Saturday, 31 December 2016

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Under-reporting of cash receipts also leads to under-reporting of self-employment tax: at US$39bn, this dwarfs the under-reporting of conventional wages and salaries of US$10bn, with an under-reporting rate of 52% compared to 4%. To put these numbers in context, Slemrod estimates large company corporation tax under-reporting, a topic that typically attracts much more attention, at US$25bn.

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Cashless society makes bank statements longer

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In October there were 1.27bn payment card transactions in the UK, a 10 per cent increase year-on-year, while online transactions rose 16 per cent to 160m, according to the UK Cards Association. Contactless card usage has risen even faster, more than doubling by number and trebling by value over the past year.

From Cashless society makes bank statements longer

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An unloved banknote: is the £50 in danger?

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Peter Sands, the former chief executive of Standard Chartered bank, suggested last February that the main use of the 50 was illicit

From An unloved banknote: is the £50 in danger?

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POST Retailers and cashlessness

British Airways have instituted a new policy of annoying customers like me by making them pay for coffee. Although, to be fair, it was Marks & Spencer coffee and it was much nicer than the usual BA coffee. Naturally they didn't take cash.

Avios are the New Money

They are not unusual in the respect. Lots of airlines don’t take cash. What a nightmare it would be to try and manage cash on board a plane.  Time-consuming and pointless. Of course, it’s time-consuming and pointless in other retailers too. Perry Kramer, vice president and practice lead at consultant Boston Retail Partners, contends that as many as four-fifths  of retailers today are already largely cashless.

“Retailers don’t really want to be banks. It’s not their sweet spot,” he says. “It is much less expensive to process credit and debit than it is cash, because cash has a lot of labor involved.”

From Cashing In or Cashing Out? | National Retail Federation

Indeed it does. And that labour might be more profitably redeployed doing something more useful to the business, such as serving customers.

The company says that employees can perform 5% to 15% more transactions every hour when they don’t have to handle money.

From Sweetgreen Is Going Fully Cashless In 2017 | Fast Company | Business + Innovation

Those are pretty substantial savings. I’ve often wondered why places like Pret, places that have multiple points-of-service, don’t already have cash-only lanes because it’s noticeably faster to “tap and go” (even if you have to stand around waiting for the checkout clerk to light up the terminal and for the super-slow printer to chunter out a receipt) than it is to hand over a fiver and wait for change. Of course, what would be faster still is to not use anything at all.

The move away from cash might also steer more people onto the Sweetgreen app. Over the last year, app use has grown 95%, says the company. Roughly a third of the business is run through the app

From Sweetgreen Is Going Fully Cashless In 2017 | Fast Company | Business + Innovation

The apps are getting smarter too. For a retailers, it must be much more attractive to have you buying things 

Domino’s Pizza, which launched a "zero-clicks" pizza ordering app earlier this year. In the past, the company has baked ordering into Facebook Messenger, Twitter, Siri, Amazon’s Echo, Google Home, smart televisions, and even Ford Sync. In the third quarter this year, Domino’s revenue grew 16.9% year-over-year.

From Sweetgreen Is Going Fully Cashless In 2017 | Fast Company | Business + Innovation

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Avios are the New Money  

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Sweetgreen Is Going Fully Cashless In 2017 | Fast Company | Business + Innovation

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The company says that employees can perform 5% to 15% more transactions every hour when they don’t have to handle money.

From Sweetgreen Is Going Fully Cashless In 2017 | Fast Company | Business + Innovation

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The move away from cash might also steer more people onto the Sweetgreen app. Over the last year, app use has grown 95%, says the company. Roughly a third of the business is run through the app

From Sweetgreen Is Going Fully Cashless In 2017 | Fast Company | Business + Innovation

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Thursday, 29 December 2016

U.S. accuses Chinese citizens of hacking law firms, insider trading | Reuters

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Prosecutors said that beginning in April 2014, the trio obtained inside information by hacking two U.S. law firms and targeting the email accounts of law firm partners working on mergers and acquisitions.

From U.S. accuses Chinese citizens of hacking law firms, insider trading | Reuters

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It's not a f**king blockchain

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It's not a fucking blockchain

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The Bank of England | British History Online

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n 1822 Turner, a Bank clerk, stole £10,000 by altering the transfer book. The rascal, however, was too clever for the Bank, and escaped.

From The Bank of England | British History Online

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How black cab drivers and passengers collude to cheat the taxman

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A regular occurrence in London, when asking for a fare receipt, is an offer of a couple of unsigned receipts or an offer to put any figure down. The taxi driver keeps no duplicate record of the transaction. This deprives the taxman of the cab driver’s tax and encourages the customer to cheat their employer and HM Revenue & Customs. This conspiracy to defraud has been going on for decades.

An Uber receipt clearly states the origin and destination of a journey and the price paid. This eliminates fraud. As an employer I trust an Uber receipt, but view a licensed taxi receipt with suspicion.

From How black cab drivers and passengers collude to cheat the taxman

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Wednesday, 28 December 2016

POST Money and markets

As my colleague Neil McEvoy and I wrote in the DEMOS Quarterly way back in 1996

Endogenous money is money created within a market whereas exogenous money is money created by some outside authority and imposed on a market. We’re used to the second – where the outside authority is the government – and have forgotten about the first, but pressures on the monetary system may have reached the point where a change is inevitable.

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POST We want change

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Developed by Carsten van Berkel and Stefan Leendertse of N = 5, an Amsterdam-based advertising agency, the contactless payment jacket allows people to donate 1€ to the wearer using their contactless smart card.

From Amsterdam Introduces Contactless Payment Jackets for Beggars | Oddity Central - Collecting Oddities

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Busk it  

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China bank calls documents fake after bond default on Alibaba-linked platform | Reuters

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The fate of a defaulted $45 million Chinese corporate bond sold through an Alibaba-backed online wealth management platform was thrown into doubt on Monday… China Guangfa Bank Co Ltd (CGB) said guarantee documents, official seals and personal seals presented by the insurer of the bonds "are all fake" and that it has reported the matter to the police.

From China bank calls documents fake after bond default on Alibaba-linked platform | Reuters

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Tuesday, 27 December 2016

Enigma technology to make new ultra-secure bank card

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In a similar vein, Barclays customers will tap their PIN into a keypad mounted on the card which will create a range of security ciphers.

The codes will be generated at a timed interval by a tiny clock and appear next to the signature strip.

From Enigma technology to make new ultra-secure bank card

This is pretty much what the card will look like I think.

 Visa SuperSmartCard

Actually, I’m being a little naughty here. That picture is actually of the Visa SuperSmartCard, produced by Toshiba back in 1986, but I imagine the Barclays one will work in pretty much the same way.

Digital payment: Post demonetisation, which digital payment method to use? Here’s how to choose - The Economic Times

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Unified Payment Interface, or UPI, provided by various banks could be considered safer than other modes in this respect. In case of UPI, one needs to enter only the Virtual Payment Address, or VPA, of the recipient, which is more secure and easy than sharing credentials such as account numbers and IFSC codes.

From Digital payment: Post demonetisation, which digital payment method to use? Here’s how to choose - The Economic Times

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The Truth About Blockchain

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Financial services companies, for example, are finding that the private blockchain networks they’ve set up with a limited number of trusted counterparties can significantly reduce transaction costs.

From The Truth About Blockchain

This is not at all clear to me. If anyone has any actual figures about this I would be genuinely interested in looking at them.

Monday, 26 December 2016

Credit card providers fight to stay top of your wallet

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“Miles and points are cash, that’s what we teach people, and it’s certainly nice when the credit card companies are giving you $1,000, $1,500, $2,000 for getting a single credit card"

From Credit card providers fight to stay top of your wallet

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Monday, 19 December 2016

POST Reputation means transactions

There was interesting discussion on Twitter the other day (as there often is) about the relationship between identity and reputation. The discussion was in the context of “fake news” but it raised a number of general points about reputation and the reputation economy that are worth reflecting on. One particular point was whether a reputation must link one-to-one with a confirmed identity in order for the reputation to be useful. I think it doesn’t, and I can point to a particular case study which I think triggered a lot of this kind of thinking in my own mind.

Many many years ago in the early days of electronic commerce and digital money and online payments and all those good things, I came across a mailing list (I’m not sure what it was called it at the beginning but it later became known as the e$ list) that I found very useful. The list had links to interesting stories, discussions and very well-informed debate on the then very new topics of money and transactions in an interconnected world. One day, there was a message on the mailing list saying that it was going to be discontinued because the person or people running it couldn’t continue to do it as voluntary effort, so without some form of sponsorship they would have to stop.

