Will Apple put the F back into NFC

The industry has now been waiting for quite some time to see the handsets that will make the dream of near field communication (NFC) possible. For a long time this was more like a no contest (NC). It is not like we do not see the benefits of tap-and-go. If all handsets were properly designed and NFC was available like blue tooth and WiFi, life would have been a better place.

This is why it was such interesting news when Apple announced the appointment of Benjamin Vigier (a NFC experts and one of the best guys in the industry) (Read here). Benjamin has been working on NFC technology since 2004 and was responsible for the Starbucks NFC project when he was with mFoundry, so he is pretty experienced in this space. It is unlikely that he was hired for anything else. Does this mean that we will now see life change?

Well for a start, let us agree that anything that Apple does, one should take seriously and Apple have a number of good tools in place to make this happen. However, they are still confronted by the two key stumbling blocks in making this real and I would be interested in their strategy in how to overcome this:

• How to cater for the secure element, especially from a personalisation perspective.
• What to do about the basic lack of acquiring infrastructure in most (all?) countries.

If Apple need some thoughts on how to overcome these stumbling blocks and to put the F back into NFC, they have a standing invitation to contact us here at F-undamo.

The time is up for experimentation

Sometimes it seems to me that I live in this unique industry where every-one is just busy with experimenting and prototyping all the time. It is almost as everybody is to scared or unsure of actually deploying something. We hear and read a lot about experiments and pilots whereas very few projects have a primary focus to actually deploy into production.

I suppose it is a symptom of very complex systems and concepts that have not been tried out previously. This uncertainty and the lack of case studies and references do create this environment where money is spent on trying out, testing and evaluating. It is true that it is safer not to go into production, but rather drift in the grey area between concept and reality. But then, is this where we want our industry to get stuck?

I say: No, the time for experimentation is over. We now know how to successfully deploy these type of systems. We now know how to distribute the product to end-consumers and we actually have enough proof-points for the business case. It is possible to pick experienced advisers and proven technologies. For sure, the time for experimentation is over.

New insurance products that would change the world

Insurance products have played a major part in the growth of mature economies. Complex risk products provided peace of mind for individuals and companies alike. Structured savings products assist individuals to prepare for retirement or other important events (like study, birth etc.). The premiums collected by means of these products often provide the capital to fund infrastructure and economic growth through investments.

Unfortunately, these benefits are not available in many emerging economies, primarily because of two reasons:

• Limited statistical information to form the basis for actuarial calculations. Without this data it is impossible to design risks products that can be delivered profitably.
  
• Inadequate payment systems making the collection of monthly or weekly premiums impossible and unpredictable.

Widely embraced mobile payment solutions will largely help solve both these impediments to insurance products. The statistical information available from the transactional behaviour of subscribers can provide much of the data that will enable actuaries to create suitable and profitable products. The payment platform provided by mobile payment systems is ideal to support regular collection of premiums in a cost effective way.

The time is ripe for the emergence of a new generation of insurance products specifically aimed at emerging economies. This will lead to a better life for all, but more importantly, the introduction of these insurance products will also directly lead to growth in the economy and will stimulate many secondary industries.

Will your phone (ever) replace your credit card?

I read a very good article on this recently making the statement that your phone can't really replace your credit card (Read here). Amongst others the article makes the following valid points:
a. Payment mechanisms require systems (and networks) that are way more reliable than what Mobile Operators can provide today.
b. Payment systems must be sufficiently ubiquitous that it can be used at most places where you want to pay
c. Many new schemes have tried, but have failed spectacularly to replace existing credit cards and finally
d. The business model on how to make an alternative work ("split the loot") is just not available.

Game set and match. No go, cards are with us for ever. It is impossible to replace them and in some ways, one must agree. Cards work perfectly, everywhere, every time, without a glitch...

Well, actually not. Cards are vulnerable in one way: it is difficult to use them when they are not present. The biggest flaw that cards have is that they are something physical and a lot of the design and the security is built on the fact that a card must be present when a payment is made. This would be okay if all payments that we make are in the real world, but truth is that this is not the case. More and more payments are made in the virtual world and this is where cards are flawed. Using digital payment instruments (like phones) and all the security that they bring is much more suitable. Phones may just start replacing cards in places where cards are needed, but where cards are not present. (So called card not present (CNP or MOTO) payments).

