Banking

Art & Money – Site Sessions Talk – May 2017

This is a write up of a short talk I gave in May 2017 as part of Leila Johnston’s Site Sessions events. This is what I wanted to say but not sure if I actually did or not (until the video surfaces that is).

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Hello. My name is Aden and the title of my talk is not ‘make art note’ but I was in Amsterdam last week and this old warehouse was outside my hotel and it seemed fitting. My talk is actually called make banks open. I am going to talk to you today about banking regulation (sorry I will try and make it fun)…and hopefully how it will unleash art on the world of finance.

A little bit about me, I worked at HSBC for over 17 years i.e. 6258 days in total. I worked in a variety of technical roles and latterly in the innovation function (no sniggering HSBC customers) trying to make the bank better. I largely failed. But I still work in the industry but I am freelance now. I have unfinished business with banks.

I want to talk about 3 things in the next 10 minutes. How regulations are forcing the banks to be more open. How those changes are leading a lot of companies to believe they can solve the problems of our financial lives. And finally, thankfully a little bit about how these changes will let the art into banking, I hope.

In 2008 banks fucked the world. Over extended credit on massively complex and opaque financial instruments such a credit default swaps and mortgage backed securities brought the whole house of cards crashing down. Leading to massive government bailouts of the banks that were deemed systemically important to the worlds continued operation. This brought about mass austerity and can be blamed for a lot of societies ills today.

This crisis also fucked the banks, less so for certain but still caused them a lot of pain. Historically low interest rates rendered a lot of their old business models almost useless and they made enemies in very powerful places. The governments and the regulators. This should not have been possible and it should never happen again. A raft of huge regulatory programs were unleashed…

Now you may think this was too little too late….and you may be right but the changes that have been put in place have largely been about protecting consumers from the casino like attitudes of large banks, betting the house on fallacies. These regulations came in many shapes and size and with many weird names…two of the largest were…

Dodd-Frank a set of measures aimed at US banks (the ones that largely caused the disaster) to improve the transparency of the banks especially with regards to products like derivatives.

This also introduced the Consumer Financial Protection Bureau, an agency designed to protect consumers from banks treating them unfairly….

This set of measures is currently under attack from the Tangerine Despot who hates its figure head Elizabeth Warren, the scourge of banks in the US. This is a disaster that will hopefully not come to pass.

The other large global set of measures are Basel III. These measures mean that banks have to hold a far higher percentage of actual liquid capital i.e. real money to avoid them over extending themselves again. Also a series of stress tests are undertaken at regular intervals to test the strength of banks all over the world to try and simulate similar crises to test their resilience now.

There is a new set of regulation that is coming to our shores soon. It is an EU wide piece of legislation AND I AM VERY EXCITED ABOUT IT.

….are you ready for this?

Boom. The Payments Service Directive 2: The revenge. Or PSD2 as it is more commonly known. It is, in my humble opinion, going to change the face of banking to a greater extent than anything I have seen in my adult lifetime (most of which has been spent working for banks).

Well my dear….let me tell you how and why it is so exciting.

There are a whole host of measures contained within the page turner of a document. Ultimately the ones that will impact us most are the following.

This set of regulations is an attack on the middle men of payments. Predominantly the big ones. Visa, Amex and Mastercard. When was the last time you did not buy anything without using those? This will introduce measures that will open up payments.

This will be achieved by the introduction of the snappily titled Payment Initiation Services and Account Information Services. New regulated entities that will be allowed to put in and take out money from your bank accounts directly in the case of the PIS. And for the AIS the ability to receive your transaction and balance data automatically in near real time.

And that is very exciting because it enables a lot of very interesting things to become reality.

Open Banking UK – doing great work to ensure the slow bureaucracy of Europe is not hampered by inertia, or lobbying from those affected etc. This is a shift that is happening across the world. Canada, Singapore, Australia and the US are all starting their own open banking programs and the tide is not going back out….

(Since I gave this talk the API specifications have now been published https://www.openbanking.org.uk/read-write-apis/)

These functions form around 90% of day to day banking functions for most people

If new regulated companies have access to these services they can be pseudo or neo banks and that means we should see some real innovation in the space which has been sorely lacking.

PSD2 is signed into European Law on the 12th of January 2018. The technical measures included need to be in place within 18 months of that law being in place. Which is a long time to wait but thankfully the Competition Markets Authority in the UK has stepped in and put some tighter timescales in place around the data part of these requirements. The first banking APIs for transaction data in the UK must be live by January next year…or else.

So the pipes are opening….what comes next? Efficiency dreams.

Throughout history the organisation of your finances has made people about as a happy as these two. I am sure you have all been in similar situations where one person in the relationship weighs your money, while the other partner stares into space wishing they were dead. It is a dull affair for the majority of us. Either a chore of indifference or something that we blissfully ignore.

The Money Changer And His Wife by German painter Ludwing Von Langenmantel

There are some that love it of course. Accountants, Spreadsheet nerds, organised people that will pour over their finances and models for hours. Planning everything to the nth degree. You know, sociopaths. For most that is out of reach both skill wise and desire wise. The stereotype I would like to lean on is that creative people are less organised / bothered by money? Anyway I hate managing money and I wish I was a spreadsheet nerd.

This is not helped by most internet banking interfaces. They may as well be bank statements sellotaped to a monitor for the purposes of making a point in presentations. This statement is from 2013. Nothing has really changed.

Little has improved since the desktop apps of the 90s that took money management to a fine art of budgets, bar graphs and pie charts. Their are lots of people who remember these so fondly.

Some banks have attempted to introduce money management features to banking. In the industry these are called PFM (Personal Financial Management). Does it really help you manage your money? Kind of I guess. Does it make you feel anything at all? Meh.

There are people that might be thinking but I have an app and it is perfectly acceptable. And I am sure it is lovely in a perfunctory kind of way. Most people have not seen what good really looks like.