Since my colleagues and I found a list very useful we stepped up to the plate and agreed to provide some sponsorship money. The list operator asked us to send the money to an ISP to cover their charges for the next six months or the next year or something. This we did and thus we became sponsors.

mailing lists (sponsored by Hyperion & C2Net Software)

From Welcome to the e$ Web Site

Now, it was only afterwards that I realised that we had just been through a commercial transaction with an entirely unknown counterparty. I didn’t know whether the mailing list was run by a person, a group of students, a rival company or agents of a foreign power trying to collect contact details of key players in the electronic money field. I didn’t know, and I didn’t care. The quality of the list established over a period of months (in other words, the reputation of the list) was the necessary ingredient for the transaction to take place. Of course, I later discovered that the list was curated by “Robert Hettinga” but that meant nothing to me and I had no clue whether he was a real personal not (he is: I've met him!).

My point is that reputation is sufficient. I did not know who or what was providing the news, but the news and the discussions were of sufficient quality to merit our money.

Man steals $1m, spends it on Game of War in-app purchases

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One sticky-fingered thief managed to embezzle over $4.8 million from his employer, and then went on to spend $1 million of it on Game of War in-app purchases.

From Man steals $1m, spends it on Game of War in-app purchases

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At UBS we are looking at ways to make it easier to share identities within financial services, so that if you have been successfully on-boarded at our bank, you can use your UBS credentials to quickly open a relationship with another. 

From

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Why Central Banks Should Offer Bank Accounts to Everyone - Evonomics

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Rather, it would provide the internet resources for retail users to access utility central banking as banks already can rather as internet giants like Facebook and Google syndicate their services through application programming interfaces.

From Why Central Banks Should Offer Bank Accounts to Everyone - Evonomics

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Why Central Banks Should Offer Bank Accounts to Everyone - Evonomics

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The result would produce ‘narrow banking’ most efficiently delivered and guaranteed by the central bank, alongside a commercial banking system that was far more focused on taking and managing risk and managing with far less government support and the consequent regulation.

From Why Central Banks Should Offer Bank Accounts to Everyone - Evonomics

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Sunday, 18 December 2016

The Hidden Costs of Cards

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On 23 December 2013, just before Christmas, Belgian merchants faced an outage of the domestic debit card scheme Bancontact for two and a half hours, costing them €51 million in sales. 

From The Hidden Costs of Cards

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POST The cost of policing payments

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regulators have imposed all kinds of measures upon the payments industry that can be grouped under the header of compliance, and that have been introduced to make life of criminals and terrorists more difficult: CDD, KYC, FATF, AML... All this comes at a price. Anti-Money Laundering (AML) efforts cost an estimated $7 billion annually in the U.S. alone.

From The Hidden Costs of Cards

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We erect (expensive) KYC barriers and the force institutions to conduct (expensive) AML operations. But suppose the KYC barriers were a lot lower so that more transactions entered the financial system. And the suppose the transaction data was fed, perhaps in a pseudonymised form, to a central AML factory, where AI and big data, rather than clerks and STR forms, formed the front line.

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Therefore detection requires behavioral pattern analysis of transactions occurring over time and involving a set of (not obviously) related real-world entities.

From Detecting Money Laundering — Startup.ML Conf

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Wednesday, 14 December 2016

How to spot a half-baked blockchain | MultiChain

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if blockchains (in the sense of useful peer-to-peer databases) are ever going to emerge as a coherent product category, it’s important to distinguish between half-baked and real solutions

From How to spot a half-baked blockchain | MultiChain

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Venezuela pulls highest-value banknote 'to strike against mafia' - BBC News

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President Maduro said there were "entire warehouses full of 100-bolivar notes in the [Colombian cities of] Cucuta, Cartagena, Maicao and Buaramanga".

From Venezuela pulls highest-value banknote 'to strike against mafia' - BBC News

I was quite surprised to read this, given that the 100-bolivar note is worth about 10p, but whatever.

Cashing In or Cashing Out? | National Retail Federation

Perry Kramer, vice president and practice lead at consultant Boston Retail Partners, contends that as many as 80 percent of retailers today are already largely cashless

“Retailers don’t really want to be banks. It’s not their sweet spot,” he says. “It is much less expensive to process credit and debit than it is cash, because cash has a lot of labor involved.”

From Cashing In or Cashing Out? | National Retail Federation

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Tuesday, 13 December 2016

Lloyds fails on fee-free in no-frills bank accounts market | Reuters

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Banks have said that providing such accounts to the financially vulnerable is a loss-making business for them

From Lloyds fails on fee-free in no-frills bank accounts market | Reuters

They are. Of course. What almost all of these finally vulnerable people need is a payment account, not a bank account. A simple, pre-paid account with a decent app able to nudge them to help them. And it needs to have a low regulatory overhead so that it works for all of the stakeholders.

Sunday, 11 December 2016

 

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Modi’s surprise announcement wiped out 86% of the nation’s currency overnight, leaving the vendors at Panjim’s fish market to suffer heavy losses. “Nobody has cash, so they’re not buying fish.”

From ‘Who buys fish with a credit card here?’ Traders scoff at Goa’s bid to ditch cash | World news | The Guardian

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From January, Goa’s government has announced that the city will go “cashless”, meaning every street vendor, rickshaw driver and shopkeeper must offer their customers the option to pay using a debit card or mobile phone.

From ‘Who buys fish with a credit card here?’ Traders scoff at Goa’s bid to ditch cash | World news | The Guardian

Is it possible to imagine Goans buying fish without cash? Well, yes. Look at Kenya, where there are now more than 33 million mobile money users and 174,000 mobile agent locations. The most recent figures from the Central Bank of Kenya (CBA) show an astonishing trend. From February 2013 until September 2016, the number of monthly M-PESA transactions almost tripled, going from 53 million to 131 million, while the number of card transactions fell from 34 million down to 18 million. Yes, you heard that correctly. While mobile money using was tripling, card use was halving. I am told by reliable sources that one of the key reasons for this, apart from M-PESA being accepted  at some 150,000 retail outlets now in a country with only around 10,000 cards terminals, is that when it came time to re-issue EMV cards for Kenyan bank customers, the customers had to go their local branch, with identification, and stand in line to get their new card. Many of them just didn’t bother, especially since they had already started to use mobile money instead of cards.

Central Bank of Kenya statistics show a decline in the use of credit and debit cards, despite the number of Kenyans holding them rising.

From Which payment system is best for when you are drunk? M-PESA! | Consult Hyperion

Anyway, the point is that an astonishing 96% of Kenya household now have at least one M-PESA users. That means, to all intents and purposes, that mobile money is an alternative to cash. That’s not to say that the cards guys are taking it laying down. They can read the papers just as well as I can, and so they have begun to look at alternatives to the dip, tap or swipe at point of sale and are investigating more mobile-centric alternatives.

Visa, has entered into partnership with Ecobank,  to roll out “mVisa,” an innovative mobile payment service in 33 African markets by year-end. Mvisa enables consumers to pay for goods and services for their everyday expenses from  groceries to  taxi services by simply scanning a QR code on a smart phone or entering a merchant identification number into their feature phones

From Mobile Money Africa

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These figures are fascinating and they show just how effective a mobile solution can be. Hence my thinking that it may have been better for India to have waiting until the more flexible regulatory had begun bear fruit before. I’m going to blog in more detail about the Indian experiment as more data comes in, 

Mobile Money Africa

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The surge in use, however, comes as the Treasury cautioned that the entrenched use of mobile money in the country posed fiscal risks to the economy if the service collapses.

From Mobile Money Africa

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Saturday, 10 December 2016

Cash circulation: from robotization to countering “black box” attacks against ATMs. First summary of PLUS-Forum 2016

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Cybercriminals can already read information from the card chip  Artyom Sychev, Deputy Director, General Directorate of Security and Information Protection, Bank of Russia 

From Cash circulation: from robotization to countering “black box” attacks against ATMs. First summary of PLUS-Forum 2016

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Blockchain: An Answer to Identity? - NASDAQ.com

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With the blockchain, you gain access to two things. On one hand, you could select only the pertinent information required for that transaction-and entering a bar through a bouncer is a transaction. In this case: name, picture, and age. On the other hand, the bouncer can rest easy knowing that once something is hashed into the blockchain, it can't be changed; new information can only be appended and there is a transparent record of all changes.

