Would you work for a firm that invests your super in Bitcoins?
This recent news headline was discussing a firm in Adelaide who are now offering their investors the opportunity to invest in virtual currencies. Financial organisations aren’t generally accepting of major change, and the regulators are even more averse to disruption. So what exactly are Bitcoins and what will they do to the payments landscape?
Where did Bitcoin come from?
The origins of Bitcoin are shrouded in myth which makes them even more fascinating, and it is widely accepted that they were founded by Satoshi Nakamoto back in 2008.
What are they?
Bitcoin is a form of cryptocurrency that uses cryptography to control its creation and management of money, rather than relying on central authorities. Unlike real money there is a finite number of Bitcoins which should peter out around 2140. By then there will be 21 million Bitcoins in circulation.
How do I get them?
Anyone is able to mine Bitcoins by simply signing up and downloading one of the many free wallets that you can download, but actually being able to make money by leaving your PC on over night is of course improbable. The general rule with standard computing power is that it takes about 3 years to mine 1 coin, so the cost of the resource to do that would massively outweigh the reward.
Hold on, 3 years, so how do I actually get them?
You are able to exchange real currency for Bitcoins through many exchanges, also exchange for goods/services, win them and of course mine them. As it stands 1 Bitcoin is worth around $72US when this article was written.
What’s the point of them and will they cause a problem to fiat currencies?
Many believe that Bitcoins provide the users with a sense of ownership of their money; it’s theirs and is not held by a bank. It’s slightly rebellious in the way that no central authority can tell you what you can and can’t do with your money – for the time being at least. There are no exchange fees and the transactions are immediate with no international boundaries. With all this in mind, it does seem like there could be a challenge to the status quo.
What are the regulators going to do about this?
At the moment, I don’t think they are entirely sure, but with any form of currency, we would expect, and are seeing, movements towards regulation. There are many pitfalls of course to the use of Bitcoins as news stories highlight wallets and exchanges getting hacked and Bitcoins being used for drug trafficking and other illegal activities, so the regulators are looking into their use.We have already seen in the US and UK the regulators are getting involved, but who knows where this will lead.
Anything interesting happening with Bitcoins now?
There are many interesting developments with Bitcoin in the news currently with the Winklevoss twins, who sued Facebook founder Mark Zuckerberg for allegedly stealing their social media idea, creating a $20 million Bitcoin fund for trading.
The ATO has said that Bitcoins are taxable from their inception and a recent statement read, “Bitcoin is no more anonymous than physical cash and the ATO has experience in working with earlier forms of ¬anonymous electronic money systems, and with physical cash, which are relevant for responding to new and emerging ¬systems,” ATO Senior Assistant ¬Commissioner for the Cash Economy, Michael Hardy told The Australian ¬Financial Review.
What does CeBIT think about Bitcoins?
CeBIT Australia’s Future of Payments Conference on the 9- 10th October 2013 are looking to accept Bitcoins for payment and will be addressing virtual currencies and Bitcoins with presentations at the event.
Click here for more information about the conference and read about presentations on:
Changing Models of Payments and Currency
Victoria Richardson, Associate, Consult Hyperion
Four Reasons Bitcoin Is Worth Studying
21 Things I Learned About Bitcoin From Living On It For A Week
Why Iceland Should Abandon The Krona And Use Bitcoin As Its Currency Instead
|This week, Steve Monaghan, Chief Innovation Officer from DBS Bank in Singapore is sharing his time and experience with us on Financial Technology. He will present at the Financial Tech @ CeBIT Conference 2013 on 29 May at the Sydney Convention and Exhibition Centre.
Steve Monaghan, in this interview, explains the challenges of a complex financial Technology and the trends he sees influencing this industry.
1. Please briefly describe your role and responsibility at your organisation.
As Chief Innovation Officer for the Group I am accountable for building an innovation culture at DBS and driving ‘step change’ innovation initiatives across our various business groups and geographies.
2. What are you presenting at CeBIT Australia?
A core focus in innovation at DBS centers on changing customer experience in an impactful and meaningful way. I’ll be sharing some of our insights, learning’s and failures under the banner of “Looking From the Outside In – Driving Innovation From A Customer Perspective” at CeBIT.