In retail banking startups like Monzo are eyeing up current accounts and thinking they can build something better…something more loveable both from a using and viewing your money point of view but also as a compnay. Something that they describe as ‘the bank of the future’

And there are many, many others who are excited about being the bank of the future and what PSD2 brings to them as they can build better products, more quickly than the tardy old incumbent banks. So they see PSD2 as the second coming. They are right to think like that.

The perceived path of all this is to beautiful place where we all have our own AI powered financial advisor. A digital private banker for the masses running our financial lives perfectly and removing all worry. That is the utopian dream of financial services…as a technologist I am intrigued as to how this utilitarian dream plays out…

But…it all feels a bit boring. More regulated industries making solutions they think fit in with what the mythical person of today (largely millennials) want from finance. That we want to be organised and efficient and that is the goal. It bores the arse off me.

What is not clear in these regulatory measures is can I have access to my own data to build my own things? In the UK it looks like this will be available for data. And this gives us some more interesting possibilities. If you can code then you can make. You can solve your own problems. Make niche solutions only you would use…but others may find useful. This has long been the source of real innovation.

And this is where I see real opportunities to let the art in. Because I don’t just want VC funded white men building the banks of the future. While they may well be perfectly designed to improve my white metropolitan elite life and reduce my flat white intake to save me money I want more…

Artistry in banking is largely limited to the notes we use. As I am sure you are all aware this is the bank note of the year for 2016. I will be honest I find it quite ugly and confusing.

This years hot favourite however is beautiful. I mean look at it. I want more if this but applied to the digital interfaces of money. And for that we need more artists.

I want interfaces designed by people like Stef and Giorgia. For 52 weeks in 2015 they set themselves a data recording challenge and then posted the results to each other. Their brilliant hand designed visualisation posted across the world every week a few years back are inspirational in many ways. A great book and now permanently installed at MoMA in new York. What would banking services made by Stef and Giorgia look like?

What would Sheffields Own Universal Everything think finance should look like via their imagined new screens and interfaces? I don’t know but it would be nice.

You can see more of their work on this project at https://www.instagram.com/p/BTbfnz-Fq0I/ and https://vimeo.com/215164746

How about Manchester based artist Brendan Dawes with his algorithmic art. This is a piece of work he created last year in conjunction with dutch payments company Adyen to visualise payments

‘With this piece I asked myself what if you could peer inside this system and see payments being added to the network. Rather than create some kind of representation of networks I instead wanted to create a world where these delicate moments seemed to float down into the network and suggest they are almost delicate in nature. Each representation is constructed from various parts of the data — the shape is born from the transaction category / vertical whilst the texture is derived from the type of device that was used. The colour is then informed by where in the world the payment took place’ Lovely.

How about local pirates and purveyors of fine gadgetry pimoroni? What would they make from the mixture of transaction data and payment ability with their marvellous machines? The physical to digital and back to physical has not really been experimented with in financial services. I think this is a rich seam of wonder.

As James just said about his shop Makers, there are many ludicrously specific economies out there and I am hoping that the PSD2 regulations opening up access to more varied companies and individuals will lead to some ludicrously specific solutions that might be built for the few but actually end up being beneficial to the many….not in a Tory way obviously.

One piece of work from a few years ago that really stuck in my head was Heidi Hinders Money No Object. Heidi researched new ways to make museum donations more interactive. This image shows the handshake agreement, RFIDs contactless payment methods built into the gloves, there is also a hive five interaction, a tap dance payment where the payment method is built into shoes.

Using RFID to bring physical interactions to payments…here is the hug and pay. Bringing different gestures and human contact to payment.

You can watch a short documentary about the project there is also more written about it over here

and returning to currency this was also by Heidi…she took everyday coins and left them in petri dishes to see what delightful bacteria formed. A vice versa of where there is muck there is brass…either way I find it quite beautiful

This is what I want to see a lot more of. I want more poeple like those mentioned above building things to do with money. Thanks to the regulations forcing banks open and releasing new data and materials into the world to make with hopefully they can.

I will end with this quote from John Maeda on design and art. I want better and different questions than the ones currently being asked by banks of fintech firms. I want to see something truly different and I have a feeling art and artists have an important role to play in that. Thanks.

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July 9, 2017 Add Comment

Just another brick in the walled garden

We live in an age where we benefit greatly from some of the most open and connected technologies ever created. The Internet and the the world wide web built on top of that, have given rise to all manner of technological and societal change. They have seen corporate giants rise upon the shoulders of open and connected, yet they all seem headed towards ever more closed gigantic networks where inter-operation is always at a bare minimum and usually only to benefit themselves, they will let you share outwards in some cases but not all, they will let content in but it must come in through their chosen and tightly controlled methods.

Now I suspect a lot of people will be thinking the answer is blockchain/distributed ledgers/new rails etc. and they might be right but I have avoided mentioning them in this piece. I have avoided them because I am interested in the fixing of the existing system rather than its wholesale replacement. Longer term perhaps new rails will exist but that will not be for decades at least.

I have long desired for banking to be far more open and inter-operable. Open APIs are on the horizon in Europe driven by regulations such as the second Payments Service Directive (PSD2) and UK government initiatives such as the Open Bank Working Group backed by HM treasury. I worry however that these are fragile initiatives even if they are mandatory regulatory changes. The lack of implementation clarity allows for too many opportunities to brick up experiences. Be that making accessing your own transaction data so complicated it is better to screen scrape the data than use official methods. Payment options that are so complex in using that plastic will always be preferred. The closed nature of banking remains even when the rules say open up because of UX disasters.