From Blockchain: An Answer to Identity? - NASDAQ.com

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Thursday, 8 December 2016

Starbucks Unveils Five-Year Growth Plan, Introduces Voice Payment Feature | Bank Innovation

Starbucks has announced its new MyBarista service that will allow people to order (and pay, of course) using chat and voice interfaces.

Starbucks Mobile App customers will be able to place their orders via voice command or messaging interface,

From Starbucks Unveils Five-Year Growth Plan, Introduces Voice Payment Feature | Bank Innovation

Wednesday, 7 December 2016

POST Venmo vs. banks vs. GAFAM

I noticed an e-mail from Business Intelligence that says

Mobile Peer-to-Peer payments in the U.S. are forecast to grow from $5.6 billion in 2014 to nearly $175 billion by 2019 as consumers increasingly skip the hassle of writing a check or going to an ATM. But smartphone vendors like Apple could cripple the dominant player of 2016 (Venmo) if they make a serious push to own the space.

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Volumes and value

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Frictionless Payments: Will they become a Mirage | David Parker | Pulse | LinkedIn

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One result of this could be is that we see consumers starting to more and more use the Direct Debit system

From Frictionless Payments: Will they become a Mirage | David Parker | Pulse | LinkedIn

David is completely right to point out that SCA just doesn’t fly - it just doesn’t work in the modern world. But as it stands it means that you will have to re-authenticate when you get out of an Uber. There’s no concept in the legislation of the “cardholder was present” token-in-device options for payments. What the Commission wants, of course, is for you to opt out of the “proprietary” (i.e., American) card options and use the direct-to-account options instead.

Sunday, 4 December 2016

Terror suspect dodges deportation by refusing to reveal his real identity for 23 years

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The man, despite being twice ruled a threat to national security, has defeated repeated attempts to deport him by illegally keeping his true identity secret.

From Terror suspect dodges deportation by refusing to reveal his real identity for 23 years

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Government plans mandatory biometric ID | The Times of Israel

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Interior Minister Aryeh Deri published a memorandum on Thursday recommending that all Israeli citizens be required to obtain a biometric identity card, with personal details stored on a digital database.

From Government plans mandatory biometric ID | The Times of Israel

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Govt plans Aadhaar-based app to replace debit, credit cards, PIN numbers - Livemint

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The government is concurrently working on developing a common mobile phone app that can be used by shopkeepers and merchants for receiving Aadhaar-enabled payments bypassing credit and debit cards, PIN and password.

From Govt plans Aadhaar-based app to replace debit, credit cards, PIN numbers - Livemint

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Wednesday, 30 November 2016

Bank chiefs demand new legal powers to help stop terrorists laundering money through London firms | London Evening Standard

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The BBA, which represents 200 banks managing £7 trillion in UK assets, wants MPs to “lower the threshold” for intelligence-sharing and make it easier for institutions to help each other spot criminal transactions.

From Bank chiefs demand new legal powers to help stop terrorists laundering money through London firms | London Evening Standard

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Financial Cryptography: Corda Day - a new force

Forum friend Ian Grigg, who I always take very seriously indeed on any such topic, wrote about Corda on his blog and concluded with a powerful statement.

Bitcoin told the users it wanted an unstoppable currency - sure, works for a small group but not for the mass market. Ethereum told their users they need an unstoppable machine - which worked how spectacularly with the DAO? Not. What. We. Wanted.

Corda is the only game in town because it's the only one that asked the users. It's that simple.

From Financial Cryptography: Corda Day - a new force

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It seems to me, however, what Ian is pointing to as the greatest strength of their approach is also the greatest weakness. A staple feature of unimaginative management consultants presentations about innovation is some variation on the statement by Henry Ford that if you had asked users what they wanted, they would have asked for faster horses coupled with some variation on the statement by Steve jobs that it was pointless asking users what they wanted, you just have to show them. In the context of the disruptive innovation analysis that we have all is a fair criticism of our 3 to say that they have been caught between two stools. On the one hand, their members want them to solve for problems that they already have in a context that they understand. Hence they want quarter to, essentially, emulate the kind of database solution that they are familiar with, potentially with some cost savings and some improved performance. But the more I think about it, and I think about it a lot, my experiences working with senior management teams in a variety of industries to help them to develop their strategies towards the general class a shares latest technologies and the specific technology of the block chain is that this new technology will have an impact not by making marginal improvements to the way in which markets function at present but by stimulating the creation of, in these new kinds of markets, the control transparency of transactions will have the most impact. This is why keep going on and on about ambient accountability.

 

I think am coming round to the point of view that block chain is a ragtag, not a thin tech.

 

Tuesday, 29 November 2016

The Royal Mint and CME to launch digital gold on blockchain

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In the UK, there have been robberies in which large quantities of gold and silver have been stolen from homes (here’s some I wrote about a few years ago)

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Why would anyone mess about with physical gold that you can drop, lose, have stolen etc. And I bet it’s hard to buy anything from Amazon with it. I’m more than happy for people to send me gold (you’re welcome to try the experiment) but generally speaking I’d prefer the dematerialised version sent to my Goldmoney account.

From Just popping out to get some gold | Consult Hyperion

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Even i

 

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A return to the gold standard may be impractical or even undesirable, but the idea of new technology monetising the store of value that is gold seems altogether a different proposition.

From There have been worse ideas, surely? | Consult Hyperion

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The Royal Mint and CME Group, the diverse derivatives marketplace, are collaborating on a “digitised gold offering" which will be traded on a blockchain – to be made available at some point in 2017. The blockchain-based gold product, called Royal Mint Gold (RMG) will transform the way traders and investors trade, execute and settle gold, said a statement.

From The Royal Mint and CME to launch digital gold on blockchain

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[The Mint] will issue RMG as a digital record of ownership for gold stored at its highly-secure on-site bullion vault storage facility. CME Group will develop, implement and operate the product's digital trading platform.

From The Royal Mint and CME to launch digital gold on blockchain

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Douglas Jackson is the Chairman and Founder of e-gold, one of the very first attempts to create an alternative electronic currency based on gold.

From Douglas Jackson, e-gold | Consult Hyperion

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Friday, 25 November 2016

Revenge porn: Peer says Twitter users must reveal real names - Telegraph

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Social media users should be forced to reveal their real names so police can track down jilted lovers who post “revenge porn”, a peer has said.

[From Revenge porn: Peer says Twitter users must reveal real names - Telegraph]

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Wednesday, 23 November 2016

Tuesday, 22 November 2016

Cash is still king in Japan, and that could be a problem for BOJ, Government & Economy - THE BUSINESS TIMES

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Even though many places now take credit cards, Apple Pay and other forms of cashless technology, the actual amount of notes and coins circulating in the country has doubled in 20 years. And that's while the economy and population has shrunk.

More than 101 trillion yen (S$1.35 trillion) of cash was circulating at the end of October. It was used for more than 80 per cent of transactions by value in 2014.

From Cash is still king in Japan, and that could be a problem for BOJ, Government & Economy - THE BUSINESS TIMES

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Banks to hire retired officials, extend working hours to stack up new currency notes in ATMs, branches | Business Standard News

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With largest ATM network in the country under its wing, SBI handles on an average 10 million withdrawal transactions involving cash worth Rs 2,800 crore every day.

From Banks to hire retired officials, extend working hours to stack up new currency notes in ATMs, branches | Business Standard News

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Just 35,000 personnel to replenish ₹16 lakh crore in ATMs | business-news | Hindustan Times

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“Re-configurations takes time so it has to be done one by one. Things should be normal in ten days. You have to understand there are 2 lakh ATMs in the country but there are only three to four vendors.”

From Just 35,000 personnel to replenish ₹16 lakh crore in ATMs | business-news | Hindustan Times

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Blogoff - The Curse of Cash - Philosophy of Money

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What I expect most non-economists reading The Curse of Cash are confounded by is not the idea of abolishing physical notes and coins – on many levels this is appealing, particularly its consequences for criminal activity. No, what’s bizarre is his insistence on charging negative interest rates on cash to stimulate demand under deflation.

From Blogoff - The Curse of Cash - Philosophy of Money

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A few days ago Ed. received a call from RBS – his bankers (well he assumed that it was the real RBS), asking if he was currently in Edinburgh trying to cash a dodgy cheque backed by a dodgy driver’s licence, all in Ed’s. name.  No said Ed. Thank you for your help, said RBS: we are here to safeguard your money.  Happy ending.  Well, except that this morning a cheque (on a different numbering sequence) for £7,332 was debited to the company bank account. Well done RBS fraud team for letting through a fake cheque with a fake signature, backed by a fake licence card, having already spotted the problem.

