features NetSpend and Banking Up as early adopters of the Compass Guide to Prepaid.

The Compass principles have helped Banking Up prioritize its pipeline of technical and operational developments: we have brought to the front of the line those developments that would have the most immediate impact along the Compass Principles.

We looked at our pipeline of future product development items and identified those that would have an immediate impact on improving consumer trust. At the time, we were:

  • Building a new mobile app,
  • Reconfiguring our live Customer Support service,
  • Trying to optimize our online customer acquisition,
  • and we wanted to improve our online self-help system.

We took each of the above topics and looked at how we could deploy them in the way that was the most consistent with the Compass Principles.
For example, we started by simply including in our mobile app a button that would immediately display all the fees in a box formatted as suggested by the Compass Principles.
We switched vendors for our Customer Identification Process and chose a solution that minimized the need to escalate to faxing or scanning paper documents, because many applicants don’t have easy access to faxes or scanners.

Some of the things we planned to do have proven more challenging than others. For example, we had under-estimated the amount of effort needed to improve the education & guidance intended to help customers understand the product and optimize its use or minimize the fees.
We have planned to create an interactive contextual help system to replace our FAQs and to produce a number of simple “how to” videos. We still have not deployed those items because they require a lot more content production work than we had anticipated.

Overall, our advice to those who want to use CFSI’s Compass Principles in Prepaid would be to consider this first and foremost as a “consumer trust building” initiative.
Ask yourself what changes you can make to your product and operations that will result in consumers trusting you and your service more than they would otherwise. Whatever the size of our organization, this is a simple criteria to apply, and potential detractors inside your organization will have a hard time fighting this because no one can be seen siding against increasing consumer trust.


Opening of Deposit Accounts is Going Full Mobile

March 3rd, 2014

It used to take a bank branch to open deposit accounts for new customers.

Then, in the early-to-mid 2000’s, when the penetration of Internet Connected personal computers reached critical mass, it became possible to open accounts from the comfort of your home (or office).

Today, 149 million Americans have a smartphone (source: ComScore, Nov 2013), and many of those people have disconnected their fixed phone line and trashed their home computer. It is evident that cellphones are going to become the dominant way to open accounts.

This is a major shift in the world of “mobile banking”. Banking apps will no longer be a companion to an account opened at the branch or from a PC: they will be how your open an account in the first place.

Below is a short presentation on Mobile Account Opening that showed at All Payments Expo on March 3 and 4 in Las Vegas:


Of Bitcoins and Ethical Banking

October 14th, 2013

Cash Room in the Treasury BuildingThe most beautiful meeting room I have ever been to is in the Treasury building near the White House. It is called the Cash Room, because it used to contain actual piles of cash when the Treasury was the bankers’ bank. The general public could also go there to cash government-issued checks, or change gold and silver.


Hacker's CubicleNow compare this with the den of Satoshi Nakamoto, where the first Bitcoins were minted and stored. OK, I made that one up, because Satoshi Nakamoto is a pseudonym: we don’t really know who created this cryptographic currency and its associated transfer protocols. It might actually be a group of developers rather than a single person.

But you get the idea: digital representation of money and mathematical protocols take a lot less space than physical cash and require no brick-and-mortar security.


When combining the exponential benefits of Moore’s law (where every 18 months the same amount of silicon chips can double in power), the multiplying effects of networks (where useful connections increase proportionally to the square of the number of nodes, as first highlighted by Bob Metcalfe’s law), and the algorithmic smarts of 20-somethings out of Stanford University, you get a Google.

While planetary growth has made it difficult for Google to stay true to its core value of “doing no evil”, one has to wonder if a Google-equivalent of banking could not be built with the same mix of computer, Internet and algorithmic wizardry and have a main goal of being an “ethical bank” that does no evil.

After many years of unconscionable risk taking, rate manipulations, customer abuses and self-awarded fat bonuses, banking is in dire need of an ethical offering available to everybody. While there are plenty of well-run, customer-friendly credit unions and community banks, their scale is limited by their own charter to serving a small number of qualifying customers in a restricted geography.

So, is digital banking the foundation for scalable ethical banking? I think digital banking is necessary, but not sufficient.

Back to Bitcoins: the technology was initially deployed with no business rules (and pretty much no business model), resulting in sites like Silk Road using Bitcoins for drug sales, before it was shut down by the Federal Government last week. While the Bitcoin Foundation is putting a brave face on this (see the Washington Post article ) there are countless Bitcoin “exchanges” being run by entrepreneurs without a clue about money laundering risks.

Digital payment processing is not the exclusive domain of new new things like Bitcoin: in fact all large banks and the dominant payment networks (Visa. MasterCard, American Express, Discover) are pretty much 100% digital, even if their protocols and algorithms are far from being as smart Bitcoin. These incumbent banking services have plenty of rules and regulations to protect consumers (and themselves), with more to come from the Consumer Financial Protection Bureau. This does not make them ethical, by any stretch of the imagination.