Mobile payments are also showing worrying trends in heading down these paths. Mobile payments are here yet not quite evenly distributed at the moment. They are tied largely to handset makers (Apple and Samsung Pay), or telcos, or existing card schemes. Interoperability remains patchy at this early stage as the market finds its feet. You need to have phone X or operating system Y and then you need to have the luck of the gods in finding merchants that actually accept your chosen payment method. The big boys are playing for keeps, they want to own the ecosystem as much as possible and they want to lock in the consumer to this perfectly constructed world. The new tech giants are just doing what banks have always done. Is it hubris that their global scale and technical prowess can allow them to succeed where banks have failed? Is it an us vs them story playing out? The new breed vs the old breed? Or is Apple Pay just helping the incumbents become more so? Technological progress is welcome but what is the end game and who will be allowed on the playing field?

Neverteroperability

My concern is that we will never get the interoperability I, and I am sure many others, desire. What if Sir Tim Berners Lee had patented the World Wide Web? Where would we be today? We have so many innovations limited by their lack of interoperability. We will surely never see a universal dial tone for say video or instant messaging. Even just something like presence, am I available to talk right now? Am I online? Am I in this country or that city?

We have had many great standards to help unify things but they are rejected at every turn and now lay dying. XMPP for messaging, RSS for all manner of content is an afterthought or seen as a historic anomaly. Anyone remember Open Social? An attempt to make interoperable social network components.

Those standards arose from a technical need to solve specific problems I.e. interoperability, and did so well but it is a problem solved that most companies would rather not have solved. Marketing money wants to know who, how many and how engaged the audience they are targeting is. The higher the walls of the garden the more it looks like a barrel and the more users look like fish fresh for shooting.

Those walls also seem to get ever thicker. Bickering between companies feels school yard level as they trade tit for tat blows. Whatsapp users being unable use their Telegram ID in their profile, Instagram and twitter blocking users/photo sharing and all manner of other petty nonsense. I guess when marketing money drives the company though then a barrel is the shape to aim for. What battles will we see between payments companies? Early shots were fired when telcos blocked software based payments like Google Wallet.

The telephone, fixed line and mobile talk too each other irrespective of telco provider, country or make of phone. This took both regulatory change to ensure networks and patents were used to benefit the greater good and avoid monopolies being formed. Email can be routed to any provider and software user due to the open standard of SMTP. Can you imagine if you could only send email to specific email clients Gmail to Gmail, Outlook to Outlook etc? Or Vodafone to Vodafone or Sprint to Sprint? (for some old enough they can probably remember what that was like). Now we acccept these closed networks as the norm as we all have Facebook Messenger, Whatsapp and Snapchat and lots of other messaging apps. I strongly believe this should not happen with financial services.

History repeating

I cannot pay everywhere.

I cannot get my data from every financial product and use it with other providers or services.

I see this exact same thing playing out in the tech world playing out in the finance world with payments and financial data. Those with the most to lose want to retain control. Those with the most to gain (Tech giants, new fintech entrants) cry for openness but will they reciprocate this in the future once they have a market share outcrop to cling to? Can we build a set of principles and standards that ensure once banking data and payments are opened up they stay open ensuring more and more layers can be built upon them, web like.

I worry for PSD2 because of how the design seems to be happening. Loose guidelines, country specific translations and implementations. Who are the people designing these technical guidelines? Are they bankers or people that understand the web? Can the fintech industry build a solution better/quicker? A better fit for what we need rather than this design by multiple committee stuff that seems to be dragging on and on. Is this regulatory change ultimately just a stick to make the market come up with something better? Will it be OSI vs TCP/IP all over again? Working and well implemented code beating the 172 page page guidelines document?

Money moving is complex and risky. The governance requirements are huge. The liability issues byzantine. I just feel that if we see a few more companies getting some working code (APIs, Auth Methods, Data Standards etc.) then it will make a greater dent in progress. Companies joining forces could do a greater good than yet more committees I reckon. I like the work Xignite has done in joining forces with 21 other companies to form a Fintech API Revolution Ecosystem. I would love to see much more of this ecosystem building, how about just some simple principles or badges of honour for those that make APIs available in FS? Maybe we see banks and FS firms joining initiatives such as the Web We Want (The bank network we want?) Build awareness to allow more building, more inclusion, more access.

The tech giants have built their new gardens and we humans seem to love silos. We love to control and be controlled but these things ultimately limit the scope and scale of technological shifts. They seemingly ensure maximum value can be extracted by the corporate overlords rather than making something bigger, more open that I strongly believe would be better. Will we just end up living in a world where you are either a Google, Apple, Amazon, Alibaba, BBVA ecosystem person and have no choice otherwise?

The opening up of transaction data access and payments instructions is clearly a huge complex change and I have simplified massively but my main point is that walled gardens will lead to fragmented experiences unless you are willing to commit yourself entirely to a single ecosystem owner. The banks have been the ultimate walled gardens as they try to ‘own the customer’ instead of being truly customer centric. They would do well to understand this shift. Excel where they can and make it is easy or seamless for their customers to do business elsewhere. Think platforms and ecosystems not locked in and owned.

Ultimately what is the end game the regulators desire for PSD2? Stop existing incumbents getting an ever stronger hold over the European Payments market i.e. EMVco. To enable greater competition and allow market forces to create a beautiful open ecosystem.

Conclusion

I think PSD2 will eventually crack open the transaction data and payments markets in Europe and hopefully the shockwaves will be felt around the world. The changes proposed however are seen as a real threat to a great many very powerful players and what the country level implementations of PSD2 we finally see in 2018/2019 will look like is a concern. I think the Open Data Institute are doing well to take a lead in the UK but do they wield enough power? Do they have enough momentum? I would like to see more involvement from the W3C. I would like to hear more from HM Treasury and the Competition Market Authority and I believe moves are underway. Also from the governments around the world making openness key. The bottom line is I would like to see a far more open approach to PSD2 from as many parties involved as possible. There are so many people relying on it and it will lead a great change. That maybe too terrifying for those that enjoy the benefits of those huge walls today.