Saturday, 19 November 2016

Blogoff - The Curse of Cash - Philosophy of Money

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Central banks could set one interest rate on digital cash held by households and another on banks’ excess reserves

From Blogoff - The Curse of Cash - Philosophy of Money

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Blockchain sprint!

Well, that was the fun. The nice people at the Meaning Conference gave me 13 minutes to try to explain what a blockchain technology is, what blockchains might do, and what the implications might be, to an audience of largely creative people. Quite a challenge.

Meaning2016-DaveBirch  

Since they were creative types, I thought I ought to frame my explanations with poetry rather than mathematics. I decided to start with the Ur-statement of ordered immutability, the Rubiyaat of Omar Khayyam:

“The Moving Finger writes; and, having writ,

Moves on: nor all thy Piety nor Wit

Shall lure it back to cancel half a Line,

Nor all thy Tears wash out a Word of it.”

You can see the revised version of the slide deck here (we accidentally sent the wrong version on the day, but it really didn’t matter). It sets out the revised “4x4x4” model of shared ledgers, so that there is context for talking about the blockchain, and then quickly works through how there are different kinds of blockchains (and bitcoin is only one) and then gets to what I think will be the lasting impact: ambient accountability, new kinds of transaction environments where traditional auditing and policing are taken care of by the environment itself.

Meaning2016-DaveBirch2  

In order to explain my focus on ambient accountability, we went back to poetry, this time with T.S. Eliot and choruses from The Rock (1934).

“They constantly try to escape

From the darkness outside and within

By dreaming of systems so perfect that no one will need to be good.”

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Meaning2016-Crowd

They were kind to me with their feedback, although going back over the presentation I’m a little disappointed with it. I think I can do better to bring the new world of the shared ledger to the general audience. So I’d appreciate your feedback on two elements of the presentation. First, does the six layer “real world ledger” model help with the discussion or is it an unnecessary complications and second do the example ledgers presented across those six layers make sense? I want to quickly show the different types of ledger in one slide.

Wednesday, 16 November 2016

31 more Australian banks have partnered with Apple Pay | finder.com.au

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Apple has signed a deal with credit card processing behemoth Cuscal, giving an additional 31 banks access to the Apple Pay contactless payment facility.

From 31 more Australian banks have partnered with Apple Pay | finder.com.au

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Strong Customer Authentication in the Payment Services Directive 2 – Bentham’s Gaze

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This security/usability trade-off is not inherent to Strong Customer Authentication (SCA), and in fact the opposite is more commonly true: in order for SCA to be secure it must also be usable “because if the security is usable, users will do the security tasks, rather than ignore or circumvent them”.

From Strong Customer Authentication in the Payment Services Directive 2 – Bentham’s Gaze

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Tuesday, 15 November 2016

Fashion brand adds NFC and blockchain for authentic personal clothing • NFC World

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Fashion brand Babyghost has partnered with Chinese blockchain-as-a-service company BitSE and its VeChain project to deliver a range of clothes incorporating NFC tags and verified using blockchain technology.

From Fashion brand adds NFC and blockchain for authentic personal clothing • NFC World

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Friday, 11 November 2016

McDonald’s to launch mobile order and pay next year • NFC World

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McDonald’s is planning to launch a mobile order and pay service in up to 25,000 restaurants worldwide by the end of 2018, starting in the US next year

From McDonald’s to launch mobile order and pay next year • NFC World

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US same-day ACH

In the US, the new NACHA same-day ACH will have a 5.2 cent per transaction fee that is paid by the originating institution to the receiving institution. It is up to the institutions whether they charge customers anything for it. But even if they were to pass that whole cost on to merchants, my guess is that the merchants will prefer the low-cost, same-day payment over the existing schemes (e.g., debit cards).

With a Flurry of New Ways to Pay, Cash Hangs On - Real Time Economics - WSJ

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A new Federal Reserve study finds while consumer habits around cash are changing, its popularity remains high

From With a Flurry of New Ways to Pay, Cash Hangs On - Real Time Economics - WSJ

I’m not sure I would say “high”. What the Fed study actually shows is that cash was 40% of all transactions in 2012, 32% of all transactions now. So it’s fallen from being used for less than half of all transactions to less than a third. That doesn’t sound like “hanging on” to be honest. What was most interesting, to my mind, was that fact that the use of cash for P2P transactions has gone up despite the advance of Venmo. My guess is that cash displaced checks.

POST The laundry bill

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These costs might all be worth it if there were any proof that anti-money-laundering laws lowered crime rates. But the laws don't even put a dent in money laundering. A Brookings Institution scholar testified before Congress that 99.9% of dirty money in the United States is successfully laundered.

[From The $7 Billion Laundry Bill - Forbes.com]

Perhaps there has been some progress, because a more recent study in the UK suggested that some 0.75% of the dodgy cash is being intercepted now. But the general point holds. Our mental model is all wrong. We shouln't be trying (and failing at great expense) to keep dirty money out of the system, we should be getting it into the system and then using the modern technologies at our disposal - data analytics, forensics, machine learning and artificial intelligence - to work out who is up to no good so that law enforcement resources can be properly targeted.

Wednesday, 9 November 2016

Undercover Criminal reveals 'Adil' who is selling fake IDs to illegal immigrants in Birmingham | Daily Mail Online

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The conman, known only as Adil, has been exposed for selling fake residency cards to immigrants in Birmingham – and charging up to £600 per ID card.

From Undercover Criminal reveals 'Adil' who is selling fake IDs to illegal immigrants in Birmingham | Daily Mail Online

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Identity, verification and blockchains

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So is a blockchain based identity practical?

I think the answer is “yes” but it needs to be designed very carefully. It may also need to start with the sort of areas that can manage it best and already need a virtual identity (such as land registration or financial services transactions).

From Identity, verification and blockchains

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Monday, 7 November 2016

From Colorado, a glimpse at life after marijuana legalization - The Boston Globe

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But her company struggles with what she estimates to be an effective tax rate of nearly 50 percent, as well as having to deal almost exclusively in cash. Because marijuana remains illegal under federal law, access to banking services is severely restricted.

From From Colorado, a glimpse at life after marijuana legalization - The Boston Globe

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From Colorado, a glimpse at life after marijuana legalization - The Boston Globe

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Each plant for sale must be tagged with a radio frequency identification chip

From From Colorado, a glimpse at life after marijuana legalization - The Boston Globe

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POST Will payment trends continue?

I happened to be reading

Instrument Change 2013-2018E
Cash down 33%
Check down 50%
Credit Card up 64%
Debit Card up 48%
Electronic up 62%

I think that as a longer-term guide these figures are misleading, because I am convinced they underestimate the impact of instant payments. If the US banks are sucessful with Zelle, I'd expect to see electronic payments grow more rapidly at the expense of cash, checks and cards as we shift to an app and API infrastructure for payments.

Thursday, 3 November 2016

Black cabs to support contactless payments next week, no more stopping at cash machines - Pocket-lint

As I have long maintained, taxis are the prosaic benchmark for a mass-market payment technology. If you can pay with it in a cab, then it’s a mass market technology.

Vegas Cab Card Reader

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From Monday 31 October, all black cabs will be required to have a contactless card payment reader, either fixed or handheld. Although from January 2017, cabs will need to have a card reader installed on the passenger side of the glass.

From Black cabs to support contactless payments next week, no more stopping at cash machines - Pocket-lint

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Wednesday, 2 November 2016

Smart Contracts and the Role of Lawyers (Part 3) – About Lawyering Transactions on Blockchains – Biglaw KM

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Today, information concerning the assets and liabilities of even “public” companies is obscured, widely dispersed and often untrustworthy. But imagine a future in which a target company’s internal financial and transactional history (including all substantive contracts with third parties) is readily accessible online to permissioned legal counsel and financial auditors, fully traceable back to their sources, immutable and completely trustworthy.

From Smart Contracts and the Role of Lawyers (Part 3) – About Lawyering Transactions on Blockchains – Biglaw KM

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POST Zcash, privacy and practicality

You’ve probably read about Zcash. It’s the new kid on the bitcoin block, a cryptocurrency with the added special sauce of genuine anonymity rather than the pseudonymity that got some people into trouble for using the Satoshi system for a variety of nefarious purposes. The claim of the founders is that Zcash is electronic cash because it shares the characteristics of cash, such as fungibility.  Transactions remain confidential unless the counterparties real their addresses by “selective weakening” of the cryptographic protection. Now, I am sceptical about whether confidential transactions will get much traction in the mass market, but that does not mean that do not have a point. 