3. What do you think are the main issues that people are facing in financial technology?
There are a broad range of issues in financial technology, from legacy to security. But from a customer perspective, simplicity is one of the key challenges. As an industry invested in complexity, how can we make banking contextual and easily actionable? There are enormous opportunities with emerging technologies to remove complexity in banking and provide customers with new interaction models.
4. Can you describe a current project you’re working on and how the solution/product is helping business to adapt to the challenges of financial technology?
Banking channels and instruments have grown over time requiring customers to learn disparate processes and shoulder the complexity of poor design. We have a number of convergent initiatives around simplifying and enriching customer interaction and engagement.
5. What do you see as the strengths for the Singapore and Australian industry; and how do these strengths compare globally?
Singapore and Australia both have strong banks and resilient markets in a well regulated environment. Globally these strengths give us a competitive advantage of a strong foundation from which to base our continued growth.
6. What trends do you see as influencing your industry?
Digital Darwinism is a key trend I see has having a high degree of influence in the financial industry. Banks are essentially secure information businesses with traditional distribution economics. As you’ve seen in other industries, as the digitization of business and channels accelerate, there are those whom will adapt well and those whom may no longer survive. The transition from traditional bank economics to information technology economics is both a key opportunity and at threat to traditional banking. Another key trend is the exponential growth of information available to customers to influence decision making. While information has become a commodity, insight remains invaluable.
7. What do you believe the future holds for financial technology?
The future is ours to create. Markets like Korea have already seen bank branch traffic reduce by 87%, presenting new challenges in reaching and selling to customers. While a new challenge for banking, there are many other industries whom have gone through similar transformations. One thing is certain, the future of financial technology is bright and growing brighter.
See Steve Monaghan, Chief Innovation Officer, DBS Bank (Singapore), at the Financial Tech Conference @ CeBIT Australia 2013 in Sydney on 28 – 30 May 2013.
|Over the next couple of weeks we will be releasing an interview with one of our top speakers from each conference to give you some insights into what you can expect from the three day CeBIT Australia 2013 Global Conferences program.
Our very first interview of the series is with David Gee, Chief Information Officer of Credit Union Australia (CUA) who will be presenting at Financial Tech @ CeBIT Australia 2013 on 29 May at the Sydney Convention and Exhibition Centre.
1. Please briefly describe your role and responsibility at your organisation.
I am CIO at CUA and have been at the organisation for almost two years. One of the primary responsibilities of my role is to support the transformation of CUA into a genuine challenger to the major banks through upgrading our IT capabilities. Fundamental to this is ensuring we have the requisite agility, flexibility and scalability to achieve this.
2. What are you presenting at CeBIT Australia?
My presentation is a looking backwards at the last year and what worked well during the IT Transformation that we have successfully completed. In essence, while technology is what we are read in the headlines; this is all about ‘people’ and getting our teams to ‘lift’ and make change happen effectively.
3. What do you think are the main issues that people are facing in financial technology?
‘Change’ – this is occurring all around us and there are new players entering this market that provide both threats and opportunity. To embrace this change and understand how you will play, is the key issue that we all face in Financial Services right now.
4. Can you describe a current project you’re working on and how the solution / product is helping business to adapt to the challenges of financial technology?
We are making significant investment in our IT infrastructures, including the relocation of our data centre and the uplifting our data storage capabilities and systems to ensure their integrity and security into the future. These are all fundamentals that we expect to operate to support our members (customers). There has also been significant work on our Digital and Branch of the Future and in both of these cases it is all about making the Customer Experience as ‘simple’ and ‘rich’ in terms of functionality.
5. What do you see as the strengths for the Australian industry and how do you see these strengths compare globally?
The Australian financial services industry has shown great resilience over what has been a very challenging fiscal period and as a result our financial institutions are recognised as being among the most financially secure in the world. From an IT perspective, we have to remain vigilant and ensure that we match this financial security with cyber security. We expect more and more of our member (customers) to embrace digital channels and our goal is to ensure that we meet these needs.
6. What do you believe the future holds for financial services technology?
‘More change’; we are on the cusp of significant and accelerated change. A great example is the early work on real time payments that is going on in conjunction with the RBA. We are living in a ‘real time’ world and our systems will need to adapt to this reality.
See David Gee, Chief Information Officer, CUA, at the Financial Tech Conference @ CeBIT Australia 2013 in Sydney on 28 – 30 May 2013.
