I tend to bitch about infographics every now and then, but sometimes you find something which is really valuable. Like the following diagram by Jess.net about how credit card numbers work. Obviously, it’s meant for you to understand the nomenclature and not actually crack the codes. Goes without saying.
Category Archives: finance
On June 28th, 2012, just before I spoke at the marketforce future of cards and payments conference in London, I was lucky enough to attend Jacob de Geer’s presentation on iZettle. De Geer started his career by being the first employee of Tradedoubler as its MD in 1999. He was introduced by the moderator as a “serial entrepreneur” and his latest invention is an amazing device which turns your iPhone into a payments point-of-sale terminal; let’s delve into the details of this magical device.
a business born out of the frustration of a small business owner
“I’m a bit of a payments rookie” Jacob de Geer admitted as an introduction. In fact, the idea for his latest invention came from his wife when she once came home and she was very frustrated about the fact that she was not able to accept payments and therefore she missed 50% of the business she could have done. “It is time you do something useful!” she added and that was what prompted Jacob to found this new start-up. Devices turning smart phones into payment terminals aren’t something entirely new though, there is already one company in the US called “Square” which does this, but it is using magnetic stripe technology whereas “Europe is a different animal” as Jacob pointed out.
The company was started in April 2010, and it partnered with “talents from all over Europe in order to form a virtual company” de Geer said. What is most amazing about this is that “90% of the infrastructure’s in the cloud and 5% in the hardware”; yet, the most important thing is that Jacob de Geer managed to get his device EMV – certified.
There aren’t any fees, only 2.75% of transactions taken from individuals and small businesses. Daily deposits are then transferred to individual bank accounts.
On day one, 10,000 merchants signed up to the service in Sweden “a country in which there are only 9 million inhabitants” de Geer said, so this is a real achievement! But the traction which iZettle got from that was from all over the world, and not just from the Nordics.
The target is that of “sub-SMEs and prosumers”; a market which, according to Jacob de Geer, is not very well catered for. It is mostly made of 1– 2/3 employee companies but it represents “10 to 15% of the GDP of Europe!” he added. These are the only ones that iZettle is catering for de Geer added.
The smartphone penetration has gone up 33% versus 2% estimated point-of-sale penetration Jacob said. “We can therefore broaden revenue streams in this market”, the Swedish entrepreneur said. The main target is electricians, blacksmiths, plumbers, taxi drivers, etc.
“This is good business, there isn’t any competition with Banks” he added. In the Nordics only there are now 50,000 merchants in operations who were signed up by iZettle in the past six months according to its owner and founder.
launching in the UK … without Visa
And for the past few weeks, iZettle has also been available in the UK: “We signed up a couple of thousands in the first day” Jacob announced. And yet, “we use no advertising at all”. The device is approved by most card schemes thanks to the creation of a commission split between card schemes and iZettle; but a major setback is that Visa is not part of the experiment in the UK: “they didn’t want to participate” Jacob de Geer added.
So far, iZettle is available in five different markets (4 Nordic countries and the UK). There aren’t any plans that I’m aware of for expanding to other countries, but I can see no reason why what worked in England wouldn’t work in certain countries such as Germany or France, the latter having a 22 year-old field experience with chip and pin.
are consumers worried?
“No! they aren’t” Jacobs declared “because of the benefit of the chip”; as to fraud levels, “they are significantly lower than standard chip and pin” Jacobs said, mostly because transactions are carried out face to face. Yet, the entrepreneur is “not naive” and he knows that “someday something bad will happen”.
But this is the reason why the iZettle company has set up a limit for how many payments can be received daily: “€3000 for individuals, and €6000 for businesses” and “this is sufficient” Jacob de Geer added. The average transaction is at €65, which is “significantly higher than the rest of the industry” de Geer added.
convenience over security …
Once again (as we did when we started Internet Banking in the 1990’s) this is proving that convenience is more important than security. iZettle is changing the ballgame by bringing payment terminals to places where they weren’t available before. That in itself is worth the risk which by the way is carried by insurance companies and iZettle themselves.
a bright future for iZettle
I think it is pretty easy to predict a very bright future for the company. There is an area which puzzle me a bit though: the fact that Visa wasn’t part of the scheme in the UK, is a bit of a shame in my eyes. I find the device so clever … I hope they will jump on the band-waggon soon. There are two other directions in which iZettle could well develop in my opinion: for one, other European countries with much bigger footprint, and second the ability to cater for smart phones which aren’t iPhones and mostly android phones. This of course would make it a lot more difficult because a lot of devices exist in the market but I’m certain that an elegant solution can be found. After all, the mobile world is all about Android now, as MWC demonstrated in Barcelona last February (see our full coverage here).
