My new business bank

Last year I wrote about the lack of innovation in business banking and someone must have been listening! Last week my Tide Business MasterCard arrived.

Tide is technically a prepaid account but operates like a business bank account with a sort code, account number, direct debits, Business MasterCard and many other trappings of business banking (you won’t get an overdraft because it’s a prepaid account). The big difference is that the whole customer experience is app centric. From sign up to daily use, the app is how you manage the account.

Sign up was easy via the iOS app with identity verification based on taking a photo of driving licence or passport plus background electronic checks. Charges are reasonable; there are no monthly fees, MasterCard transactions are free and other transactions incur small charges.

MasterCard transactions appear instantly in the app with none of the delays associated with legacy bank apps. All transactions are categorised and card transactions can have comments and attachments added to them. I would like to see more transaction metadata, along the lines of Monzo.

The app has a tab called Toolbox which so far contains two interesting features you don’t see in a legacy bank app – invoicing and API access. Invoicing lets you create simple invoices for billing your customers and API access is for developers to add third party apps. The Toolbox tab will be one to watch to see what else appears here.

Another nice feature is no FX loading or surcharging on foreign currency transactions (similar to Monzo) which makes card transactions in other currencies much cheaper than those with the usual suspects.

Tide is still in beta so there are a few rough edges – I’ve had a couple of card validation problems and card transactions coded as continuous payment authority are not yet supported. However any problems are easily resolved via an instant messenger interface in the app. Overall it’s a great start and another reason for the legacy banks to be very afraid of the future.

I won’t be closing my legacy business bank account yet but the day of reckoning for legacy banks is getting ever closer.

Originally published on DisruptiveViews.

A week with Mondo

Last week the nice people at Mondo signed me up for the alpha of their new payments product. Mondo is one of the new generation of companies applying for UK banking licences who aim to fundamentally change the way we bank.

Mondo iconWhat makes Mondo different from other ‘digital challengers’ is that rather that wait for their banking licence application to be approved and then launch a product on an unsuspecting public, they have launched their ‘banking’ app in parallel with their licence application. Mondo wants to use customer feedback to help build and evolve their product before they formally launch as a bank. Mondo has done this by launching a prepaid account with a contactless MasterCard via the prepaid card issuer Wirecard Card Solutions under Wirecard’s emoney licence. When Mondo’s banking licence is approved and they become a ‘real’ bank they will provide their own bank accounts and issue their own cards.

Mondo notificationMondo’s aim is to put consumers in control of their spending using the power of their iPhone (Android et al is coming later). All transactions appear instantly in the app whether it’s a debit card top up to add funds to the Mondo account, an ATM cash withdrawal, a contactless transaction, a chip and PIN transaction or an online transaction. Transaction data includes merchant details, geolocation details, plus historical spend data for that merchant. There’s also the option to add extra data including a note and a copy of the receipt to each transaction.

Mondo cardAlthough the app is currently in alpha it works amazingly well. As soon as I make a purchase I receive a push notification on my iPhone or Apple Watch with confirmation of the transaction details. Over the past few days as I’ve used the app, additional features have been unlocked – a nice way to introduce the user to more functionality. Despite being an early release the app is considerably more engaging than legacy bank apps. A neat feature is the ability to ‘freeze’ my card temporarily so it can’t be used; great for people who mislay their cards and then find them again. When I freeze my card the app image of the card is covered in ice and the button underneath offers to defrost it!

Mondo defrostSomething else that appeals to me is the ability to add funds to my account using Apple Pay, making topping up friction free. If you haven’t yet paid in app using Apple Pay, you really haven’t seen the future!

Mondo is definitely one to watch and if they keep up their momentum the legacy players need to be looking over their collective shoulders; it’s not looking good for them!

Originally published on Disruptive Views.

When payments misses a trick

I’ve lost count of the number of times I’ve written about how innovation in payments must reduce the friction in the transaction process if it is to have any chance of succeeding and capturing the attention of consumers.

Apple Pay in-store generally meets this criteria, assuming your bank is signed up and you accept the usual contactless limit restriction of £30 (in the UK) in most stores. Once all the banks are signed up and the limit restriction is gone, Apple Pay will feel like a truly frictionless payment experience, especially using Apple Watch. A couple of weeks ago I got an insight into the future of in-store payment when I bought a MacBook Pro using my Apple Watch – an expensive test and even the Apple retail employee said it was a first for him!

Fill Up & GoLast week I signed up for Shell’s new Fill Up & Go payment app which allows you to pay for your fuel at the pump using your iPhone. I duly downloaded the app, created the required two different Shell accounts (work that one out!) and added my PayPal credentials (that’s how the payment works). The process was awkward and fraught with errors and if I hadn’t been a dedicated payments professional I would have given up long before the end. However having eventually got there I jumped in the car and went to the local Shell station to buy some petrol. No QR codes in sight – apparently it’s not operational yet although the QR code was there in July and I have a photo to prove it. So not only a poor sign up process but also a failure to deliver at the point of sale. One bizarre point that caught my eye in the instructions is that apparently you have to remember to only scan the QR code on the pump from inside your car because you’re not allowed to use your phone outside your car (really!). What Shell ought to be doing is implementing Apple Pay at the pump – but then of course you’re not allowed to use your phone outside your car!

