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Digital Bank: Strategies for Launching or Becoming a Digital Bank by Chris Skinner
algorithmic trading, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, augmented reality, bank run, Basel III, bitcoin, business intelligence, business process, business process outsourcing, call centre, cashless society, clean water, cloud computing, corporate social responsibility, credit crunch, crowdsourcing, cryptocurrency, demand response, disintermediation, don't be evil, en.wikipedia.org, fault tolerance, fiat currency, financial innovation, Google Glasses, high net worth, informal economy, Infrastructure as a Service, Internet of things, Jeff Bezos, Kevin Kelly, Kickstarter, M-Pesa, margin call, mass affluent, mobile money, Mohammed Bouazizi, new economy, Northern Rock, Occupy movement, Pingit, platform as a service, Ponzi scheme, prediction markets, pre–internet, QR code, quantitative easing, ransomware, reserve currency, RFID, Satoshi Nakamoto, Silicon Valley, smart cities, software as a service, Steve Jobs, strong AI, Stuxnet, trade route, unbanked and underbanked, underbanked, upwardly mobile, We are the 99%, web application, Y2K
This is why Barclaycard have estimated that the UK will move from £20 million of contactless payments in 2011 to £6 billion by 2016. The constraint however is that it is card-based and not as easy to use as a mobile. Then that all changed when Barclays launched Pingit. Pingit is a PayPal-style mobile app offering simple peer-to-peer mobile payment, whether you are a Barclays’ customer or not. Developed internally by Barclays through a private cloud service, it was launched in February 2012, and the ad campaign started in April. What proved interesting in the launch is the speed of use of Pingit. From day one in February, people were downloading the app fast – 120,000 in the first five days, over 400,000 by mid-April and 500,000 by May 9th. Barclays claimed the number had reached over 700,000 as of May 16th 2012, 80% of which is on iPhones apparently, even though it’s also available on Android.
I’m sure the ads help, and Barclays claim that their social media is helping, illustrated by this screenshot of their Facebook page. What really helped is that Apple highlighted Pingit as a showcase app, due to its fast download numbers rising, and that #Pingit was the second highest trending topic on twitter the day after launch. Barclays then said that they were surprised at the uptake in usage volumes, and how the average transaction had been anticipated around the £25 mark but was, so far, averaging around £75 per transaction and increasing. The demographics prove interesting: 29% of users are 18-25 years old; 37% are 26-35; 26% are 35-50; and 7% are over 50. The real power of Pingit is that it is a really simple idea – use Barclays to send mobile payments – and, more than this, that it’s a method of capturing the consumers’ and corporates’ attention.
The real power of Pingit is that it is a really simple idea – use Barclays to send mobile payments – and, more than this, that it’s a method of capturing the consumers’ and corporates’ attention. The reason being that the app sits on your phone with Barclays branding all over it, whether you are a Barclays customer or not. This is why, in May 2012, Barclays went one step further and launched Barclays’ Pingit for Corporates. Now they’re pushing for merchants to offer Pingit via simple QR codes and Corporate Identifiers. The idea of the Corporate ID is that firms can buy Pingit accounts such that customers just put in “Tesco” or “Waterstones” and the payment is made without needing to know the company’s account numbers or other details. That’s pretty cool. Even better is that you can embed all the data you need in a QR code. So, as you walk past an ad for a charity campaign, hold your phone over the QR code and make an immediate donation or, even better for the utility firms, send out a bill to a customer with a QR code embedded that includes all the payment details and the payment amount.
Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives) by David Birch
agricultural Revolution, Airbnb, bank run, banks create money, bitcoin, blockchain, Bretton Woods, British Empire, Broken windows theory, Burning Man, capital controls, cashless society, Clayton Christensen, clockwork universe, creative destruction, credit crunch, cross-subsidies, crowdsourcing, cryptocurrency, David Graeber, dematerialisation, Diane Coyle, distributed ledger, double entry bookkeeping, ethereum blockchain, facts on the ground, fault tolerance, fiat currency, financial exclusion, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, index card, informal economy, Internet of things, invention of the printing press, invention of the telegraph, invention of the telephone, invisible hand, Irish bank strikes, Isaac Newton, Jane Jacobs, Kenneth Rogoff, knowledge economy, Kuwabatake Sanjuro: assassination market, large denomination, M-Pesa, market clearing, market fundamentalism, Marshall McLuhan, Martin Wolf, mobile money, money: store of value / unit of account / medium of exchange, new economy, Northern Rock, Pingit, prediction markets, price stability, QR code, quantitative easing, railway mania, Ralph Waldo Emerson, Real Time Gross Settlement, reserve currency, Satoshi Nakamoto, seigniorage, Silicon Valley, smart contracts, social graph, special drawing rights, technoutopianism, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, wage slave, Washington Consensus, wikimedia commons
In the United Kingdom we have two mobile A2A front ends to interbank payments: the aforementioned PingIt, offered by Barclays, and Paym, offered by everyone else. Paym has around 2 million people registered and it transferred around £26 million in 2014. We happen to be a Barclays-centric household so I use PingIt all the time and find it very convenient. I was very excited, therefore, back in February 2015 when they extended their addressing from mobile phone numbers to Twitter handles! (If you want to try this out for yourself while supporting a good cause, by the way, simply fire up the PingIt app on your mobile phone, select a modest amount for test purposes – say, £250 – and send it to @dgwbirch. I will let you know as soon as your payment reaches the ‘Dave Birch Holiday Home in the South of France’ emergency appeal fund.) While neither PingIt nor Paym is close to being used by half the adult population of the United Kingdom, or to edging cash out of the way for the person in the street, across the North Sea MobilePay is playing a key role in bringing Denmark closer to cashlessness.