Unless cooperation is forced is the chance of it happening lost forever? Also is the wrong sort of force / design potentially even more harmful? There are industries that need a kick to get started and some industries that need a kick to remember their history e.g. Telcos. I want PSD2 to succeed in cracking the engine open but while the bonnet is up I want to be sure then when it slams shut it’s not all covered in glue and irreparable, licensed components and parts only, registered dealers the only ones allowed to fix and the DIY hobbyist i.e. the individual user is left out.

This all points to a wonderful opportunity for forward thinking financial services players, be they the incumbents or the newer breed but either way I want more of them to work together, to aim for something more open, flexible and altruistic like the web. Altruism and banking might not be easy bedfellows but if you want to be truly customer centric as most keep saying and to truly digitally transform then it would be a wise goal to aim for.

April 29, 2016 Add Comment

The brands of Fintech

Fintech. A portmanteau of Financial Technology. Now widely used to mean all manner of things it could talk about a hot new financial services startup or the magical image capture of cheques by a mobile device. I wonder if a cheque book encoded with a QR code or NFC tags would be Fintech? More widely and sensibly it seems to mean companies of a certain size and world view that want to improve or disrupt financial services.

It is also regularly bastardised and pluralised as Fintechs to refer to more than one of the certain type of company subjectively deemed as Fintech even though it means financial technology. Fintechs = Financial Technologies surely.

So when is an technological change in financial services not fintech? When it is done by a bank?
What happens if a previous fintech company is bought by a bank? Does it cease to be fintech?
Does the fintech label disppear after a certain time? Are 20 year old PayPal getting too old now to be considered Fintech? If a bank buys a load of Fintech companies does it by osmosis become a Fintech?

Should Fintech be FinTech or fintech?

Underneath the parent brand there are other brands. Insurtech and Regtech to cover specific areas i.e. Insurance and Regulatory technology advancements. We have the amazing brand of Roboadvisor which seems to mean investment advice done by a computer program or for added PR bonus an algorithm or AI instead of a highly paid human. We have the current Queen of buzz the Blockchain. An all encompassing brand covering all manner of ledgers and distributed databases and registers and crypto currency and smart contracts and hyperbole.

They have all come to being out of a subset of existing mega trends and brands such as social, mobile, big data and cloud. These brands has elevated and conflated a series of technological shifts and allowed them to be codified and deified and allow for specialists and snake oil salesman to arise.

The brands are a banner to wrap around all manner of things, or to be stretched across the roof of a bandwagon.

This is both good and bad. The bad is that the brands become so broad they lose all meaning as more things are shoehorned in. The good means that these much needed changes to the staid and needlessly complex world of banking get more focus and investment. Let’s try and focus on the good and not just needless PR for PR sake of the bad.

March 11, 2016 Add Comment

Curve launch – The embodiment of the Faster Plastic Horse?

Following on from my recent post about Faster Plastic Horse, and the importance of plastic cards for a long time yet, I was contacted by Anna Mostyn-Williams of Curve asking if I would like to find out more about their fantastic plastic product. I said yes as it sounded brilliant.

On Monday I had a chat with two of the three founders of Curve Anna and Tom Foster-Carter the COO of Curve. The CEO is Shachar Bialick.

In their own words this is what Curve is.

‘Curve simplifies payments by combining all of a person’s bank cards into one card which is accepted everywhere.

Curve is supported by a mobile app and contains chip and pin, magstripe and contactless technology.

Built on the MasterCard® Network, Curve works just like a standard bank card, unlocking a set of services to help everyone become savvier with their money, underpinned by simplicity, control, security and fraud protection.’

Combining all cards into one has been offered before by some of those Kickstarter backed wunder cards which require bluetooth connection to a phones and battery power of its own but this is the first time (to my limited knowledge) anyone has done it behind a normal piece of plastic and available in the UK.

You choose the card you want to use in app and it is then set to the default card for use by the Curve card. Once set you can just pay as normal. No need for your phone at all really if you just want to take the card.

They are offering some nice transaction categorisation features and allowing you to group more easily your actual card spending across multiple accounts. Manual process at the moment to begin though. There are realtime notifications aplenty too (which I suspect a lot of cards added to Curve might not have today).

There are a few killer features that the card has above the ones already mentioned. The ability to use Amex more widely i.e. everywhere Mastercard is accepted. You still collect all your usage benefits from any card added e.g. air miles, loyalty points etc.

curve_add_a_card

The ability to add cards from other country based accounts and then take away the FX complication. They will do the conversion at wholesale rate and then charge a fee on top. This means people traveling or new to country can use existing accounts more easily. This FX play is also a big reason that Taavet Hinrikus of Transferwise invested early on. Partnership opportunities are clearly another great future benefit for Curve.

They will also have the ability in future to reverse decisions made e.g. if you accidentally charge a business expense to a personal card. Talk of a platform play in this area was very interesting indeed but that is one for the future and has real potential to insert new features into the existing purchase process and rails.

There is however a downside, they do not have an Android app yet (the COO is an Android user so he assured me it won’t be long) which meant I can’t become a beta user because I would use this service as I have multiple cards to help manage the family finances. There is also a one off charge of £35 which may put some people off but I suspect not too many.

Any other challenges I can see? Getting people onboard is obviously the big challenge and ensuring they get enough fee earning business/partnerships on top of the one off joining fee to make it viable in the long term.

I think it is a great looking product, the key will be execution and if it really can work across geographies and card schemes as seamlessly as they are proposing / demoing / beta testing with iPhone owners then they have a great opportunity to build something smart on all that existing plastic based infrastructure that we all know and love and understand how to use. I wish them luck and I hope they get that Android app sooner rather than later because I want to use this. Thanks to Anna and Tom for the demo.

