This document discusses new payment technologies and provides a roadmap for understanding innovation in this area. It begins by introducing the topic and exploring drivers of digital money like business changes from SEPA and cultural shifts with new generations. Examples are given of past attempts at cash replacement that did not work and why new technologies may succeed. Case studies of banks and operators implementing new payment solutions are described. The document proposes models for visualizing a timeline of innovations and contextualizing technology impacts to help create a roadmap for planning and discussion.

2. N ew P a ym ent Tec hnolog ies
Understanding the technology roadmap
E-Money in Russia and CIS: Moscow (November 2009)

3. New payment technologies—understanding the roadmap
Author: Relevance
Co-Founder of Consult Hyperion
www.chyp.com
dave.birch@chyp.com
twitter dgwbirch
Visa Europe Research Fellow in Payment Innovation
Centre for the Study of Financial Innovation www.csfi.org.uk
Chair of the Digital Money Forum
www.digitalmoneyforum.com/blog
Associated podcasts
www.chyp.com/podcasts.php
iTunes “Consult Hyperion”
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4. New payment technologies—understanding the roadmap
Author: Books
Digital Identity Management (May 2007)
Digital Money Reader (Mar. 2009)
Digital Identity Reader (Nov. 2008)
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5. Approach
S etting out some areas for discus sion

6. New payment technologies—understanding the roadmap
Introduction
Think around innovation
Learn from the past
Think about the future (see space coins…)
Explore drivers
European figures
Look around
Some snapshots
Figure out how to get a roadmap
Planning for new technology
Travelex / UK National Space Centre
It is the business of the future to be dangerous… the major advances in civilization are processes that
all but wreck the societies in which they occur
Alfred North Whitehead (1861-1947)
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7. Innovation in Payments
Let’s look again at the “payments problem”

8. New payment technologies—understanding the roadmap
Digital Money: Where is it?
Wholesale is all electronic
Retail cash use is falling
Slowly
Cheques are to disappear
This really is a first!
It is difficult to introduce new payment instruments to the market when there will not be any direct
chargeable returns; it is difficult for new competitors to enter the market with new services, as there is
little opportunity to compete with seemingly free services — H. Leinonen in Payments Habits and
Trends in the Changing e-Landscape, Bank of Finland (April 2008).
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9. New payment technologies—understanding the roadmap
Digital Money: What’s driving it?
Business change
Follow the money
Š Interest
Š Fees
Š Transaction charges
SEPA
SCF
Š Downward pressure on interchange
Š Non-bank pressure
EU9 Payment Profits
What about non-SEPA? (Source: McKinsey, 7/07)
Š Transparent pricing?
A common element in all the European payment systems is that they have reached a state of
equilibrium by using cross-subsidies — W. de Ploey & O. Denecker (McKinsey) quoted on gtnews (3rd
July 2007).
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10. New payment technologies—understanding the roadmap
Cash Replacement: Why didn’t it work?
Early attempts
EFT-POS UK
Mondex/VisaCash/SEMP/Sermepa/Danmont etc etc
Paybox/Movilpago etc
Limitations on acquiring side
Channels to the market
Overall POS density
Value-added services
The heyday of bank card profits may be over as officials begin to wonder if there will ever be such a
thing as profits — The third issue of the Nilson Report (now a respected and long-standing source of
news for the card business) in September 1970.
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11. New payment technologies—understanding the roadmap
What’s different? Why now?
Technology change
Ubiquity of mobile phones
Contactless and NFC interfaces
Š Link to transit
Machine-to-machine
Cultural change
Mobile generation
Connected consumers
Emerging infrastructure
Does this “solve” payments?
You’ll be able to keep [keys, money, ID and watch] and more in another information appliance we call
the Wallet PC… Rather than holding paper currency, the new wallet will store unforgeable digital
money… — Bill Gates in The Road Ahead (1995)..
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12. New payment technologies—understanding the roadmap
Global technology picture
>
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13. New payment technologies—understanding the roadmap
Cash Replacement: Why will it work?
Technology change
Ubiquity of mobile phones
Contactless and NFC interfaces
Š Link to transit
Machine-to-machine
Cultural change
Mobile generation
Connected consumers
Emerging infrastructure
Does this “solve” payments?
You’ll be able to keep [keys, money, ID and watch] and more in another information appliance we call
the Wallet PC… Rather than holding paper currency, the new wallet will store unforgeable digital
money… — Bill Gates in The Road Ahead (1995)..
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14. New payment technologies—understanding the roadmap
Case Study: Bank
Monitise
Mobile interface SMS, Java, iPhone etc
Connected to 20,000 institutions via FIS
Fidelity and Metvante
H&R Block example
Tax rebate via bank-issued prepaid card
Transaction alerts instead of call centre
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15. New payment technologies—understanding the roadmap
Case Study: Bank and Operator
O2 Money
Visa prepaid card, energised by mobile
Load n’ Go (13-18) / Cash Manager (18+)
Immediate success
Mass roll-out
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16. New payment technologies—understanding the roadmap
Case Study: Operator
M-PESA
7 million users
11,000 new customers per day
Extending financial services
New commerce
We have not sold any sugar in months. They only want M-PESA
A shopkeeper in Bukura, Western Kenya, quoted by University of Edinburgh researcher (June 2008)
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17. Making a Roadmap
Models to support communication and discussion

18. New payment technologies—understanding the roadmap
Roadmap: Timeline
Metcalfe’s Law
>
Reed’s Law
Moore’s Law
What surprises me is just how inefficient and siloed the whole payment system still is
Michael Porter (author of Competitive Advantage).
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19. New payment technologies—understanding the roadmap
Roadmap: Innovation in Context
>
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20. New payment technologies—understanding the roadmap
The impact of technology
>
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21. T ha nk You
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