“If you start with a perfect electronic cash system building block, then you can build an electronic cash system with selective weakening in a way that makes sense for society.”

From ZCash Will Be a Truly Anonymous Blockchain-Based Currency - IEEE Spectrum

Adam Back is, as you would expect, completely correct about this. An electronic cash system that is going to offer some forms of privacy must be built on a truly anonymous infrastructure. You can’t do it the other way round. But… a truly anonymous infrastructure provides ample opportunities for mischief and some of this mischief might be of significant harm to society as whole. So what will happen?

Trying to think this through, it seems to me that there is something of a paradox here in our mental transaction models. We want our transactions to be anonymous because we are good people but we want other people’s transactions to be tracked, traced and monitored because they might be criminals. Obviously we don’t want child pornographers and terrorists to have access to anonymous electronic cash but we do want freedom fighters and oppressed minorities to have access to electronic cash.

So how might this paradox be resolved? Well, one option might be to assume that the anonymous cash will be used primarily by criminals and possession of it will be taken to be prima facie evidence of criminality. Thus law enforcement resources can be targeted. Remember, in an anonymous world no-one knows you’re a dog but no-one knows that you’re from the FBI either. Hence you could argue that anonymity can actually help law enforcement to carry out old-fashioned police work (and since no-one knows you’re a bot either, I’d assume that the police will have large-scale big data analysis and pattern recognition and machine learning and all sort of other things to help them). It’s not at all clear to me that a terrorist child-pornographer will be any further beyond the reach of the law because their cash is anonymous, but I’m open to debate.

What about the mass market though? As I wrote before, I can envisage an environment where some kind of what I generically refer to as “zerocash” is in existence but is never used in its “raw” state, because people, companies and governments will only use the privacy-enhanced layers on top of it.

In Zcash, there are two types of addresses, "transparent" and "shielded." The transparent addresses and the amounts sent to and from them show up on the blockchain as they would in bitcoin. But if a user opts to use a shielded address, it will be obscured on the public ledger. And if both the sender and receiver of funds have opted to use shielded addresses, the amount sent will be encrypted as well.

From How Zcash Tries to Balance Privacy, Transparency in Blockchain | American Banker

The reminds me a little of the idea for light transactions and dark transactions that artist Austin Houldsworth put forward. The idea that counterparties can choose whether a transaction is visible or not is interesting and under explored. Whether Zcash succeeds or not, and I have no relevant knowledge to help me to decide one way or the other, the general principle strikes me as unlikely to vanish and it makes consideration of the institutions and structures that are needed in the presence of anonymous electronic money all the pressing.

This discussion takes me back to the early days of Mondex and DigiCash, when the new era of electronic money began. As indeed, did the Consult Hyperion Tomorrow’s Transactions Forum. Next year will be the 20th annual Forum (so block out 26th and 27th April in your diaries right now) so I think it will appropriate to set up an informed discussion about electronic money and anonymity to see if we can come up with a narrative for the future that makes sense for finance, technology and society. Stay tuned.

Dunkin’ Donuts Leverages Mobile Gifting | NACS Online – Media – News Archive

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Users can purchase Dunkin’ Donuts mGifts in Messages using Apple Pay, and once received, the mGifts can be moved into the Dunkin’ Mobile App and registered for use.

From Dunkin’ Donuts Leverages Mobile Gifting | NACS Online – Media – News Archive

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Monday, 31 October 2016

Money2020 16

CHYP on Tour Vegas 16

Money2020 was pretty different this year. I’m glad I went, it remains one the most important events in our calendar and it’s a fantastic opportunity for Consult Hyperion folk to meet up with all of our key customers and soon-to-be customers. And I’ll go again next year. But… it’s not like in the old days. Money2020 has matured into a mainstream business event. It’s no longer a place where people go to see fascinating presentations on what a blockchain is or how P2P lending works. It’s not longer a place where people go to watch passionate debate on panels full of conflicting views of the future. It’s a place where people go to do serious business. Here I am, for example, engaging in an in-depth discussion about the business opportunities for Payment Service Providers (PSP) because of the European Commission’s Second Payment Services Directive (PSD) open API provisions on the retail payments ecosystem in the UK, in the light of the UK Treasury’s parallel initiative, the Open Banking Working Group (OPWG).

CHYP on Tour 16  

I told our commercial chap Nick that I’d been into the conference and was a bit bored. He told me that we’ve done five times as much business at the event this year as we did last year. I couldn’t help but reflect on the fact that next door to Money2020 was the National Fasteners Conference. I’m afraid to say it, but this is the vision of a successful future: a trade show where everyone goes to do real business year after year. I spoke to a few other people about this. There was a feeling like we all know that SXSW will be more fun, but Money2020 will make us more money.  And to be fair, Money2020 was bigger, better organised and easier to navigate than ever before. They’ve built a very successful show.

Vegas 2016  

The main reason that I was at the event (apart from to make money for the company, of course) was because I had been invited to moderate one of the financial inclusion panels and I chose to focus on what the US could learn from emerging markets when it comes to the topic. They asked me who I would like to have on my panel and my first pick was Professor Lisa Servon from Penn. Lisa wrote one of the best papers on financial inclusion that I have ever read and I thought that the best way to explore the many aspects of the issues pertaining to the small percentage of American’s who are unbanked (perhaps around 7%) and the much larger proportion who are underbanked (perhaps 20%) would be to go to a Cirque de Soleil show, so I chose their Beatles show. It was great, by the way.

Vegas 2016  

I was delighted to welcome Lisa on board along with Jed McCaleb from Stellar, Michael Schlein from Accion, Daniel Monehin from MasterCard and Arjuna Costa from Omidiyar Network. Michael wrote a very good blog post on the key takeaways from this panel so there is no need to repeat them here. What I will say is that the panelists received a well-deserved compliment later in the week when I was told that is was one of the stand out panels of the event, and I wasn’t surprised. I refused to have a set script so I asked them interesting questions and they responded with interesting answer, discussion and debate. A great start to the event.

Money2020

I started to become somewhat deranged on the second day, partly because of lack of sleep, partly because of the over-stimulation at Bruce Parker’s top secret Payments Illuminati dinner (which had, I have to say, one of the best ice-breaker strategies I’ve ever come across at such events) and partly because of the amount of nonsense being talked about the blockchain was getting out of control. As you can see, my mental state was beginning to deteriorate. Someone tells me that the blockchain is going to revolutionise something or other. So I say “wow that’s great - how?” and they begin to describe some fantastical elaboration of some sort of distributed database with wholly mythic qualities and tell me “there, see”. I think perhaps some of his has to do with Money2020 Europe locating in Copenhagen, home of Hans Christian Anderson and his fairy tales. The spirit is permeating the event. I swear I saw a presentation that might as well have been about magic beans for all of the actual content it had or education it delivered. I was losing it, no about.

 Vegas 2016

In fact, the more I start to think about it, the more the whole thing seems like it was one big fairy tale. Most of the stories I heard weren’t true, they were marketing, and that’s a sort of fairy tale.

The Tale of the Ugly Blockchain.

There once was a little blockchain. He didn’t use proof of work to form consensus, so all of the other blockchains made fun of him. You’re a quack, they told him. Quack, quack. And the little blockchain was very unhappy. But one morning the ugly blockchain was out playing by himself, because none of the other blockchains would play with him. In fact, they were chasing him with a hard fork. But then, as passing consultant saw what was going on and came over to help him. “Hey,” said the consultant, “what is a beautiful shared ledger like you doing out here with these ruffians?”. He wasn’t a blockchain after all, he was a double-permissioned shared ledger with a practical Byzantine fault-tolerant multi-round consensus algorithm! And he lived happily ever after.

Time for a glass of champagne. Luckily, they had some in green room for the W3C panel on “One-Click Buying: New W3C Standards for Web Payments” so I poured myself a large one and went on stage to toast the guys while they discussed the working draft of the W3C Payments Request API (July 2016). They deserved it, because in-app and in-browser payments are going to be huge. Bringing chip and PIN security into the web and mobile world is huge.

CHYP on Tour Vegas 16

The impact of this is, if the people I spoke to were anything to go by, considerably underestimated. The ability to make secure and convenient remote payments is transformational and it will inevitably mean a significant growth in online business. But more than that, it will drive more transactions in-browser and in-app and this will mean that there will be more competition, because its easier to introduce new payment mechanisms this way.