They have published a nice video giving an overview of the features. It has a killer last line taking a dig at those other battery powered cards trying to do something similar.

https://youtu.be/PW0mGjEANZI

You can sign up here http://www.imaginecurve.com/

You can find out much more about the team and the product in their press area

February 17, 2016 Add Comment

Faster Plastic Horse

Whenever some new fancy change to the ubiquitous plastic payment card my default reaction is usually negative. I know what let’s add something to the well known and used plastic cards that make it seem innovative! How about a real time balance display? A Passcode generator? A fingerprint reader? Let’s get a Kickstarter going to combine all your cards in one handy must be charged and Bluetooth connected to your mobile phone and can only be used in a country that has not implemented EMV yet* card, yeah? Please stop. I should embrace these innovative attempts to improve the humble and ubiquitous plastic card. They feel like like the embodiment of faster horse, which I agree with another Davies is not necessarily a bad thing but still are they really worthwhile?

*Coin coming soon in EMV flavour!

In the flurry of PR when these things are announced certain details are often left out of breathless press releases and masturbatory tech site reviews. Why not say how much they cost to make and issue in comparison to normal plastic? Say how many you will issue in this first phase and how you will be different from all those other plastic enhancement projects that never got past the (I suspect very limited) pilot stage? Be more honest about the realistic aims of these things.

Experiments yes but solving real issues? Really? Is this stuff really going to have a measurable impact outside of limited prototypes and trials? Yes mobile payments is still in its infancy, yes people are used to plastic but surely there are things between the two that move people along the seemingly inevitable journey to software based payment devices? But…not everyone has an NFC equipped smart phone. If you are too poor for a smartphone capable of these payments innovations then the chances are you are also too poor to be chosen for expensive plastic proofs of concept? Normal plastic cards probably cost under a dollar, these prototypes 10-20 dollars? Is that sustainable for a wider roll out?

Stable infrastructure

But what if the little plastic card that could did continue to be ubiquitous and software did not eat it but just augment and cement that ubiquity? Are the plastic rectangles the optimal technology for payments? The plastic card links to the ecosystem very well via embedded infrastructure. How many 85.60 × 53.98 mm size slots are there in the world? Millions? Billions? Every Point Of Sale terminal, ATM, card payment enabled vending machine, parking meter etc. The move from physical to software brings some benefits but enough to phase out this infrastructure? Not any time in the next few decades.

The mobile can easily be tied to the interaction of the card and terminal today. Realtime notifications are becoming widespread for plastic interactions. The payment information can easily be tied to the mobile device. The back end systems to support payments and feed them to whatever realtime system needs them. The front end process and interaction has time to morph as infrastructure is upgraded. If it needs to at all that is. Plastic cards are already pretty good, durable, inexpensive, known & understood.

Whether or not the behaviour or value of paying with your actual mobile device will ever beat some other payment device i.e. card, sticker, embedded chip etc. I am not sure anymore. Can mobile interaction better the already pretty slick process of contactless plastic? Chip & Pin? Maybe America was forcing the hand of a move to mobile payments by choosing to go chip & signature instead. (You fine American folk seem to love paper almost as much as you love guns)

You can lead a horse to water…

Mobile payments adoption has been slow and fragmented so far. Even the deified Apple Pay is not getting the traction we had all hoped. Even rich people who can afford an iPhone 6 are too lazy to stop using plastic cards and paper money it seems. It may need a generational shift to make it truly mainstream, the children for which plastic swiping and inserting habits are not yet ingrained.

We are yet to see software based payments really come into their own. Tokenisation and in app payments and stores without physical checkouts are all at the experimental stage at the moment and there are a whole host of design and behaviour challenges to overcome before we move away from the act of inserting or tapping to pay altogether. For most plastic still is the main form of payment interaction.

The changes to plastic cards over the years that have made it to near ubiquity are those proposed by the EMV giants. Chip cards and contactless being the big ones. Very worthwhile changes at differing levels of adoption. All the other trials and examples have not really gotten close. Could that change? What if these trials involved more companies? What if some of those Kickstarter experiments actually were moderately successful? Results of trials were shared more widely? Opened up somehow? Share more and maybe the chance of growing and wider adoption increases.

If you really are as customer centric as you say you are then you are industry centric too and not just in it for yourselves. Hippy Utopian dreamer that I am I know this is probably unrealistic. When atoms are involved it gets harder, when payments networks and regulations are involved that difficulty level passes extreme add in ego, greed and competitiveness and we can see why payments evolution has taken so long.

The finishing line

What I would really like to see gain a lot of interest and PR is the results of these trials. Let us know how many people tried them, how far and wide they have been rolled out, Did they solve the problem you thought they would? Did new interesting problems arise? Will they replace all cards going forwards? Will there be a phase two? What have you actually learnt from the trial? Those answers are the rewards for the company running the trial I suppose (to the pioneer the spoils) but I think it would make for a much more worthwhile experiment and more laudable PR if more of the hypotheses and results were shared rather than just the shiny faster plastic horse. Show the thing yes, but show more of the thinking and working out too.

January 12, 2016 Add Comment

PSD2 – the second coming is nigh

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Not only is PSD2 (Payments Services Directive) the second iteration of PSD it is also seen as the second coming by many in financial services, particularly that random bunch of new players broadly placed under the brand of Fintech. If you are not familiar with the 170 odd page delight of a read then here is a link to it though I highly recommend Starling Bank’s far shorter explanation, which also exudes their excitement for it. For a longer more detailed insight try this from Out-Law.

The excitement is brought about due to PSD2 promising to deliver an open payment network through APIs (PSD2 will do much more but this is the bit people are focusing on most). These will let companies with the appropriate license have the ability to make payment instructions upon bank accounts. Those with access are known as payment initiation services providers (PISPs) i.e. make payments, move money. The second group can aggregate transaction data from multiple institutions and are known as account information services providers (AISPs). The final text of the European wide regulation got rubber stamped in the European Parliament at the beginning of October. This means that by the beginning of December the countdown will begin. Member states and their banks / financial service providers have two years to implement the changes and place them into law. By the 1st January 2018 (if not a smidgen before) the second coming will be upon us.