Before launching, payment providers need to step back and look at what their application actually means for consumers and whether it addresses the friction issue.

Apple Pay in the wild

Much has been written about the launch of Apple Pay in the UK; how it works, where you can use it, which cards are supported and so on. But what’s it like to use in the wild? Setup is very easy – especially if the card already stored in your Apple / iTunes account is issued by an Apple Pay partner. Adding additional cards involves snapping them with the iPhone camera, adding the CVV2 number and waiting for activation. A couple of times the card expiry dates were incorrectly recognised so one to watch before confirming card details. My American Express cards activated with no additional steps, my NatWest card required an additional authentication step via a code sent by SMS.

Using Apple Pay in-store is straightforward, especially with the iPhone. The Apple Watch is a little tricky as there’s a knack to twisting your wrist so the Watch face is over the contactless reader but you avoid smacking the face of the Watch on the reader and risking damage!

So what makes paying with Apple Pay better than just using a contactless card? Apart from the novelty value of paying with my Watch, there are two important elements for me.

Transactions are more secure – the retailer does not receive my card details so there’s no risk of them being stolen from compromised point of sale equipment or elsewhere. Each transaction is tokenised so there’s nothing useful to steal.

Realtime transaction alerts to monitor spending are important and can avoid later disputes. American Express already offers real time transaction alerts via iPhone Passbook notifications. Recently I was double charged in-store for a chip and PIN purchase; despite the terminal confirming the transaction was successful, the retailer assured me the till showed it hadn’t gone through so asked me to try again. I was able to show him a double transaction on my iPhone (and yes both transactions did settle later).

There’s still a long way to go with Apple Pay. Removing the £20 transaction limit and installing contactless readers in stores that typically process higher value transactions will massively increase the utility of Apple Pay as a payment method.

I’ve not yet had the opportunity to pay in-app – that’s my next challenge! Securing in-app card transactions, which are inherently susceptible to fraud via stolen card details, will be transformational in reducing online card fraud.

What sets Apple Pay apart from every other mobile or wearable device I’ve tried for payments is that it does feel it’s been designed with the consumer in mind.

Putting consumers first for call costs

At last UK telecoms regulator Ofcom is putting consumer interests before those of the telcos and stepping in to regulate some of their more devious pricing practices. From Summer 2015 Ofcom is making changes to save consumers money and make some of the more opaque call charges clearer. Despite Ofcom reorganising phone numbers some years ago into the 01 to 09 ranges it has been far from clear to consumers what they will pay to call many numbers, especially in the 08 range where they are rarely included in call bundles.

Ofcom has mandated that mobile calls to ‘free to call’ 0800 and 0808 numbers will be free from all mobiles, as well as landlines. Currently only giffgaff (an innovative O2 MVNO) and Three (on some tariffs) offer free calls. Historically other mobile operators have used 0800 calls as an extra source of revenue by charging for them outside call bundles or making them inclusive for an additional fee. As a giffgaff user I’ve saved a lot over the years calling 0800 numbers for free.

Charges for calling other 08, 09 and 118 numbers will also be more transparent. In the future the charge will be comprised of two elements; an access charge and a service charge. The access charge will go to the consumer’s phone company and will be made clear on bills and contracts. The service charge will be the rest of the call charge, determined by the organisation being called and displayed by them. Consumers will no longer be faced with confusing messages like ‘Calls cost 20p per minute from a BT landline. Other landlines may vary and calls from mobiles may cost considerably more’.

It’s good to see Ofcom taking a more consumer centric approach to pricing.

The future is definitely mobile according to BT and Hutchison

Last week BT confirmed its acquisition of EE would proceed, subject to regulatory clearance. From a proposition perspective, this looks good news for BT, as its forays into the mobile space since selling O2 have been less than inspiring. As a customer of either organisation, I could only hope that somehow, on some level, they manage to create a new customer service operation that is better than the norm for telcos (experience tells me not to get excited here). As an aside, one reason I like being a giffgaff customer is that I know I will never have to talk to someone in a mobile operator call centre!

Much of the comment about the BT EE acquisition has focussed on how it will create a dominant player in the market across both fixed and mobile. However I’m not convinced this will matter so much in the future. For many of us, landlines are history and we only have them to deliver broadband. In the future, data services will increasingly be delivered wirelessly, especially via whatever next generation wireless broadband can deliver. The role of fixed line networks will increasingly be focussed on backhaul for wireless providers; I can see a case for carving this part of the BT network out into a separate, transparent business.

Although yet to be finalised, it looks like Hutchison will attempt to acquire O2 and merge it with Three. This is a more contentious deal because it reduces the number of mobile networks in the UK from four to three. I’m not convinced this is necessarily a bad thing because of the costs of running networks and the hardware duplication involved (some infrastructure is already shared).