In the recent eBillme Online Spending Index (Read here), the volume of online payments (read card not present) grew with 8% quarter on quarter. That is a lot. Maybe cards will get replaced by mobile phones when online becomes more popular than actual retailers. Statistics seems to show that this is possible.

Hockey stick or horseback of mobile wallet take-up

I have been thinking about this for some time now and have touched on it in previous posts. Based on our experience to date, what does a typical growth curve for mobile wallets look like? To put it in another way: Would the graph look like a hockey stick graph: slowly picking up speed over time and then gathering momentum to ultimately get a life of its own? Or would it look like a horseback graph: Quickly getting up to speed with a significant penetration and then pick up the rest over time?

Our immediate logic says: hockey stick. This thing is foreign and it is going to take time for the masses to actually start using it. It is up to the early adopters to first try it out and to get to grips with it so that the rest can get onto it in time. But this is where we make a massive mistake, I believe. This thing is different. This is about a network effect: the fax machine problem. Even if the early adopters take it up, but do not quickly have enough reasons to use it, they would also discard it.

This is my view now: the only possible success for mobile wallet deployments is if the initial (first) penetration is quickly (and fast) enough to create a community that can sustain itself. The first launch is critical and must be decisive and swift. Consumers must immediately buy in to the value proposition and start using it immediately with positive feedback - only then will the product stick.

It is also my impression that this theory is supported by what we observe in practice. The really successful deployments made a quick start and established a critical mass within eighteen months. Others that started out tentatively usually do not meet expectations and get caught in the valley of desperation where they are not bad enough to close down, but also not good enough to get anyone excited.

Bigger is better for insurers, says Purisima

By Ted P. Torres (The Philippine Star) Updated August 03, 2010 12:00 AM Comments (0) View comments

MANILA, Philippines - Newly appointed Finance Secretary Cesar V. Purisima is in favor of a higher capital and risk weighting regime for the country’s insurance industry.

“Bigger is better in this industry,” Purisima said during the 60th anniversary of the Philippine Life Insurance Association (PLIA) last week.

The finance secretary was referring to the country’s insurance industry, which is struggling to raise sufficient capital to cover all risks as well as meet the claims of the insurer public.

There are 120 insurance companies, 34 life and another 86 non-life insurance companies, including one re-insurer. All are required to reflect a minimum P100-million paid up capital covering the period 2009.

Department of Finance Department Order (DO) 27-06 requires that all life and non-life insurance companies must reflect a paid up capital of P250 million (or a P500-million net worth capital) by 2011.

“I am encouraging them (insurers) to prepare for bigger competition,” Purisima said. “They have to be bigger, stronger, and better capitalized.”

Majority of the life insurance firms have actual capital well beyond the required P100-million paid up capital for 2009. But industry sources said that a handful of life insurers might not be able to reflect legitimate paid-up capital of P125 million for period 2010.

“That is fine since we want bigger, stronger, healthier, and liquid firms that can meet our standards as well as the claims of the insuring public,” finance officials said.

After all, increasing capital that is risk-weighted is a global standard. Last year, a significant number of large commercial banks already went to the capital markets to raise funds ahead of global standards.

“Our interest is a healthier insurance industry, I hope we can revitalize them,” the finance secretary said.

The life insurers ranked in the top 10 in fact account for roughly 80 percent of total premiums yearly.

Among the non-life insurers, only a third have reflected paid-up capital of more than P100 million. The next 20 or so players reflected a flat P100 million paid up capital based on data from the Insurance Commission (IC).

In terms of gross premiums, only a quarter of the non-life insurers account for 70 percent of the business.

Purisima also wants the insurers to invest in infrastructure although the methodology has still to be worked out.

“The very nature of their industry is long term, and infrastructure investments are not only long term but a direct benefit to the economy,” he said before the life insurers.

The finance secretary said that a vibrant insurance industry is a crucial component to savings and investment
generation.