In parallel to this in the UK we have the Open Banking Working Group (OBWG). A group brought together in response to the request from the Treasury for information on APIs and open data in banking. The OBWG is co chaired by The Open Data Institute and is represented by a host of experts across six sub committees from many aspects of finance. The aims around data access are similar to that of PSD2 (and their will be alignment) but the individual customer seems to be slightly more of a focus for the OBWG.

Let me state that I personally think both of these initiatives are brilliant. Access of this nature has been long needed to not only stimulate the market but more importantly give banking customers (pretty much all of us) access to our own transaction data in a more useful form than a downloadable spreadsheet. I have said this plenty of times in the past. The ability for payment instructions to be made on top of the existing accounts effectively means that the entire banking experience could be replaced by a third-party service and allow you top operate your banking across all institutions, with which you have a relationship, in a single interface.

That above are just the obvious use cases, these changes should unleash upon the world a wave of innovation like nothing the financial services world has seen…or maybe not. Plenty of people are imagining more such as Mondo, David, Matt etc. All good.

But I have a few concerns….

Banking is a slow moving ass and sometimes needs the stick of regulation to get it moving. What if the mandatory nature of this regulatory stick does not lead to an ideal solution to the problem it is trying to fix? The Technical Standards for PSD2 are 12 months behind the regulatory standards. This means there will be 12 months of analysing/designing/guessing how the compliant solutions should operate. The authentication methods to be used for access to data and the creation of payment instructions are key implementations upon which the hopes of many rest. Get this wrong and implement some clunky awful and unworkable solution and the blossom of innovation they hope to nurture will never appear.

Are the right level of people involved in the creation of these technical standards? I hope the very companies that desire this the most get to have an at least equal say in the design of these access methods. I also hope that people with experience of doing this kind of change before are also involved. For example the W3C (Web Governing Standards Body) are currently building out the Web Payments charter. The timescales align very well but I believe the twain have never met. The PSD2 proposed changes feel like they should fit perfectly or at least very well with the changing nature of payments as part of the fabric of the web. Leaving this design to bankers and policy makers alone feels risky to me.

In the UK the Open Banking Working Group have explicitly stated OAUTH as a mechanism of choice to be used for delegated access to data which is good news. While it may not be perfect it is a widely used standard and I believe these changes should be looking to use the best of breed of today rather than trying to create new standards.

Another aspect I am not clear on (and maybe completely wrong about) is the nature of access available to the individual customer. PSD2 refers to PISPs and AISPs but what about the humble user? Can I choose where I plug that data? Will I only be able to choose from an approved (by whom?) list of licensed and regulated AISPs? Can I not use the data myself in my own apps if I have the talent to build such things? Can I link that data to AISPs in other countries? What about companies outside the jurisdiction of PSD2? Are there rules around this data that make it far more sacred than it needs to be? People have been able to download and upload spreadsheets wherever they see fit for decades.

This automated feed does indeed bring greater risk but that being said hampering it with rules for rules sake may present more of a risk to growth than the threat risk perceived.

I am also concerned that banks will see this as yet another regulatory demand placed upon them outside of their business strategy. This means compliance as a bare minimum and nothing else. This is what the Fintech horde are hoping for. Complacency compliance instead of the incumbent providers taking the massive opportunity before them and making a real digital step forward. Clearly some banks will play this differently to others and history will no doubt show who played their hand most wisely. This is another reason that the people driving PSD2 cannot just be the banks or the regulators.

And finally…what happens when Apple/Amazon/Facebook/Google apply for their AISP/PISP licenses. Second coming gets a California style hype boost then and bank boardrooms across Europe hit the panic button. Maybe.

PSD represents a fundamental change to the way banking operates across Europe and possible the most seismic shift in ‘centuries of stony sleep’. The implementation of it will be key to ensure this delivers truly open payments and data access and not just the change that satisfies the regulation minimums. Let’s see what happens between now and January 2018 and then beyond.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

The Second Coming by W. B. Yeats

November 12, 2015 Add Comment

Proper Digital Engagement

I am a big fan of well designed notifications. I have seen a couple of fantastic ones recently.

This one by Capital One highlighting a rising charge

https://twitter.com/javan/status/632180313016274944http://thefinancialbrand.com/53637/mondo-digital-mobile-banking-experience/?utm_source=dlvr.it&utm_medium=twitter

And this one by new guys Mondo, which is a simple but beautiful you have spent this much today.

From this article on them over at Financial Brand.

Proper digital engagement not just talking at people on Twitter.

September 9, 2015 Add Comment

Blockchain Bandwagon

As more and more banks & VC’s start investing in Bitcoin and ever more the Blockchain it seems this almost nursery school age technology is destined to play an ever greater and more influential role in the future of finance. It is being breathlessly lauded as the potential destroyer of almost every complex process of today around the transferral of goods, services, documents, IP, identity, contracts, laws, house ownership etc. etc.

I have not really written anything about Bitcoin or Blockchains before but someone asked me recently what I thought about them. I have to admit I have not put in the time to really understand the mathematics behind The Blockchain. My almost A Level standard maths studies at college and university fell apart around plotting 3D sine waves. I never studied cryptography. I am however fascinated by the fact the technology behind the Blockchain has seemingly solved the problems around transferral of ‘digital assets’. Cryptographic proof of transfer, units of work distributed across a network, the ledger of those transfers open to all. It sounds great.

I also never studied economics so I can’t tell if the Blockchain relates well to some age old theory that economists seem to like. ‘It is just like fractional reserve banking’ or something something gold standard. No idea.

The thing that interests me most about it is its openness. The fact that this has allowed a sizeable ecosystem of businesses and applications to build up around it in such a short period of time. This is also seemingly the one thing none of these keen investors are interested in. I haven’t done an MBA either so I know nothing about business models really but I believe that open and lots of funding from VC’s/banks don’t really go hand in hand.