The Tale of the Princess and the POS.

Once upon a time there was a Princess. She went to see the King and told him that she was bored and that she wanted to be an entrepreneur so she wanted the money to set up a shop. She decided to set up a potpourri shop and it was very successful.

She ordered a lovely POS terminal and put it on the counter.

Several customers came in every time to buy potpourri, including a Prince, who was very attractive to her because of his tubby Dad body. The Prince paid with his John Lewis MasterCard but things didn’t go as smoothly as the Princess had hoped because it took far too long for the transaction to complete.

When she went to bed at the night, she couldn’t sleep. The POS was bothering her.

“It’s big and ugly Daddy and it takes up space that should be occupied by lovely potpourri”.

So the King got her a small POS and attached it to her mobile phone.

But when she went to bed that night, she still couldn’t sleep. The POS was still bothering her.

“Daddy all my friends have Venmo and Zelle, so why do we make them use stupid old cards like the peasants have?”

So Daddy took away the POS and next time the Prince came in for some potpourri, she got the money by Venmo. And his number.

“That’s better Daddy” she told the King. “Now that there’s no POS I can sleep properly again. And my potpourri sales have gone up because of the loyalty scheme in my app”.

The Prince and the Princess changed their status to “hooked up” and they lived happily ever after.

I was sent off to the exhibition like a flesh and bone drone remotely piloted from Guildford. I was getting instructions like “go to stand XXX and see if the PIN on glass solution is in the TEE (it was) and certified (it wasn’t)” and then “go to stand YYY and see if the demo is real or simulated” and so on. So I did, and then I ran into noted venture capitalist Matt Harris. I decided to tell him my theory about regtech being a more important use of new technology than fintech for many of our customers because of the disproportionate and uncontrolled costs of compliance. I think I may have convinced him. Then I explained to him why it sometime makes sense for Manchester City to play a “false 9” against teams who lack pace at the back, because midfield runners can always move around the centre backs who are caught between tracking and sitting back.

CHYP on Tour Vegas 16

I went off to a couple of conference sessions but since my first meetings of the day were at 7am on all of the first three days, I found it a little hard to concentrate. When I went to the Cafe Presse to get a little pick me up (quadruple shot latte with an extra shot) and I kid you not there were two guys in there who were fast asleep. Lightweights.

The Tale of the Emporer’s New Blockchain

Once up time, there was an Emperor. He ran a marvellous stock exchange. One day, a stranger came to town and she went to see the Emperor and showed him a blockchain. The Emperor said “I can’t see anything”. The stranger told him that only very clever people and management consultants could see the blockchain. The Emperor didn’t want to seem stupid, or provincial, or behind the times, so he told himself that he could the blockchain and that it was beautiful.

The Emperor went and told all of the people about his blockchain and the people were very happy.

After a while, though, the people shouted that they wanted to see the blockchain, so the Emperor decided that he would show it to them and impress them. And he took out the blockchain that the stranger had given him and showed it to the crowed.

But then one small boy consultant standing at the back said “I can’t see a blockchain. The stock exchange has only one node!”. And then everyone in crowd realised that was the boy said was true. There was no blockchain, just a database run by the Emperor as before.

The Emperor was upset at first, because everyone else had a blockchain and he didn’t. But then he realised that no-one else had one either, so he cheered up and started to invest in artificial intelligence chatbots instead and he lived happily ever after because he had a defined benefit pension.

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Photo ID  

Here I am engaged in a heated debate with noted retail banker over the likely future identity and verification ecosystem. He said that given the dynamics of the space, and given that banks already have to carry out the rigorous KYC, it makes sense for banks to develop a co-operative sector-wide kind of financial services passport that could be used cost-effectively by third-parties while the underlying identities are strongly protected by tried and tested cryptographic techniques including tokenisation and blinding. I said “wha-hey you're my best mate you are”.

 CHYP on Tour 16

By the final morning, I was going about my normal business, albeit in a persistent vegetative state, when I was accosted by the shy and retiring head of the Emerging Payments Association. We had a fruitful discussion about using strong biometric authentication against revocable tokens to use pseudonyms (with strongly-attested attributes) in transactional environment. He said that he thought that this might be where the blockchain makes sense because the transparency around shared reputation management was a positive, whereas sharing private transactions was a negative and would require complex strategies to maintain commercial confidence. I said “stop shouting”.

CHYP on Tour 16

I think that for our clients and friends in the USA, the most important commercial announcement was the launch of Zelle by EarlyWarning. Zelle will launch in 2017, the equivalent of Paym/PingIt in the UK: instant account-to-account payments. It launched with 19 banks: Ally Bank, Bank of America, Bank of the West, BB&T, BECU, Capital One, Citi, Fifth Third Bank, FirstBank, First Tech Federal Credit Union, Frost Bank, JP Morgan Chase, Morgan Stanley, PNC, USAA, U.S. Bank and Wells Fargo. Pretty impressive. If you look at Venmo's hockey stick, it's clear that a P2P proposition has a ready market. But my sense of Venmo is that it suceeded because of social media integration so I suspect that Zelle’s long term role will be as an API for other platforms (e.g., Facebook) to use rather than as a standalone app or something that is tucked away in bank apps. This is the sort of thing that is best considered with a Mai Tai, by the way.

CHYP on Tour 16

Back home, here I am trying to work out exactly how much I lost in the casinos. I think it might have been as much as $80, because I’m pretty much of a high roller, especially when egged on by VocaLink Vixens and Money2020 Molls. Still. Vegas.

Dollars

Thinking about it, almost all of the interesting things I saw or heard about weren’t really about fintech and payments, they were about regtech and identity. It’s almost as if Identity2020 is the new Money2020.

See you next year.

Sunday, 30 October 2016

Cashless society: Average Briton now carries less than £5

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Half of adults in Britain now carry less than £5 in cash in their purses or wallets amid a surge in popularity for online shopping and contactless card payments, new research shows.

From Cashless society: Average Briton now carries less than £5

Surprisingly, the same survey showed that 7% of Brits had more than £50 on them, which I thought surprising.

Saturday, 29 October 2016

Would you trust a digital identity? | The Mandarin

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This rising phenomenon of frustration is what executive general manager of Australia Post’s Trusted eCommerce Solutions division, Andrew Walduck calls “identity friction”

From Would you trust a digital identity? | The Mandarin

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Tuesday, 25 October 2016

Witness for the prosecution | Consult Hyperion

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Witness protection in the age of Facebook is a whole lot more complicated because protecting your privacy in an online age is a minefield

From Witness for the prosecution | Consult Hyperion

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An identity service founded on the principles of post-modern relativism thus has no problem dealing with the multiple identities. In essence, it would treat all identities as pseudonyms. The use of the pseudonym that happened to coincide with your “real” name would not be a special case.

From Witness for the prosecution | Consult Hyperion

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Wells Fargo Fiasco Lays Bare a Broken Identity System | Bank Think

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A few forward-thinking banks, such as U.S. Bank, BBVA and USAA, have been exploring opportunities to themselves act as identity providers. They have to know everything about their customers under anti-money-laundering regulations, but other businesses don't. Netflix, for example, may need to know that someone is old enough to view adult content, or located in a jurisdiction where certain material is not under copyright restrictions, but it doesn't need a birthdate or a street address.

From Wells Fargo Fiasco Lays Bare a Broken Identity System | Bank Think

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Witness for the prosecution | Consult Hyperion

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If you are a spy, or an undercover policeman, or in the witness protection programme, or perhaps even a restaurant critic, you may have perfectly legitimate reasons (in some cases very literally a matter of life and death) for wanting one identity asserted over another.

From Witness for the prosecution | Consult Hyperion

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This is why people hate banks

For many, many years I have had a John Lewis MasterCard. It gives cash back in John Lewis vouchers and is our preferred card for household spend. For what seems like the last century, when I sit down to check the credit card bills once per month I have paid 

 

So, I logged in and sent a few grand to my John Lewis account, logged out and went on my way. I got a text message from my bank saying that the few grand had been transferred and forgot all about it.

