New payment methods: e-money (1/3)

 

 

In this article we will look at the situation with which banks are confronted as far as new methods of payment are concerned (through the new channels, innovative offers from non-banking partners or competitors). We will also have a look at what is available on the e-money market and close the article with some tips on a monetary policy central banks could develop in this field.

To situate better the subject of e-money, we can subdivide e-commerce globally into e-payment and e-finance. So with e-payment we will cover all types of electronic money, mobile payments etc. Another definition comes from the legal side: e-money systems defined by the European Central Bank in 1998 and in the Directive 2000/46/EG about e-money institutions in 2000.

 What is a definition of e-money given by the IMF[1]?

Electronic money, or e-money, is any electronic payment media – any material, device, or system that conducts payment via the transfer of electromagnetically stored information

1.1. Situation[1] 

The e-money market was characterised by a slow take off in the past. The use of card-based e-money is every day more widespread in the European Union. Many countries are coming out the experimental stage. Developments in the area of network e-money have been a bit less rapid than those in the area of card-based products.

Some of the basic reasons for this are given here. Merchants were reluctant to accept new methods of payment and invest in new techniques. They did not want to have more to worry about with different accounts and inflow of money. This also influenced the cost structure, since every new way of payment involves new costs (banking, technology infrastructure etc.). For these new methods of payments (e-purse, digital cheques, …) special security measures have to be installed (these are different from traditional payment methods and also require a higher degree of  security control) in e.g. vending machines and storage media. This was another reason for the slow take off.

On the customers’ side adapting their payment habits (e.g. less cash) were rather slow in order to use e-money. During the introduction phase, the customer information about this systems were also insufficient.

 There were also worries about the legal and regulatory framework which had to be decided on, fixed in different countries, accepted and implemented before it could be used. Cross-border payments, funds of uncertain origin etc. were just some of the troubles merchants (and clients) had to face.

For a network system to work properly, a critical number (high volume) is necessary: acceptance in many countries, by many clients and by many merchants affiliated (to different systems).

Multifunctionality could have been another problem to solve before the system could be accepted widely by the merchants. Multifunctionality means that there are bridges between the different systems (new and classic payment methods, e-money and credit cards, bank accounts ant internet accounts etc.).

As soon as there is more liquidity and most of the problems mentioned above have been solved, the new payment methods will be an attractive alternative to classic methods of payment. Customers will use them more widely for their transactions both in shops and for person to person transactions (e.g. e-bay auctions paid from person to person through Pay Pal).

 To conclude this situational overview, let’s look at some figures:

Total amount of cash (notes & coins) in use of money
	1990	2003
Netherlands	28	5,7
France	15	7,4
Germany	24	11,3
Belgium	24	11,8
Italy	14	11,3

 A clear decrease in use of cash money can be noted in these European countries who introduced e-money, debit and credit cards as an alternative to cash.

 The new developments in the e-money sector are :

-          the integration of different sections into the chip card, such as electronic ticketing and other non-banking products
-          the combination of e-money facility with credit or debit cards
-          the cross border use of electronic money thanks to improved standardisation and interoperability

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[1] ECB The effects of technology on the EU banking systems, July 1999

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[1] Source: Six Puzzles in Electronic Money and Banking

Connel Fullenkamp and Saleh M Nsouli

International Monetary Fund

Mobile banking for micro finance

Mangolia’s leading microfinance bank XacBank and Horus Nomadic Solutions have announced the launch of AMAR, a new mobile banking service for microfinance, on Thursday.
It will help XacBank’s clients to conduct cash transactions using mobile phones through a network of agents and merchants. AMAR services can be used with all four mobile operators — G-Mobile, Skytel, Unitel and Mobicom — in Mangolia, said a press release.

Horus Nomadic Solutions has developed Noomadic, a mobile banking platform for the purpose, to launch AMAR which will now serve the needs of banks and microfinance institutions. The platform is designed to offer financial institutions a wide range of mobile services using any type of mobile handset, the release said.

XacBank has entered into partnerships for the service with Petrovis, the country’s largest gas distribution network with 400 outlets and Mongol Post networks.

Source: http://www.microfinancefocus.com

Maybank sees higher growth potential for mobile banking

Kuala Lumpur: Maybank says it sees high growth potential for its mobile banking services and plans to double its growth this financial year.

The bank recorded an average of RM2 million worth of transactions monthly for its mobile services last year.

Maybank this week will also become the first financial institution in the country to be introducing the first, free and downloadable banking application called M2UMap for the recently launched iPhone.

In a statement here Friday, Lim Hong Tat, Maybank’s Senior Executive Vice President and Head of Consumer Banking, said Maybank had good potential to expand its mobile banking services via the iPhone platform.

“Our mobile banking services has seen a growth of 36 per cent in our customer base in 2008 compared to the previous year.

“Our market share of mobile banking customers in Malaysia represents about 45 percent of the total number of 530,000 as at end December 2008 according to Bank Negara’s Report 2008,” he said.

Meanwhile, Maybank is introducing the M2UMap service in Malaysia this week after hitting Maybank Singapore in May. This is expected to mark a new milestone for the mobile banking services in Malaysia and to iPhone users.

Source: http://www.dailyexpress.com.my

Evolution and the impact of electronic banking

For the past years, the banking industry is a way that people usually save their money to invest in their future;

Interested ? More details here: http://ivythesis.typepad.com/term_paper_topics/2009/08/evolution-and-the-impact-of-electronic-banking-on-the-banking-industry.html

Todos AB becomes members of OATH – upgrades eCode system

Todos AB has become a member of OATH (Open Authentication), an industry initiative designed to provide an open specification for strong authentication to help combat online fraud globally.

Since eCode is an open, flexible authentication platform that supports any form of authentication, including smart card readers, tokens, PKI and mobile solutions, it is natural that Todos AB includes OATH compatibility within its eCode back-end architecture.

Through its OATH membership, Todos AB will provide the community with the benefits of the company’s vast experience of large-scale deployment of authentication solutions to the global financial sector. Already compliant with all other key global standards, the addition of OATH support means that eCode retains its ability to provide uniquely flexible compatibility with authentication protocols.

“eCode has become widely adopted by banks around the world – largely due to the fact that it has flexibility and compatibility as its key cornerstones.” Peter Gullberg, VP Product Strategy says. “By including support for the OATH standard we ensure that eCode remains fully able to meet any authentication requirements a bank might have.”

Todos AB joins more than 80 other leading device, platform and application vendors and end-user customers of authentication technologies, all of which are dedicated to creating an open authentication architecture that facilitates the growth of both eBanking and eCommerce.

Source: http://www.abcmoney.co.uk/news1/