Through mobile phones we now have a network that connects all the consumers and all the merchants and all the banks, so why don’t we just use that? Why bother with Visa and MasterCard? Provided the consumer has some ‘token’ to identify the relevant bank account, why can’t they just give this token to the merchant and have the merchant go directly to the bank account to get their money? One day soon, my Waitrose app will obtain tokens from my V.me wallet, my MasterPass wallet, my PingIt app, my Zapp app and any other wallets it can find on my phone through a standard discovery process and a standard API. Then, when I check out at Waitrose my app will pop up and take care of business. Maybe I will have configured my MasterPass wallet, which is where my John Lewis MasterCard will be stored, to allow the Waitrose app to charge £100 without additional authorization. This will completely change the experience of POS for most people.
(My good friend Kristian Sorensen tells me that to accommodate strong opposition from the government’s right wing coalition partners, the proposal was eventually replaced with a more lightweight approach, where only certain types of merchant during specific times of the day are allowed to refuse cash. Petrol stations can refuse cash at night, for example.) Once again, it’s the mobile phone that is the enabler. Most of the adult population of Denmark use MobilePay, the mobile-initiated account-to-account immediate-payment service (the equivalent of Zelle in the United States or Pingit in the United Kingdom), which was introduced by Danske Bank in Denmark. It was launched in 2013 and has attracted more than 3.4 million users out of a population of 5.7 million, which, when you look at the demographics, means that it already has around 70 per cent of its total addressable market (i.e. Danish smartphone users aged fifteen and up). Right now it is processing around 500,000 transactions per day, with an average value of around €33.
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Mobile Banking refers to the adding of mobile as a channel for existing bank customers. In the majority of cases the features and functions of mobile banking are not dissimilar to those of Internet banking, only optimised for a smaller screen. In some cases, banks have elected to add services such as a location-based directory of branches and ATMs, and loyalty discounts. With the recent news that Barclays’ PingIt had 120,000 downloads in its first five days, that Square already has more than two million merchants on its payments platform (around a quarter of all US card merchants/retailers), that Starbucks is doing 25 per cent of its North American payments via a cardless app13—it seems like mobile payments are taking off phenomenally. “We are the number one company not in the U.S. but in the world in terms of mobile payment, transactions and dollars.”
If we are a customer of a subscribing bank receiving a payment, then the payment goes straight into our nominated bank account. If not, we simply go to the POPMoney website, register and give the bank account details of where we would like it deposited, and POPMoney uses the SWIFT network to finalise the transaction for us. Chase launched QuickPay in 2010 as a competitor to the likes of PayPal, primarily driven from a mobile phone app that enables P2P payments. Barclays, not to be outdone, launched PingIt in 2011—specifically via mobile. In neither case do we need to be a customer of the bank. In 2011, JPMorgan Chase, BofA and Wells Fargo upped the ante by forming ClearXchange, designed to facilitate a future P2P capability between three of the largest banks in the US—only 11 years after PayPal launched the same. As money becomes more abstracted, then the digitisation of money will lead to an interesting intersection of change.
NFC: Near Field Communication—a short-range high-frequency wireless communication technology which enables the exchange of data between devices over about a 10-centimetre distance OCR: Optical Character Recognition OpEx: Operating Expense OLED: Organic Light-Emitting Diode (also Organic Electro-luminescent Device OELD)—an LED whose electroluminescent layer is composed of a film of organic compounds. OTC: Over the Counter—refers to physical transactions or trades done on behalf of a customer by a trader or customer representative who has access to a specific closed financial system or network. PayPal: A leading P2P payment provider; others include Square, i-Zettle, ClearXchange, Dwolla, PingIt, PopMoney, QuickPay, Vermo, ZashPay. PCI compliant: Complying with Payment Card Industry data security standards. PFM: Personal Financial Management PPC: Pay-per-Click; a method of paying for appearing in search engine results by bidding and paying for specific keywords; you then pay at the successful bid rate every time a user/visitor clicks on your link. P2P: Peer-to-Peer or Person-to-Person—a method of passing information or data via IP-based communication methods between two individuals connected to the Internet via computer or mobile devices Pod: Modular customer engagement station POS: Point of Sale—the location where a retail transaction occurs; a POS terminal refers more generally to the hardware and software used at checkout stations.