The days of New Zealanders having to lug around an overstuffed leather wallet may soon be over with Auckland Transport, Telecom and Westpac today revealing details of their “mobile wallet” trial.
The trial, announced earlier this year, is in collaboration with Gemalto, Thales and Paymark. The six organisations have worked together to develop a virtual mobile wallet that can hold multiple cards – including a credit card and transport card.
The three partners say that the “proof of concept‟, revealed at the Thales test laboratory in central Auckland today, is further evidence that mobile wallet technology will soon be a reality in New Zealand. They emphasised today’s demonstration is simply the first stage of a much bigger vision, which will see mobile payments and other mobile wallet services rolled out nationally, involving multiple vendors and service providers.
Speaking about the progress they have made in the trial, Telecom’s Chief Product Officer Rod Snodgrass said “Telecom built the Smartphone Network with smartphones in mind, as people are doing more than ever on these devices. This trial takes the use of mobile payment technology to a whole new level. We are all accustomed to storing our address books and diaries in our phones. Well, now we can store our wallet there as well. This is not simply another application – it truly is a “mobile wallet‟, which will hold multiple cards and secure applications, providing a fast, convenient and safe way to purchase goods and services.”
Westpac Chief Information Officer Peter Fletcher, said “over the next 3-5 years, mobiles will become our customers‟ key banking tool for transactions, product research and other banking needs. Westpac is committed to delivering a market leading mobile proposition and the mobile wallet trial is an important step as we help Kiwis move towards a mobile banking future.”
Auckland Transport Chief Operations Officer, Greg Edmonds, said “mobile phone technology will form an important part of the mix of payment options for transport services in the future. We look forward to the introduction of this technology providing further choice for commuters in the way they pay for transport.”
The next phase of the trial will see 30 plus participants test the new mobile wallet technology at contactless Point of Sale terminals, across Auckland Transport’s network and top up their Telecom Mobile Accounts on their mobile. The technology is expected to be available near the end of 2013.
Learnings from this next trial phase are expected to enable the collaboration partners to further build on the proof of concept and develop an even wider and more valuable mobile wallet proposition for consumers.
This mobile wallet trial is another step towards a full rollout of NFC technology within New Zealand. It comes off the back of Paymark, Telecom New Zealand, 2Degrees and Vodafone New Zealand’s announcement in April 2012 of their intention to form a Trusted Services Manager (TSM), which will establish a robust, open ecosystem for NFC-enabled New Zealand.
See Roxanne Salton, Snr. Product Manager – mCommerce and Advertising, Telecom NZ, at the Future of Payments Conference in Sydney on 16 – 17 October 2012.
Any discussion about the future of payments that doesn’t have identity management in the opening sentence will inevitably miss the point, according to payment security expert David Birch.
Security issues and privacy remain paramount. But as the battlelines are drawn in the coming era of digital money, phone-based payment services and the cloud, identity management will become paramount.
A founding director of UK-based specialist Consult Hyperion, Mr Birch says the mass migration of payment data to smart infrastructure presents huge opportunities if the identity issues are dealt with upfront..
With the move from dumb infrastructure to chip-based cards well underway in this country, the chips themselves will soon be integrated into mobile phones and other devices. And from there the payment smarts will move into the cloud.
Mr Birch, who is the international keynote speaker at the CeBIT Global Conferences Future of Payments event on October 16-17, says a more sophisticated thinking needs to be applied to identity issues.
“There is a battle coming, and it’s not about the actual payment systems anymore,” Mr Birch said. “It is about identity, and the management and control of identity.”
“Because once I know who you are – that I am sure of your identity – the moving of money or payments to you or from you becomes a relatively easy thing,” he said.
The rapid evolution currently underway in payments systems can cause nervousness among consumers and user groups over privacy and security concerns. But assuming a discussion about these changes includes consumers of these services – that is, everyone – then the changes will actually improve the privacy and security situation in the payments ecosystem.
Mr Birch says the problems with identity in a 1.0 world rested with having to share too much information with too many people in order to establish identity. For example, producing a drivers license as proof of age identity to get into a bar, a consumer is actually sharing a variety of other information – age, address, expiry date – which are all problematic in identity theft and the like.
And the guy standing at the door to the bar – or his colleagues – really don’t need to have or retain that information.