What could Ofcom do to deal with competition concerns? Create a regulatory framework that compels mobile operators to support virtual operators (MVNOs) on fair terms; force the sale of some LTE spectrum which might be attractive to broadband providers looking to use wireless for fixed broadband (as suggested by @sammachin); impose more stringent data coverage requirements; would all be options.

Whatever the outcome the next couple of years will be interesting …

Looking back on payments disruption in 2014

As the year draws to a close it’s worth reflecting on some of the more interesting disruptions in payments we’ve seen this year. Highlights for me include …

The launch that will perhaps have the biggest impact on consumer payments over time was Apple Pay. Apple Pay takes a lot of the friction out of the transaction process and combines this with much improved security. Whilst it has got off to a fairly slow start in the US, once Apple starts promoting it via handset prompts and merchant acceptance improves, it will start to make a major impact. International expansion is scheduled for 2015 so will be interesting to see which banks jump on board in the UK.

The roll-out of contactless card payments across the London Underground, following the move to cashless travel on buses, is probably the biggest boost to contactless payment adoption we’ve seen since contactless first emerged. This will help contactless payment become a more mainstream payment choice in the London region – I’ve already surrendered my Oyster card!

Moven in New York launched to the public and showed the rich functionality a digital bank can deliver to its customers via an app. Moven has since licensed its technology to Westpac NZ and TD Bank, showing the interest that traditional banks have in delivering an enhanced digital service. I’m hoping we will see a UK Moven licensee in 2015.

The launch of Paym in the UK marked the start of simple, ubiquitous, mobile, person-to-person payments. Being able to pay someone with just their mobile number (no more account numbers and sort codes) was something I imagined many years ago and it’s now a reality, at least for customers of the banks that have got round to launching; and launching both pay and receive (unlike my friends at NatWest!).

One of my personal favourites this year was discovering there is a bank in the UK that has over 180 branches, no counters and offers a service that combines the best of personal banking with decent apps. Handelsbanken must be the best kept secret in UK banking!

The decline of the bank branch

One of the most contentious subjects in UK retail banking is around branch closures. According to the Campaign for Community Banking Services, more than 8,000 UK bank branches have closed since 1990. This decline will continue (Lloyds has announced they are closing 200 more branches although curiously they are opening 50!) and potentially accelerate because of the dropping footfall in branches.

It’s not news to learn that customers are increasingly using online banking and mobile apps to manage their accounts and inevitably this leads to less branch visits. For many bank customers the branch is a redundant piece of history. However there is no ‘one size fits all’ model for bank customers; many older customers are challenged by technology, many business customers rely on cash handling, some customers prefer discussing financial matters face-to-face. These customers are marginalised by the branch closures as they have very limited alternatives. Some of the banks have deals with the Post Office but they could go further to help customers.

The last branch in a town or village should be able to generate revenue by charging other banks for servicing their customers. Banks should ensure there are convenient free to use cash machines available in all locations where branch banking is limited or non-existent. Bank staff, including managers, should be available to talk to customers face-to-face in areas where there are limited or no bank branches.

Of course there are costs involved in doing this but customer satisfaction comes with a cost and also it provides the opportunity to generate revenue via an improved relationship with customers.

Although contentious, dropping ‘free if in credit’ banking would remove a significant cross subsidy and barrier to innovation. It would allow banks to price their services sensibly to reflect different customer needs. Banks already tariff some accounts to favour electronic transactions over physical transactions and removing ‘free’ banking would allow this model to apply to all current accounts. Offering branch centric accounts would allow the customers who wanted branches to use them and pay accordingly, eliminating the cross subsidy from digital centric customers.

It’s time we saw a real debate on the alternatives to branch closures.

It’s all about the payment experience

There has been much discussion recently about the decision of two retailers in the US to drop NFC payments in order to stop Apple Pay being used in their stores. These stores are part of the Merchant Customer Exchange (MCX) consortium that is planning to launch a non bank payment product CurrentC next year.

On the face of it, it doesn’t seem unreasonable for retailers to want to save on their card merchant acquirer fees, plus a bit of competition is always good. However CurrentC depends on consumers ‘doing more’ and ‘sharing more’. The payment process involves unlocking your phone, launching an app, scanning a QR code, the retailer scanning a QR code (apparently you hand your phone to the retailer!); and that’s after setup which involves sharing drivers license and social security details plus linking the app to your bank account.

Contrast the CurrentC experience with Apple Pay, where the transaction uses existing card details and nothing is shared with the merchant, not even the card number. CurrentC looks like it’s all about the merchant, with the customer experience coming a distant second. If MCX retailers believe that CurrentC is so much better than ApplePay they should allow the two products to co-exist and see which one the consumer prefers.

I’ve always taken the view that for new payment systems to succeed they have to do two things for the consumer; be better than whatever they are aiming to replace and remove friction and frustration from the payment process. CurrentC appear to fail on both these points which is why I think it’s destined to fail. In contrast, Apple Pay simplifies and secures an existing process using the cards which consumers are already familiar with. Apple is positioned as a trusted partner and enabler who speeds up the payment process for consumers.

As Apple CEO Tim Cook said the other day; “You are only relevant as a retailer or merchant if your customers love you”.