I liked Fred Wilson’s comment that it could become a protocol like the foundation of the Internet. Will the development around the blockchain mean that good enough beats over prescribed just has it has done in the past with the likes of TCP/IP vs OSI. I am watching the W3C Web Payments group with interest but I feel it is going to be a very difficult challenge to supplant the existing rails/work with them well enough to make everyone happy. We are headed for another set of silos surely? I do hope not.

I also like what companies such as Eris are building. Blockchains without the Bitcoins. Build your own. It is just a database at the end of the day (and apparently has something to do with marmots). In fact everywhere you turn there is something new. Some reimagining of something old but in a new time. The Elements Project being another interesting avenue of investigation/work. The openness just allows people to build and therefore we might see some age old problems, that the exisiting rails just can’t technically or economically support, finally become a reality e.g. do blockchains/sidechains allow micropayments to move closer to viability?

It feels like it has further potential to be the basis for real changes to the financial rails. The complex back office processes required to facilitate the movement of assets and traded goods feels particularly ripe for improvement. This seems to be where the bulk of the investment from banks is focusing.

Maybe some companies or industries will create their own ledgers and currencies for specific types of trade. Again a rich angle of investigation. But I do wonder about the what if they did some of this experimentation in he open? Made a public ledger of an exisiting trade flow? Allow others to access all that information? Build upon it?

What this openness and high speed evolution and creation has done is chipped away at the rules and regulations and made people in governments believe their may be a better way. Where once the view might have been this will definitely be regulated out of existence it is now clear that some countries will do the very opposite. It is also driving the debate about opening up the networks further. Midata v2 / standardised banking APIs loom large in the UK. Payments Service Directive 2 (the revenge) includes some great stuff around access to account for third parties to gain a foothold / build an ecosystem upon.

Will all this investment bring further innovation, smooth the edges and bring about the manufactured normalcy field to make Blockchains and crypto currencies more understandable / accessible to mainstream users? Or will the more protocol like nature mean it will merge into the vapours of the cloud and become another strand of plumbing few need to truly understand.

For me the key point is the open nature of Bitcoin and it’s by product the Blockchain is the thing that make it great. I would like to see more investment from banks to build things in the open / for others to build upon freely and see where it takes us. Not sure capitalism works like that but we shall see.

From my lofty position of having pretty much zero education in the relevant technical / economic areas on the subject, these are my reckons.

July 2, 2015 Add Comment

Where is the Uber of banking? Nowhere hopefully.

Chris Skinner wrote an interesting post a while back entitled ‘Where is the Uber of banking?‘.

And then we have this widely shared piece of insight from Tom Goodwin

‘Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.’

And he is right it is but what I want to take umbrage (uberage?) with is the way this headline/trend is being used by the ‘fintech thought leaderati’.

We now see lots of platitudinous use of ‘Uber’ as the bogeyman for banking. Finally the thing we have been reckoning could happen to banking (a player comes out of nowhere to disrupt an entire industry globally) now has a name and a face so it is obvious the very same thing will happen to banking.

Maybe it will. This move to no ownership by the controlling company might continue to play out to the advantage of the few. What happens when the model of ownership it is built upon collapses? Matt Webb wrote a great piece on the change in ownership structures around this new breed of companies. It looked at an example of just such an ownership scheme going belly up in the form of UK courier network City link. He talked about a Coasian flip…

‘TaskRabbit workers paying the cost of the company pivot. Neighbours of Airbnb hosts soaking the externality of strangers in their space without choosing to accept it. Drivers who used to be employees being encouraged to be independent Owner Drivers – still in City Link livery – bearing the risk of the company’s capital expenditure and future success… without seeing any of the potential upside.’

Matt spoke about both the bad and the good of this flip but also around the models that might be needed to make this more beneficially to the ’employee’ of these kinds of networks. Dan Hon also said a thing that stuck with me on the rhetoric around Uber et al. Software eating jobs.

‘What irks me is when companies like Uber take that software-eating-jobs position and then distort it into a “we’re providing jobs” message. That’s not fulfilment. That’s not helping people succeed. It’s meat-puppetry.’

Network ownership

Who owns the network itself if the company providing it goes titsup? If Uber burns through all that funding and has to switch it off? Will the customers and drivers be picked off by other players such as Lyft and Hailo and their ilk? Do we have easy driver / customer portability between networks? Do your Uber ratings go with you?

The big focus should be on the networks. It is clear that Uber and AirBnB have built networks of need and intention. Allow an easy flow of people needing a car to get them from one place to another or an apartment for a weekend.

Banks are of course networks but the customers have no easy way of speaking to each other. They have no real way of declaring those needs to the network only to the singular owner of each banking network. Also the needs are multitude not singular (well they kind of are). An ecosystem of service providers also has no way of interacting with that network because of a lot of laws and regulations. Can someone make a network of money needs open to all where before there was none? Perhaps. Perhaps not.

Bernard Lunn went into detail on ‘Why the Uber of banking Fintech model is a mirage‘ looking at what this network would mean from a delivery / manufacturing point of view.

‘Uber of banking is a mirage because of two fundamental differences:

The commoditized service providers (aka Banks) have more power than freelance taxi drivers.

The full banking service is more complex than getting a passenger from point A to B.’

So the rules are complex and doing an Uber like thing within banking would be very difficult. Maybe the blockchain is the answer? Decentralised disruption! We could build a decentralised network of needs and intention to buy. The intention economy powered by the blockchain. My hippy ways think this would be a lovely thing indeed. No one has yet managed to really crack the whole decentralised thing for X at any sort of decent scale and adoption. I bloody hope they do soon though. If not we will continue to have the likes of very well designed and funded business models that play around with ownership and transferral of risk without necessarily providing the benefits of real customer control and power.