In his book “Jimmy Stewart is Dead” Professor Laurence Kotlikoff suggest “Limited Purpose Banking” as a cure to what he calls the ongoing financial plague. While large established players would have a hard time limiting themselves as suggested by Kotlikoff or dividing themselves up into the required independent pieces, new initiatives, or “neobanks” can easily just focus on retail or consumer banking.

While I am not expecting neobanking initiatives to use the words “ethical” or “sustainable” explicitly in their marketing pitches, nor include “do no evil” in their mission statement, the opportunity is there for entrepreneurs to achieve ethical banking by combining:

  • The digital efficiency and scalability of computers and networks.
  • The rules and regulations already in place for consumer protection
  • Their own additional rules of conduct, mission statement and operational procedures

Two initiatives came to my attention last week, which looks like they are being built in exactly that way: the Occupy Cooperative, born out of the Occupy Wall Street movement, which plans to launch a prepaid card, and Sustain Green, which plans to launch credit, payroll and prepaid cards with rewards in the form of carbon offsets.

I suppose they will also keep an eye on Bitcoins and other new ways to make electronic payments more efficient in the future, like the recently announced protocol by Visa, MasterCard and American Express to make online and mobile payments simpler and safer.

These are exciting times.


The Future is Mobile for Everyone

October 31st, 2012

As a veteran of the wireless phone industry, I get irritated when new business partners start a discussion with a lecture on how fast the mobile world is expanding. The cellphone is the fastest-growing consumer device ever… African villagers are getting paid at the open air market through their cell phones… I know, I know.

But I have to admit being inconsistent: I get even more annoyed when other people presume that a large part of the potential customers for Plastyc’s prepaid-based banking services have either no cellphone or no data plan on it.

This week, I stumbled on a forecast by telecom giant Ericsson in the Special Report section of The Economist which illustrates how amazing the expansion of the mobile world really is, with stunning graphics.

Here it is:

Mobile forecasts from 2011

(from the Oct 27th 2012 issue of The Economist)

While I have argued in a prior post that mobile wallets that allow people to pay at the point of sale are still not ready for widespread use by the general public, there is no doubt that the banking industry had better accelerate its deployment of mobile access for both its customers and employees. This includes:

  • tablet and mobile applications for customers to access their accounts (or open new ones)
  • tablet applications for branch employees to deliver customer support
  • tablet and mobile replacement of counter-top point-of-sale terminals
  • pushing brick-and-mortar check cashers out of business by offering mobile deposit capture of paper checks from mobile phones
  • replacing the store racks full of plastic cards dangling from j-hooks with instantly-issued stored-value applications loaded into cellphones

I am going to buy some reprints of The Economist article to distribute around at some of my next business meetings.


Don’t get a mobile wallet… yet.

October 17th, 2012

You may have seen it. You’re standing in line at McDonalds, Starbucks, Home Depot or a local store, and the person in front of you waives her phone at checkout then walks out with her stuff. No cash, no card, just a waving phone.

Mobile WalletThat person in front of you is one of the 12 percent of Americans (according to the Federal Reserve) paying with a “mobile wallet”. Chances are good she is using a service from Google, PayPal, Square or Starbucks. You can expect to see more and more mobile wallet payments as companies start using the Passbook service in Apple’s IOS6 to distribute coupons and barcodes that you can redeem at certain stores, and as more stores back ISIS, the mobile payment joint venture backed by AT&T, T-Mobile, and Verizon Wireless, which will start to roll out, reportedly, on Oct. 22.

Mobile wallets are full of promise because they are always connected to the Internet and they know where you are (thanks to the geo-location feature of your smartphone), so they could have cool features. Wouldn’t it be great to have an app that warns you if that new TV you covet is beyond or  within your budget, or one that that pings you with local coupons for a store you’re visiting or one that lets you share restaurant deals with friends in the neighborhood?

Sounds good, right? So is it time to toss your faithful leather wallet and go mobile?

I don’t think so, and here’s why. So far the promise remains a promise; none of the apps I mentioned are available (other than in limited forms). Mobile wallets are just another way to pay with no substantial benefit over cards or even cash.

And there are some drawbacks. There are competing vendors, each with their own partnering stores. No one system has emerged as a standard, so a mobile wallet that works at Starbucks may or may not also work at Target.

In addition, tying your wallet to your phone has risks. What if, like me, you are among the 70 percent of people who do not use a password to lock their mobile phone and you lose it? Or what you don’t lose it but the battery needs a charge? Or what if the phone falls in a puddle and stops working? Also, I’ve yet to hear about using mobile wallets getting cash at the ATM. Until there’s a mobile driver’s license, you’ll need to carry a wallet anyway, so you might as well carry some plastic as well and wait until mobile wallets mature a little.

That said, if your bank or card provider offers a free mobile banking smartphone application to manage your account on the go, jump on it. Mobile banking apps are not like mobile wallets: they will not let you wave your phone to pay in the checkout lane, but they will let you stay on top of your budget on the go.


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