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Archive for the ‘Mobile Payments’ Category

Square Gets Boost From Apple

Square, the mobile payments company, is now featured in Apple’s online store. You will also be able to purchase their device in Apple retail stores. You can read more over at TechCrunch.

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The Death of Free Checking

January 2, 2011 Leave a comment

All I wanted for Christmas was for someone to sit down with me and explain how a checking account was profitable.  Well, I didn’t get that present, and I still don’t know.  Now, I don’t really believe that free checking accounts will go away.  But I do believe that banks and credit unions that continue to focus on checking accounts may go the way of the dodo.

Changes in banking laws have done nothing but hurt the profitably of checking accounts.  In the past, fee income and interchange fees drove the focus on this account type. Now, overdraft fees have been drastically reduced.  It also looks like a law will be passed that will limit the amount that can be earned from interchange.  But as they say, trouble comes in threes.  Number three will be mobile payments.

This summer, iPhone 5 will hit the market, and along with it, NFC capable phones.  Although the Android based Nexus S is NFC capable, it’s not currently being used with mobile payments.  Apple will change that.  Even with “antennagate”, Apple has sold close to 6 million iPhone 4s.  A newer phone that fixes the old problems and adds NFC will be big.  The kicker would be offering the iPhone on Verizon’s LTE network.

With all of this pushing down the profitably of checking accounts, why would banks and credit unions continue to focus on them?  I think the industry has it wrong.  Checking accounts are the razors, savings accounts are the blades.  If you look at the history of the industry, savings and loans are how we made money.  Fee income from checking accounts was just the gravy and caused the industry to get lazy.

Once it got to the point that fee income became the focus, the beginning of the end started.  The interesting thing is, customers seem to be most interested in savings and convenience.  According to one poll*, customers that signed up for Bank of America’s “Keep The Change” and Wachovia’s (Wells Fargo) “Way 2 Save” programs did so to build their savings accounts.  Of course, the banks most likely did it to build their interchange fee income, but they also built up their deposit base.

I am definitely in the savings and customer convenience camp.  Apparently, I’m not the only one.  At the end of the day, banking is a service industry.  Focusing on customer needs is what built the industry.  Now, it’s what will save it.

*The people surveyed consisted of me (BofA customer) and a cousin (Wells customer).  See, you can find a statistic for anything

Photo from Ziggy on GoComics.com

More Mobile Payments News

November 29, 2010 Leave a comment

AT&T, Verizon and T-Mobile have created the joint Venture Isis to build out the mobile payments network that will use NFC at point-of-sale.  This network should be available in 18 months in key geographic markets.

In other news, Google’s Android Gingerbread release will support NFC and Nokia has said that all of their 2011 released phones will support NFC. RIM is also getting on the bandwagon with the recruitment of NFC experts.  In addition, there is speculation that the next iPhone will have NFC built in.

It’s beginning to look like banks and credit unions have about 18 months to have a game plan ready to implement.  If they continue to ignore this space or just take a wait-and-see approach, I’m sure some enterprising, industry outsider will be more than happy to step up and take a chunk of another industry revenue stream.

Merry Shopping

November 26, 2010 2 comments

If you were looking for an argument that would allow you to skip contactless cards and go straight to mobile payments, look no further.  It seems that enterprising people are really using RFID readers to steal credit card information as people walk by.

Here’s how RFID works: when the card reaches a certain distance from an electronic scanner or card reader, it sends a signal which is received by an antenna embedded into the card, which is connected to the card’s RFID chip, thus activating it.

Criminals are able to do the same by walking close to your wallet or purse. A hand held chip reading device can easily steal your credit card information if someone walks by you or inches close enough to you.

You can read more here.

Mmmm…Gingerbread

November 17, 2010 1 comment

Mobile payments are about to get a serious toe-hold in the US.  In case you haven’t heard, Google is about to release the newest version of Android, Gingerbread, which will support NFC.  Once Apple releases their next iPhone in 2011, you can expect adoption to increase exponentially.

So what does this mean to banks and credit unions?  Most won’t be affected for a while.  But the big boys like Bank of America, Wells Fargo, Citibank and JP Morgan will really start to feel the pain sooner rather than later.  Mobile payments will allow users to connect their credit and debit cards to their phone.  But that’s only if Google and Apple decide to play nice.  They could set themselves up like PayPal, which means that everything would flow through ACH.  If that happens, you can kiss interchange fees goodbye.  The bigger banks would feel this first because their customers are among the early adopters.

Now, you can stick your head in the sand and hope that adoption doesn’t happen for another 10 years, or you can start planning your strategy today.  One thing I’d look at is charging a fee for any ACH withdrawal.  The second is getting familiar with iOS and Android.  Because if you aren’t planning to adapt, others are.

First ODP, Next Interchange

October 19, 2010 1 comment

Brett King, of Bank 2.0 fame, has a post over on Finextra titled The iPhone 5 Debit Card – coming soon.  In the article he discusses the potential impact of Apple’s iPhone 5.0 that will most likely be released next fall.  One highly anticipated feature is contactless payments, which is something I wrote about here.

Brett poses a question of “how will banks compete against Apple, Google, Microsoft and the carriers in the credit card space?”  Apple already has customers that setup their credit cards to use for iTunes.  You can bet that Google and Microsoft will do the same.  Google is better positioned than Microsoft, with their Google Checkout.  But I think Brett missed one important area.

For most banks and credit unions, credit cards aren’t a huge revenue source.  I’m willing to bet that those interchange fees they get from debit transactions has way more income.  I happen to use PayPal for a lot of online transactions.  One thing I recently noticed was, my PayPal account currently has $0 in it.  However, PayPal is able to directly transfer from my checking account to pay for any transactions.  This means that PayPal gets a percentage, but my bank gets nothing.  As far as my bank is concerned, it’s just an ACH transfer.

So, when mobile payments finally take off, it won’t necessarily be banks and credit unions that benefit.  With electronic transactions being the dominate form factor for payments, losing the credit card market isn’t what should keep executives up at night.  It’s losing the debit card transaction market.

We Don’t Need No Stinkin’ Cash

September 6, 2010 Leave a comment

I am SO looking forward to the day when I no longer need to carry cash around.  With the advancement of smart phones, mobile payments and companies like Square, the day may be here sooner than we think.  Somaliland, a small country in the horn of Africa, just may be leading the way.

Somaliland could very well become the world’s first cashless society.  Given the fact that cash pretty much doesn’t work there (17,000 shillings = $1 US and the highest denomination is 500 Shillings) and the advancement of their mobile banking industry, getting away from cash is becoming a necessity.  Carrying wheelbarrows of money around isn’t that feasible.  However, using such services as Dahabshiil is.

Now, who thought that a small African nation would be the catalyst in changing the world to a pure electronic format?

You can read more over at TechCrunch.