“This is problematic because by the time you have used your drivers license for identity purposes over and over, the more people you will have shared your information with. And the more people who know who you are from an identity perspective, the more problems that are presented from an identity perspective,” Mr Birch said.
“It is actually a lot less complicated in the online world because there are cryptographic techniques that let you prove things about yourself without disclosing everything.”
This new world requires a new way of thinking about identity and the a new way that customers will think of their relationship with trusted companies. A bank that issues a customer with a debit card, for example, already has that trusted relationship. And ways of making payments evolve and new finance structures emerge, consumers may be encouraged to think of the traditional bank infrastructure not necessarily as a place where money resides, but where a trusted identity resides.
That smartphones and other mobile devices will become payment devices is not a new thing, but as the payment data moves into the cloud, these device will drive the consumerisation of identity management systems.
And biometrics will almost certainly play a big part, Mr Birch says. And despite all the objections from consumers over the years about biometrics, it will become a mass market phenomenom – because of the convenience factor.
Apparent moves by consumer behemoths like Apple and Google in the biometric space is critical to the acceptance of such systems – with the selling point always about consumer convenience.
“I am a fan of biometrics, but only in the right place,” Mr Birch said. “And it has to be understood (be the consumer) as a convenience technology.”
“If the role of the biometrics is to connect you to the device, and then the device (your mobile phone) is used to manage identity, then it is convenience. The phone can then be used for a variety of identity matters (from banks, to reward programs, to government healthcare and citizenry).”
“So biometrics has a big role to play in this.”
Mr Birch says the developments in the payment sector are picking up pace, and the discussion about identity management is crucial in order to bring consumers on board with the changes.
“Proper identity infrastructure that is managed properly and by the right people presents an enormous opportunity. And that is the discussion that needs to take place and is taking place.”
It is a good thing that Apple is the global consumer-marketing company without peer, because it is about to take on its biggest ever marketing challenge – selling biometric identification products to urban hipsters.
And they will do it with ease, too. The confluence of smartphones, Near Field Communications, and electronic banking and payments has created a perfect storm where convenience trumps any lingering stigma about fingerprints, or concerns over privacy.
Apple’s hastily put-together US$365 million plan to acquire biometric security firm AuthenTec – announced in late July – is fascinating and demonstrative of how fast things are moving in the payments sector.
The AuthenTec acquisition points to the likelihood that future Apple devices will include an integrated biometric identifier. We know that NFC capability is likely to be built into Apple products, and it is not difficult to imagine the iPhone on/off button repurposed as a thumbprint reader.
Think iPhone 6.
Globally recognised payment specialist David Birch – the founding director at Consult Hyperion – says the addition of a biometric security on devices will ultimately be an easy sell (and certainly not one that will be restricted to Apple’s ambition.)
The appeal to consumers of biometric security on a mobile device rests with convenience. The additional security layer – when a biometric is added to passwords – enables safer identity management.
And that means consumer convenience. Whether its in using the device as an electronic wallet – which will have enormous appeal – or for accessing secure service (think government healthcare or welfare services, or even drivers license, citizenship, or passport ID.)
The addition of NFC chips and beefier security will unlock further potential for smartphone devices as an entry point for identity management.
It is a fascinating idea, that in countries like Australia and the United Kingdom – where citizens have so thoroughly rejected the idea of biometric technologies being used for national ID schemes – consumers will accept the idea of having using a thumbprint every time they switch on their phone.
Mr Birch is a fan of biometrics, and says its introduction into mobile devices will be accepted by consumers as long as it selling point properly framed as “a convenience technology.”
After last week delivering a stunning $7.1 billion full-year profit on the back of investments in core banking systems, the Commonwealth Bank is now looking to drive further productivity improvements and market growth from its recent payment technology deployments.
A swag of new customer payment systems – including customer facing retail offerings and a flexible new merchant platform – have been unveiled in the past couple of months that leverage the Commonwealth Bank’s $1.3 billion core systems revamp.
These payment systems, which include the Kaching mobile payment platform as well as a brand-new EFTPOS platform, represent the largest block of changes to electronic payments since the original introduction of eftpos in this country.
In addition to the smartphone-based contactless systems like Kaching, the bank has also outlined plans for an application that will let customers perform secure banking tasks through Facebook.