A couple of days later, I logged in to 

Thursday, 20 October 2016

POST Lights, camera, inaction

It’s an old meme on this blog, but I think it is essentially true that the Big Brother of Orwellian nightmare isn’t really the government, who do their best to spy on us all the time in order to track down people who post abusive tweets and such like, but us. We are Big Brother. The mobile phone and the Internet have combined to

I’m sure most people, as I do, assume that if they are in a business meeting them someone will be recording them on a pen with a movie camera in it or through their glasses or whatever. But what is to be done?. I remember a super story about this that I saw in a newspaper a while ago. Some Austrian wildlife photographers had set up cameras in a forest in order to capture exotic forest creatures going about their business, but instead caught an Austrian politician up to his

Members of the Carinthian Hunting Society in southern Austria are accustomed to observing animals in the wild, such as the western European red deer or wild boar, with the help of cameras in the forest. But the hunting society got more than it bargained for last week when their cameras recorded footage of a politician enjoying an explicit sexual encounter in the woods.

[From Forest Sex Footage Sparks Debate in Austria - SPIEGEL ONLINE]

As one comment I saw had it, "if it had been with his wife it would have been even bigger news". Amusing, indeed. But the story does raise some interesting points about mundane privacy in a camera-infested world. I don’t know whether, in a world of smartphones and social media, one might have a reasonable expectation of privacy when having sex out in the woods somewhere. I would have thought not, but I am not a lawyer (or a wildlife photographer). It’s getting really hard to think about privacy and what we want from it.

Privacy is not a static construct. It is not an inherent property of any particular information or setting. It is a process by which people seek to have control over a social situation by managing impressions, information flows, and context.

[FromWhy Teens Are Innovators Of A New Public Form Of Privacy | Co.Exist | ideas + impact]

As I’ve written, blogged and spoke about many times before, I think that the only construct that makes sense is to think about privacy as a function of control over personal information.

I've talked before about how privacy is not a "thing," it's a tradeoff.

From Privacy Is About Tradeoffs... And Things Go Wrong When Those Tradeoffs Are Not Clear | Techdirt

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a big problem is that the tradeoffs aren't as clear or as explicit as they should be.

From Privacy Is About Tradeoffs... And Things Go Wrong When Those Tradeoffs Are Not Clear | Techdirt

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Apple Promotes A Cashless Society In Japan (AAPL, SNE) | Investopedia

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In an interview with Nikkei news agency, Apple CEO Tim Cook said the company intends to use its products – Apple Pay, iPhone, and Apple Watch – to become “a catalyst for taking cash out of the system.” “We don’t think the consumer particularly likes cash,” he said. Cook also said

From Apple Promotes A Cashless Society In Japan (AAPL, SNE) | Investopedia

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Distributed proof of jerk – Medium

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The blockchain does not solve this problem. It records a decision, but it does not record the circumstances.

From Distributed proof of jerk – Medium

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Privacy Is About Tradeoffs... And Things Go Wrong When Those Tradeoffs Are Not Clear | Techdirt

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I've talked before about how privacy is not a "thing," it's a tradeoff.

From Privacy Is About Tradeoffs... And Things Go Wrong When Those Tradeoffs Are Not Clear | Techdirt

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a big problem is that the tradeoffs aren't as clear or as explicit as they should be.

From Privacy Is About Tradeoffs... And Things Go Wrong When Those Tradeoffs Are Not Clear | Techdirt

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Tuesday, 18 October 2016

Apple's Next Goal: Killing Paper Money Once and For All

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“We would like to be a catalyst for taking cash out of the system,” Cook said. “We don’t think the consumer particularly likes cash.”

From Apple's Next Goal: Killing Paper Money Once and For All

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Monday, 17 October 2016

Transport Secretary says passengers should be able to pay with a 'flick of a card' | Daily Mail Online

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Chris Grayling said by the end of 2018 everyone should be able to travel with a ‘flick of a card’ or the ‘touch of a mobile phone’.

He said passengers should never have to queue again for a ticket, and should be able to buy them from the comfort of their home or while enjoying a coffee at the train station.

From Transport Secretary says passengers should be able to pay with a 'flick of a card' | Daily Mail Online

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Sunday, 16 October 2016

Surge in explosive attacks on European ATMs

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Criminals blew up 492 cash machines across Europe in the first half of 2016, an 80% increase on the same period the previous year, according to figures from the European ATM Security Team (East). Most of the attacks used gas, although 110 involved solid explosives, says East, with hits causing an average loss of EUR16,600, although this does not take into account the significant collateral damage done to equipment and buildings.

From Surge in explosive attacks on European ATMs

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Friday, 14 October 2016

Seqr launches contactless payments service in the UK

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As of today Seqr customers in the UK are now able to quickly and simply link their bank account to the Seqr app and make payments directly from their bank account.

From Seqr launches contactless payments service in the UK

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Thursday, 13 October 2016

| Could Bitcoin Be the Future of Blockchain Post Trade?

snippet

Speaking of the direction where the disruption will come from, Yermack sees three potential players. These include challengers (complete outsiders looking for disruption); collaborators (like Overstock and R3); and regulators (countries like the UK, Australia, and Canada).

He was optimistic that regulators might be the most active agents of change, even going so far as to mandate changes that enable the technology to be used more broadly.

[From

| Could Bitcoin Be the Future of Blockchain Post Trade?

]

snippet

Monday, 10 October 2016

Identity, money and conservation

Identity and money

 

Mark King

 

I think I might touch on this in my keynote talk on Digital Identity at FinTechStage in Cannes on November 30th.

Saturday, 8 October 2016

POST Cash and compliance

As I always tell everyone, the fastest way to learn is by arguing with smart people. So I particularly enjoyed arguing with old chum Ian Grigg about the relationship between cash use and tax evasion. I decided to take the time to go and research some up-to-date figures.

The average bank spends £40m a year on KYC Compliance, according to a recent Thomson Reuters Survey, which also revealed that some banks spend up to £300M annually on KYC (Know Your Customer) Compliance and Customer Due Diligence (CDD).

[From The spiralling costs of KYC for banks and how FinTech can help | ITProPortal]

So let’s say a £1 billion for the big four and another £1 billion for the rest. So £2 billion in KYC. And that doesn’t include (obviously) the £5 billion that the UK Treasury estimates that UK banks spend on "financial crime compliance" (which I assume means AML, CTF and PEP). So… that’s something like £7 billion on compliance and presumably tax evasion is one of the main crimes that it is supposed to be tackling.

How does that compliance spend compare with the tax gap? The what? Well, the difference between what Her Majesties Revenue and Customs (HMRC) thinks it’s owed in theory and what it actually collects is called the ‘tax gap’. The tax gap is currently estimated to be £34 billion in the UK. 

It includes a number of things as well as evasion and avoidance. HMRC estimates that in 2013/14, differences in legal interpretation cost it £4.9 billion; unregistered paid work cost it £6.2 billion; organised criminal attacks cost it £5.1 billion; non-payment cost it £4.1 billion; the failure of people to take reasonable care with their tax returns cost it £3.9 billion; and honest errors cost it £2.6 billion.

[From Tax: evasion and avoidance in the UK - Full Fact]

By far the single biggest contribution to the tax gap is the underreporting of income by SMEs, especially those who take payments in cash. Everyone from your builder to your taxi driver contributes to this, which is why the scale of the evasion is so vast. Here are the HMRC figures broken down by source rather than type.

  • SMEs £16.5 billion.

  • Large businesses £9.5 billion.

  • Criminals £5.1 billion.

  • Individuals £3 billion.

That’s a lot of schools and hospitals. Everyone goes on about big companies like Apple and Facebook engaging in perfectly legal tax avoidance (blame the government not Google) but that’s not the biggest chunk of cash missing from the books. Now, no-one would be so dumb as to imagine that reducing cash would eradicate the tax gap. But it would raise the costs of tax evasion as well as the risks and therefore, I would think, at least reduce it. And given the dominance of SME cash under-reporting (it’s half of the tax gap) that would seem to be low hanging fruit, as they say. Maybe instead of spending all of this money on compliance, we should spend it on migrating away from cash?

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Big questions remain for all these guys about security. How much of the data used for verification will be kept? How will the data be protected? To what standard?

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The Privacy Dangers of a Cashless Society Were Clear Over 40 Years Ago

Some people really can seen into the future. 50 years ago this was already clear

In 1968, Paul Armer of the RAND Corporation testified in front of a U.S. Senate subcommittee about his concerns for privacy in the future.

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The Privacy Dangers of a Cashless Society Were Clear Over 40 Years Ago

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The first is that computer technology is introducing order-of-magnitude reductions in the cost of collecting, transmitting, and processing information.

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Second, centralization of data is usually a concomitant of computer use. The payoff to successful snooping is much greater when all the facts are stored in one place. Though most of the data to complete a dossier on every citizen already exists in the hands of the government today, it is normally so dispersed that the cost of collecting it and assembling it would be very high.

