VISA Squared... what are the possibilities of VISA & Square

As per my pervious blog posts, the Mobile Financial Services industry is hyped with frequent merges and acquisitions currently. The most recent being VISA's move to take an interest in Square, Twitter inventor Jack Dorsey's disruptive mobile payments service.


First, let's take a look at Square. Square combines two services, an electronic payment service, and a card-reading device that simply plugs into the headphone jack of your iPhone, iPad or Android phone. Allowing users in the US to accept credit cards payments through their mobile phones, either by swiping the card on the Square device or by manually entering the details on the phone (Wikipedia, 2011). The business model offered is simple:

• Free card reader. Free app for iPhone, iPad & Android.
• Get Paid through VISA, MasterCard, American Express & Discover Card, directly into your bank account.
• All for only 2.75% per transaction.
• The services requires no contract and no ongoing commitments.

Think that will scare the banks, who currently make millions in Merchant Acquiring solutions? Or will it scare the Ingenico's & Verifone's of the world to realise they are about to be disinter-mediated on a device front? Personally I think it's brilliant. It's a key step in sunsetting the legacy infrastructure that burdens the modern consumers payments networks with proprietary expensive devices. Instead a payments accepter just needs an iPhone, iPad or Android device. Last quarter Square did $66 million in payment volume and plans to triple that this quarter, and that's just in the US.


To date Square has needed to cross one of the toughest bridges in the financial services industry, it needed buy-in from the industry, which is highly regulated and has barriers to entry. VISA taking an stake in Square goes a long way to legitimising Square's technology. If VISA and Square can work to develop a VISA certified device, I'd suggest wide scale adoption will happen, fast! Particularly in the Small to Medium Business sector where the cost of current Point of Sale Merchant services are not as attractive. What else legitimises Square's disruptive approach is the appointment of an exec from JP Morgan, which is Square's US payments partner.


One the broader vision of Mobile Financial Services, this move by VISA should be seen as a strong one. One of the key challenges of using mobile devices for point-of-sale payments is the change in consumer behaviour shifting from Plastic Cards & POS Devices to a mobile to mobile transaction. If VISA can drive mass adoption of the Square reader, the market would be quickly taken through a perception change as they witness an increasing amount of merchants using a mobile phone, therefore building confidence over time in the technology. Thus creating a more sustainable stepping stone for the longer consumer adoption of mobile as a payments instrument.


It's only a matter of time then until the card is replaced by a service, NFC, Application or other, in the consumers handset. Creating mobile to mobile point of sale. From there the possibilities are endless.


Great move by VISA

Single Sign On in a Mobile World

Over a period of time the concept of Single Sign On has pushed its way into the very core of how an organization looks at User Authentication. This includes the Global Banks with infinitely high security standards, policies and procedures. 

In the modern company, an employee logs onto their Domain account once, which opens to the door to an endless amount of corporate applications such as Email, Intranet, Finance Systems, Customer Systems and more. This approach means that user authentication, and security policy can move to a central function. So when the security policy for password expiry changes from 60 days to 30 days, the policy is only changed in one place and instantly applies to all users and all systems.

But how can this authentication experience be replicated in the Mobile world? How can a method of identifying an individual be securely deployed and managed, when a users primary device of interaction is their mobile phone?

A solution to this challenge has so many applications. Mobile Executives could use it to be always available on corporate workflow tools, such as Account Payable, or business processes that require executive approval; Consumers could have a single trusted authentication mechanism which opens the door to dozens of cloud services such as Facebook, Banking, Shopping, Memberships; Mobile could then be used as a primary authentication for virtually any service. Imagine a world where your mobile is locked by a bank grade PIN, just like your ATM card is today. But instead of only granting you access to your Card at an ATM or POS, the PIN unlocks your phone and along with some internal authentication a user can access Facebook, Email, etc all as a trusted user. Therefore negating the need for a user to manage multiple user name & password relationships. With such a trusted mechanism in place, a consumer could enter a shop, purchase goods, wave their Mobile Phone with NFC, a payment request is pushed to the users phone to approve the payment using their PIN. This would enhance the application of NFC to cover larger value transactions other than public transport.

Take the idea further, a consumer would wave their Mobile Phone to access doors, and where necessary additional authentication is requested of the user in more secure sensitive situations. Therefore removing the need for the work issued security card, instead the employees electronic ID in their Mobile is registered and used as the primary means for identifying who they are. The same can be used for to access your home, and while your at it, you house recognizes your home and adapts to your preferences, turns on heater, switches on the TV to the news with items specific to you similar to your Facebook or Twitter account.

The reality is all the technology to do this exists today. NFC is now standardized, door readers exist in a large majority of corporate buildings, 500 million of us have Facebook and 100 million have Twitter, Secure USSD PIN requests can be sent to a Mobile Phone authenticating at a physical level that you are you, you have your registered SIM card(MSISDN/ICCID), you are using the same Mobile Handset(IMEI) and you are located(GPS) in a place that suggests you are actually the person requesting the service. But why are we not seeing this wide adoption of innovative eco-systems to enable this? The answer is turf protection. The NFC guys aren't openly talking to the door security companies, who aren't advising their customer to adopt an open authentication. The banks are still caught up on understanding mobile, let along embracing its true power. And no one, and I mean NO ONE has looked to fully utilize the power of Facebook as a global means to identify someone and their preferences.

Anyone want to give it a go? I am keen :)

Merging Lanes

The past six months have seen some interesting changes to the industry of Mobile Financial Services. Over the past 5 years I have endured the long haul of taking an immature experimental industry as it drives towards the ambition of one day going mainstream. Recently, large brands have made public announcements to commitments to either implement or acquire. The vendor space has seen a succession of acquisitions, such as Sybase into SAP, m-Com into Fiserv. The line between Banked and Underbanked has been blurred, as wallet based transactional businesses strive to increase the financial intuitions share of the consumer's wallet.


But what has this translated to on the ground? Realistically, nothing. The industry challenge of scale still remains. Hence the question remains: which one of these moves will eventuate in a highway to scale, and eventually the mainstream adoption of Mobile as a means for Financial Services.


I think the answer to this question lies in understanding the history of the industry. The past ten years has seen several successes and failures, but there are some very key themes to success. First and foremost those who have succeeded appreciate the difference between bank based architecture and telco based architecture. As the number of consumers in the market increases, bank principles such as financial integrity, reconciliation, risk management and consumer protection have ensure businesses avoid some of the traps of the mobile operator approach to transaction processing.


Secondly, a senior commitment to vision is critical as a player enters the market with a new service, as this commitment will be essential for the business to drive consumer engagement, effective launch campaigns and ongoing consumer adoption. This stuff doesn't happen overnight, nor does it happening easily.


So what's my tip for the year to come, look for players/partners that have:
1. A strong commitment to the vision of the industry.
2. Have a strong deep history in launching these Mobile Financial Services businesses
3. Understand the principles required in the manufacturing of Financial Products, financial integrity, scalability, risk management, transaction life cycling and consumer protection.
4. Have past experience in consumer understanding and consumer adoption for your specific market


They may sound simple, but you' be surprised how often people miss the obvious.