The CBA’s Merchant Solutions General Manager Andrew Cheesman will provide an in-depth overview of the Commonwealth’s payments strategy as keynote speaker at the Future of Payments conference in Sydney on October 16 -17. The Future of Payments conference is presented by CeBIT Global Conferences.
Mr Cheesman has been responsible for the CBA’s merchant solutions since early 2010. The bank has about 200,000 terminals in the Australian market, accounting for about 30 per cent of credit and debit volumes. He is expected to use the conference as a platform for an industry briefing on the bank’s new point-of-sale platform – CommBank Pi – and the terminal products launched with it.
Mr Cheesman is also expected to discuss Kaching developments and some future developments in smartphone based payments systems and other near field communications developments.
In announcing the Commonwealth’s $7.1 billion full-year profit last week, the bank’s Chief Executive Ian Narev said the cost reductions and productivity developments could be sheeted directly to its technology investments.
“We are starting to see the benefits of core banking show up in the business,” Mr Narev said in announcing the full-year results. He said improvements in the bank’s cost to income ratios were a direct result of new systems – just as it had been intended.
The retail bank side of the business grew by 3 per cent during the year, while expenses grew at the slower rate of 2 per cent. The business bank grew 4 per cent, while growth in expenses were restricted to 1 per cent.
“We have worked hard at tailoring our cost base to this new lower growth environment. The significant investment we have made in technology over the last five years has helped us meet this challenge to improve our productivity,” Mr Narev said. “Two businesses which benefit most from our Core Banking Modernisation program, Retail Banking Services and Business and Private Banking, have again reduced their respective cost to income ratios.”
Last month, the Commonwealth Bank unveiled a suite of new point-of-sale payments platform call CommBank Pi, as well as applications and products that the bank says will redefine the POS experience for both businesses and retail consumers.
The announcements were the result of a large design and engineering investments that addressed the complex security needs of POS while tapping new opportunities presented by tablets and industry-standard platforms like Android.
“Every aspect of the customer interaction is being transformed by social, mobile and online technologies,” the Commonwealth’s Corporate Banking Solutions executive general manager Kelly Bayer Rosmarin said.
“Today we are leveraging our multi-year investment in core banking and ongoing innovation at the edge to transform point-of-sale forever,” she said.
“With CommBank Pi, Australia is positioned to lead the retail revolution globally and deliver outstanding experiences to consumers that are as secure as they are simple.”
The Commonwealth Bank’s bold new point of sale (POS) payments system “Pi” could signal a radical change in the services Australian banks offer and how Australian retailers accept payments from their customers.
“Every aspect of the customer interaction is being transformed by social, mobile and online technologies,” said Kelly Bayer Rosmarin, Executive General Manager of Corporate Banking Solutions, Commonwealth Bank.
She told the media that “we are leveraging our multi-year investment in core banking and ongoing innovation at the edge to transform point-of-sale forever. With CommBank Pi, Australia is positioned to lead the retail revolution globally and deliver outstanding experiences to consumers that are as secure as they are simple.”
The new Commonwealth Bank POS offering will consist of:
- Pi – a software platform built on industry-standard technologies and integrated to create the next generation of merchant POS solutions. This platform enables application developers and businesses to easily create applications for business use and distribute them through CommBank Pi’s AppBank to merchants.
- Albert – a brand new omni-commerce device which combines a range of industry firsts into a multi-functional hardware platform featuring an interactive touchscreen experience, Android based platform, secure EMV pin interface, printer, and merchant terminal functionality.
- Leo – attaches to Apple iPod Touch or iPhone4 and iPhone4S devices to enable Pi to transform them into a fully functioning merchant terminal and move beyond unsecure card reader alternatives. Both Leo and Albert represent the future of merchant terminals and open a new innovation ecosystem to developers and businesses alike.
- CommBank Pi Applications – which have been designed specifically to improve businesses’ interactions with their customers and improve their operating effectiveness. For example, the intuitive Split the Bill application will make it simple for a bill to be divided between multiple people and payment methods.
Since the unveiling in late July, an estimated 200 third party developers have signed up to show their interest in developing applications for the Pi ecosystem, which is a big vote of confidence that they believe it will be successful.
Andrew Cheesman, General Manager Merchant Solutions at the Commonwealth Bank will be a keynote speaker at the CeBIT Future of Payments Conference explaining “What will the Pi Platform mean for Payments Innovation In Australia?”