Other bugbears

It is frictionless! It is like the payment is not even there, it is so frictionless I did not even feel like I was paying for my £50 limousine trip! Maybe I get a bit miffed about Uber being the be all and end all because it feels like it started off as a service for rich folks on their smartphones too lazy to leave their champagne and caviar and walk outside to flag a taxi or to have to actually speak to a human being at a cab company. But what about Uber X? That is not for rich people, it is launching in Newcastle. Yes, I know. Uber and Hailo etc solved a real last mile (well, ten yards) kind of problem. Is my taxi nearby/outside right now? If the price can be made good enough to benefit both the drivers and the wider public i.e. not just those who can spend £50 on a single journey then I am all for it.

‘But what about the sharing economy?! It points to new forms of ownership, no one will need cars anymore.’ Usually said by people in massively expensive to live and drive cities with impressive public transport infrastructures or ‘free’ shuttle buses to their giant donut shaped offices. I guess this ties in well to the banking for rich people by rich people, which is always going to be an attractive market.

And then there is the CEO.

Of course like any other low powered middle manager I think I would like to see some Uber style disruption in banking…just the good side of Uber not the bad. But maybe there is no such thing as good disruption? You don’t make omelettes without breaking a few eggs, hey?

There is a need to understand the network dynamics and ownership models that enable these new wave of Internet behemoths to disrupt all the things. Don’t just judge on growth alone though. What are those new models of ownership doing for the way the world works not just from the incumbents being disrupted but those that work within both the old and the new.

Having the Uber bogeyman will hopefully make some banks do interesting things in response other than spout missives like we will be the ‘Uber of this bit of financial services’ or ‘We are the AirBnB of mortgages’ but please be careful what your platitude wielding thought leaders scare you into doing.

Update 19/05/15: A couple of people have asked isn’t P2P lending the Uber of banking? Well I guess it could well be. A network of people and their money being used to fund needs and wants of folk. I guess the fact that P2P lending institutions still need to keep capital in reserve should it all go wrong means the ownership model and transferrral of risk is not quite as high in some regards of meat puppetry but investors can still make losses. An angle for a future post certainly.

May 18, 2015 Add Comment

Digital Biscuit Tins

I have worked for a bank for the best part of two decades but I am still rubbish with managing my money.

I have zero control or comprehension of where I am with my money day today let alone a longer term view with regards to things like pensions or mortgage pay off dates or my children’s university funds.

It is the day-to-day management of family household expenditure that is of most concern today. I am in a situation where we have a decent size mortgage, two young children, two salaries coming in and all the financial management that entails. What we are lacking are the tools, products and services to help. Somewhere a tiny violin plays.

We manage today using a series of accounts. One joint, two personal, a separate shopping account and we also have separate credit cards for petrol and just in case scenarios and we have one with a lump of debt on. I also have a credit card for work expenses which is automatically paid off at the end of each month (whether I have claimed my expenses back or not). All those products are provided by four different institutions and operated by two people (God knows what I will do when my kids have accounts).

We use these products as virtual biscuit tins to put hard(ish) limits on our spending. To break it own into manageable chunks of household outgoings, weekly shopping and personal expenditure. It works fairly well but it has taken is some experimentation and mistakes to get to fairly well i.e. The use of easily available credit without decent controls meant more debt. It is far from perfect and it really should not be like this.

Personal Financial Financial Management tools are not that prevalent in the UK at the moment for a number of reasons, mainly the ease of access to transaction data. Those tools would help to some degree but I have yet to see a bank implement one with these kinds of hard spending limitations. They have soft budgeting capabilities ‘oops you have gone 14% over your flat white budget this month you silly sausage’. Which might be useful to some (coffee drinking morons) but they give no sense of being really skint i.e. I physically only have this money to spend. For all the digital advancements today no one has really cracked the USP of cash, once you have spent what you physically have on you it is gone.

There are solutions more targeted to the underbanked and financially excluded such as prepaid cards and the likes of Amex Serve in the US but again they are also not prevalent in the UK. It feels like to me we have a very blunt set of basic products; The Current Account, The Debit Card, The Credit Card and The Savings Account. The basic tool set for the vast amount of people’s day to day financial needs.

I believe that thee setting free of transaction data will herald a new beginning, especially in the UK, and I applaud the governments focus on opening up APIs for all. (Get your responses in on that by the way). Clearly the data only allows you to go so far and what is really needed is a rethink and some bloody good design into what the basic tools of finance could become. Software is eating the world so they say but it has not really taken a nibble at the basics. It is just adding layers on top of the data e.g. soft budget target.

How can you engineer hard stops on spending? How can you make those budget targets really mean something. How can I get to the till in the supermarket and be filled with a sense of dread that I can’t afford this weeks Aldi shop? Across different products and institutions?

Some institutions have savings goals and saving pots i.e. logical splits of a single savings account. What about these for credit? A shopping biscuit tin. Hard limits for the week. Differing credit limits for differing pots which can be raised and lowered as need be.

These kind of biscuit tins would need to be understood by the network, the myriad of merchants and schemes. Today they would be hacked to create virtual cards or accounts and they bring about real complexity and push the boundaries of a system built on things like branch sort codes, linking money to physical spaces that may no longer actually exist.

This is a very rich seam, I have only scratched the surface of the singular products but what about them working in conjunction? What about different levels of control for different people i.e. family members. The accounts as software, allowing them to be programmed and played with.

Until we see a fundamental change to the basic tools of finance then I am not sure true control over the day-to-day spending of most folk is ever going to be well understood or feel like it is in control. Maybe this is just me being rubbish with money, looking for digital brilliance to save me from my laziness. The organisation that can help relieve the feeling of barely keeping my head above water will have earned a fantastic amount of loyalty. It is hard to swim carrying all these tins.

February 2, 2015 1 Comment