[From 

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The third factor is that computer systems with remote terminals can permit, unless proper safeguards are provided, remote browsing through the data with a great deal of anonymity.

[From 

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Computer Scientists Close In On Perfect, Hack-Proof Code | Huffington Post

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The technology that repelled the hackers was a style of software programming known as formal verification.

From Computer Scientists Close In On Perfect, Hack-Proof Code | Huffington Post

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Imagining a Cashless World - The New Yorker

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American money is private. Sweden has embraced cashlessness more readily in part because it finds the value of currency in the transfer and velocity, the social path it follows, the bonds it traces. It’s social: a network conception of wealth.

From Imagining a Cashless World - The New Yorker

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Yes, I know, no cash does not mean no crime

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Last summer brought Sweden’s first Swish mugging, when two thugs beat up a man and forced him to Swish them. The criminals were rapidly identified by their account.

From Imagining a Cashless World - The New Yorker

This has to be a candidate for the most stupid crime of the year. I realise it is up against some pretty stiff competition - I absolutely love Drew Curtis’ Fark and some of the crimes curated there are jaw-dropping but, I mean… come on.

 

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The commission is on its third day of vetting traffic police officers in Mombasa where most have been found with huge M-Pesa transactions.

From Police officer on Sh45,000 salary moves Sh100m via Mpesa - Politics and policy

Who knew a life in public service could be so rewarding? 

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In other cases, rogue officers open mobile money outlets where an alleged offender is given the agent’s number and told to withdraw bribe money from their accounts — instead of sending. One does not need to be anywhere near the agent’s physical location.

At the end of the day, the rogue officers reconcile their dirty proceeds by making entries in the catalogue, including filling fictitious personal details of those who “withdrew” cash. 

From M-Pesa the bribe, and other tricks traffic police use - Daily Nation

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Junior officers in the police force were being used by senior police officers to get bribes from the public and send the money through specific M-Pesa accounts. It emerged during the vetting process that the senior officers had set a target for their juniors which they were supposed to meet daily.

From M-Pesa Transactions Led To The Sacking of The 63 Police Officers ▷ Tuko.co.ke

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Imagining a Cashless World - The New Yorker

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Swish, a peer-to-peer service like Venmo, launched in December, 2012. Less than four years later, it is used by half the Swedish population and by ninety per cent of adults under thirty.

From Imagining a Cashless World - The New Yorker

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Music Fans Start to Rock Japan's Cash-Loving Economy - Bloomberg

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Credit and debit cards and e-money make up only 17 percent of the Japan’s retail consumption, versus 85 percent in Korea, 56 percent in Singapore and 35 percent in India, according to a 2015 report by the credit association. Usage in the U.S., which includes data only for credit and debit cards, exceeds 40 percent.

From Music Fans Start to Rock Japan's Cash-Loving Economy - Bloomberg

I thought about a couple of things on reading this. First, it’s interesting how Japan (like Germany) is very cash dependent. The second is that the US doesn’t have e-money.

Friday, 7 October 2016

Cash on principle

While I was behind enemy lines at Security Printers 2016, I picked a copy of a report from Guillame Lepecq’s Cash Essentials.

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One section of the report talks about the European Commission’s 2010 recommendation on Legal Tender, which I’ve written about before.

A bank person mentioned to me that they think the European Commission’s recommendation on legal tender (22nd March 2010) is, as he put it, “strange and undesirable”.

From Tender moments | Consult Hyperion

After I’d taken the time to read and reflect on the recommendation, I posted a more sober and balanced perspective, explaining why the recommendations are wrong.

the European commission published a bonkers recommendation concerning the legal tender status of the euro

From Electronic legal tender | Consult Hyperion

One of the main reasons that I thought that the recommendations were bonkers is because they have no strategic context and no economic purpose. They are wholly political.

As Norbert Bielefeld of the European Central bank noted in his excellent article “Dare to be bold: electronic legal tender is an option” in the EPC newsletter back in May 2011, the recommendation flatly contradicts the European Union’s strategic objective to switch to electronic payment methods in order to reduce the total social cost of payments across the member states

From Electronic legal tender | Consult Hyperion

So, as you can imagine, after reading Cash Essentials I thought I just had to blog something about these recommendations again! The Cash Essentials report sets out the “guiding principles” of the recommendation. Here are the first four, all of which are, in my opinion, wrong.

  1. Legal tender: mandatory acceptance of banknotes and coins, for full face value with the power to discharge debts. This is wrong because no-one should be forced to accept payment in anything. Legal tender, in English Law at least, does not mean what people think it means. It does not mean that shops have to accept cash: it means that if you incur a debt, you can settle it with central bank cash and have the debt discharged. If a shop wants to accept cowrie shells, Bitcoins and Avois that is up to them: you don’t have to do business with them and they don’t have to accommodate your fivers.

  2. Can can only be refused for “good faith” reasons (e.g., retailer has no change).This is wrong because even if the mandatory acceptance of principal one exists, there is no way to determine what “good faith” means.

  3. The acceptance of high denomination banknotes should be “the rule”. This is wrong because of principle two. Just as “good faith” is meaningless, so “the rule” is meaningless. And that’s is not even taking into account that it is wrong for society to have these high denomination notes in circulation.

  4. No surcharges on cash payments.This is wrong because retailers should be allowed to surcharge for whatever they want. If the Commission wants to single out the payment that has the lower total social cost and make that the benchmark, then it is PIN debit. The rule should be no surcharging for PIN debit but allow surcharging for everything else.

I won’t go on. Except to talk about the later recommendation about coins for a moment. Coins? Yes, the recommendation goes on to insist that retailers accept the 1- and 2-euro cent coins and that governments do not allow “rounding". To understand why anyone would make such a baffling recommendation, you have to understand that the euro is for some people (e.g., the Commission) a political project. To retailers, and to most other people, the small coins are pointless and a waste of time and effort. But the to Commission they represent an aspect of the European family and to refuse them is a slap in the face to political union. There are people out there who think that producing the smallest denomination coins is a ridiculous affectation and it may be time to stop: if there are none of these coins in circulation then retailers won’t have to accept them so the Commission’s principle is redundant.

Mark Carney, the Governor of the Bank of England, has suggested that the 1,200-year-old British penny could be scrapped.

From After 1,200 years, could it really be time for the penny to be dropped?

Actually, I’ve suggested it more than once and even tried to get a No. 10 petition about it going, but just because he’s the Governor of the Bank of England his plagiarised proposal gets all the attention. Meanwhile, across the Irish Sea, the Commission’s recommendation appears to have fallen on deaf ears.

Some 126 million coins have been taken out of circulation since a scheme was introduced to round shoppers' bills up or down.

From 126 million coins taken out of circulation

Ireland can do it, why can’t we? Minting one penny and two penny, one cent and one euro cent coins is insane. The European Commission might stand against rounding, but even in that last redoubt of currency conservatism, the United States, the writing is on the wall and rounding is taking root. For one thing, they are a waste of time.

According to a study undertaken by the National Association of Convenience Stores and Walgreens, handling pennies adds 2 to 2.5 seconds to each cash transaction.

[From The Fight Against the Penny | News | Oakland, Berkeley, Bay Area & California | East Bay Express]

Who can blame retailers..

[Ken Martin decided] to stop using the coins in his eleven Bay Area stores in June 2011… Although Mike's Bikes and Cheeseboard Pizzeria still accept pennies as payment, neither store hands them out in change. Instead, both stores round transactions down in the customer's favor to the nearest nickel. Although the stores lose a little from the rounding, Adams said it's ultimately worth it: "For us, it's a net savings. It's more convenient, and the time it takes to roll the pennies and deal with them makes it worth it."

[From The Fight Against the Penny | News | Oakland, Berkeley, Bay Area & California | East Bay Express]

It is clear that, even to those who want to promote the use of cash over electronic alternatives, that the small coins have to go. It is impossible to understand why any most is wasted on their development and manufacture.

The Swedish central bank’s recent release of a new line of bills and coins struck her as foolish. “It’s trying to be more like the E.U.—two-kronor coins and things like that,” she said. “But it’s, like, why? What’s the point? No one uses it anymore.”

From Imagining a Cashless World - The New Yorker

Whatever the European Commission might think,  I don’t think retailers should be forced to accept cash at all, but if they are, there’s no reason why they should accommodate the extremes: the 1- and 2- cent coins, the €200 and €500 notes. Let them wither or, better still, just get rid of them altogether.