Last but not least, Jacob de Geer is a very impressive entrepreneur: soft-spoken, cool-headed and extremely professional, yet anything but smug or haughty. And while he talked, all were listening in the room. It’s true that we’d looked into how to use mobiles for payments for one and a half day and a young entrepreneur from Sweden was showing us how to do it.
Stephen Harrison (photo), Chief Executive , Nation Fraud Authority (NFA) delivered a presentation on June 28 regarding the importance of fraud in advanced payment methods in the UK at the marketforce future of cards & payments conference:
the National Fraud Authority was set up by a response to fraud by the UK Government in 2006 in order to understand fraud risks and develop partnerships to counter it. the NFA is part of the Home Office. The idea is to get a better handle on the reasons and the extent of fraud. NFA came with the annual fraud indicator indicator in 2012. Here are some of the metrics taken out of the report:
- £73 billion fraud loss
- £20.3 in the public sector
- £6.1 for individuals
- £45.5 in the private sector
“We are also talking of personal tragedies with people who have lost their life’s savings” Harrison added, “it’s not just an economical problem”. Focusing on the private sector (£45.5 billion). Payment frauds had impacted 71% of victims. The not for profit sector has lost £1.1 billion only and 43% of respondents had been victims.
Online banking fraud remains quite low and falling though. Plastic card fraud is by far the biggest, a little below £350 m in 2011 falling slightly from 2010 (see picure above). “It’s not always the case that the Banks are refunding individuals and there are cases in which there is a huge impact on individual users” Harrison said. Yet, whether it’s due to complacency or lack of education (or both), many consumers aren’t really protected from fraud.
how to make consumers part of the solution?
“It’s about changing behaviours” Harrison said, and the NFA is trying to work with the private sector. The “Devil’s in your details” campaign funded jointly with telecom operators. Here are 2 examples taken from the NFA Youtube channel.
NFA didn’t have the budget for a TV commercial and using the Internet and Youtube was cost effective: “it cost only £0.068 per person who saw the add” Stephen Harrison said.
After Stephen Harrison’s presentation, there was a panel with Karen Tyler, Head of Fraud at Santander and Debbie Strickland, function leader, Cooperative financial services. Here are some of my notes during that panel:
- social engineering is one of the essence in fraud, with fraudsters using existing technologies and even traditional means of communications to steal money from individuals
- Santander is worries about the way that things are happening
- Debbie Strickland confirms that there is an increasing issue about new modes of payment and education is the solution.
- Mobile payments is clearly seen as the future threat even though in terms of amounts, mobile isn’t really on the radar yet.
- A lot of people have gotten used to the tokens, Karen Tyler said, but there are also concerns as to how this will be used by consumers with the new forms of payment and mostly mobile-based.
It’s the most extraordinary bubble burst ever since the end of the 1920′s and it might even take a few more years before we start feeling the angst to the full; for we should remember that the heart of the great depression was 1934 and not 1929. Yet, despite the incessant stream of gloom and voicing of bad news – which is reminiscent of Kal’s excellent frontpage for the Economist dated November 1997, i.e. the midst of the previous global meltdown in Asia – there is no guarantee that history will repeat itself. Thank God for that. ICT expert Stewart Baines from London even goes one step further suggesting that certain sectors – and the telecom sector in particular – is bound to benefit from the crash.
This question has attracted quite a few comments on the part of more experts on Linkedin (check here for details), which shows that the topic is hot and deserves more than just the gloom being delivered on the media (listening to ‘wake up to money’ on BBC radio 5 early in the morning produces the same result as a stroll in the temple of doom in the midst of Halloween). So the question is not to evaluate whether the slump is bad or awful, it’s about evaluating how we can do better business during these troubled times and focus on positive factors.