Press the red button for financial inclusion
[Dave Birch] I can’t remember exactly when it was, but one of the first conference papers that I ever presented relating to the internet was called “Smartcards on the Superhighway”. I think it was in 1995, because I subsequently turned it into a journal paper that was published in The Journal of Internet Research 7(2), p.116-119 (1997). I can remember putting it together, because we’d been asked by a couple of financial services customers to take a look at the nascent internet and see if it might be used for their products and services. One of them, as I recall, was the London Stock Exchange, and I went off to talk to some people—including Forum friend Steve Bowbrick, who was at that time running the first Internet Cafe in London, called Cyberia —about what wasn’t even called electronic commerce yet.
My conclusion was that the best way forward would be to leave the IP infrastructure alone and forget about trying to build security into the network, because the dynamism of the Internet was so critical to its success. The fact that anyone could connect to it and send anything they want to anyone they wanted to was a fantastic, unparalleled landscape for creativity. Instead, I thought, if we wanted to use the Internet for business, for government, for “serious” communications, then it would be better to secure the end-points, and since software would never be adequate, that meant tamper-resistant hardware. Since the only tamper-resistant hardware I could see in the mass market was smart cards, I drew the inevitable conclusion: we’d do business on the web using smart cards. There were three ways, I thought, that this might work.
- We could take smart cards issued by banks, governments and others and connect them to our PCs using smart card interfaces. I was seriously wrong about this: I figured that as a smart card interface would cost a couple of dollars, we’d all have them, but it really didn’t work out like that. I don’t think I ever got a working smart card reader plugged into my Mac ever, except the one (that worked perfectly) from the Britney Spears’ fan club.
- We could use the smart cards inside mobile phones, the SIMs, in some way. Some of the projects we were working on at that time were for what was then Cellnet (now O2) and the precursor to T-Mobile (on things like prepaid services) so I didn’t think that that was much of a prediction. It seemed obvious that phones would become important payment devices.
- My final vector was TV. We’d done a fair bit of work on satellite data transmission and digital TV. Since I could see that set top boxes would use smart cards for subscriber management, I thought that (as in the case of the mobile phone) these smart cards could be used for identification and payment as well as access control.
I think this analysis has held up pretty well over the years. I’ve written a few times that I thought that digital TV deserved more attention as a channel but for one reason or another it hasn’t really taken off. Where are we now? If my remote control were to sprout an NFC interface so that I could buy stuff online by just tapping my phone or contactless card on it, as they have in Japan, then I would unhesitatingly use it. But I’d also use it if the telly caused a message to pop up on my iPhone asking me for a PIN. Either way, the combination of the TV and the mobile looks terrific. Television itself has changed over that time as well. My kids watch TV on their laptops or iPads, not in the living room, and the living room is now the province of the “smart TV”. Well, sort of smart TV.
Estimates at the end of 2011 from retailer John Lewis suggested that no more than 15 per cent of Smart TVs are ever actually plugged in to the web.
My smart TV is fully plumbed-in, as is my smart blu-ray player, but I never use either of them online because I have an Apple TV and that works much better. But the general trend is there. TV has gone digital (the analogue signal has now been switched off in the UK) and it is going connected.
What will you do with your connected TV? I imagine that one of the things you will do is buy stuff, so bringing payments to the channel is vital. Consult Hyperion has done plenty of work on this in the past (we worked on the Sky Barclaycard, for example) and we put forward a number of idea for using one-time password, remote controls and even NFC on different TV-related projects.
[From TV’s times]
Perhaps the likely trajectory is one where digital TV is used to deliver financial services around a particular niche that is not well served by the web, where the combination of convenience and security forms the right balance. And so to the point! The London Rebuilding Society (LRS) and Consult Hyperion have been awarded funding by the Technology Strategy Board (TSB) to explore the use of the television as a channel for payments for socially-excluded groups, using both bank accounts and pre-paid “jam jar” accounts to explore the relationship between financial and social inclusion. The project’s aim is to help the 1 million unbanked people and the further 2.5 million people in the UK that use the very basic form of bank accounts. These basic accounts can often impose extra costs of up to £1000 per annum on households. Additionally, some 12 million bank customers per year pay charges for going overdrawn or making unauthorised payments. Current solutions to the problem of financial exclusion are not working, and these low income and vulnerable households are paying the price, especially as mainstream providers of credit are moving out of the personal loans market, and high cost lenders and loan sharks are stepping in.
“We want to turn the way retail financial services are done on their head, said Naomi Kingsley,” The London Rebuilding Society. “Instead of providing off the shelf products which are often socially useless, we design products to meet the needs of those excluded from the mainstream. If it works for those at the bottom of the ladder, you can bet the mainstream will follow, so we’re pleased to partner and utilise Consult Hyperion’s experience in payments to help make this concept and working reality and change the lives of the millions that have been let down by the current financial system.”
The project team will develop a working prototype of a standard EMV prepaid card account that users can manage through an IPTV (Internet Protocol Television) set-top box, using a contactless interface on the TV’s remote control. Account holders will have full account management capabilities via their television screen, enabling them to track and manage their finances and manage regular payments and bills on a standard pre-paid card account.
“Digital technologies are opening up new opportunities to tackle financial exclusion,” said Margaret Ford, Consult Hyperion. “We’ve seen mobile phones transform the lives of people in Africa and other developing countries, so we’re looking forward to using our expertise in digital payments and partnering with The London Rebuilding Society on the HomePay project and help people here in the UK. The ”in-home” service will allow users to make transactions, pay bills, and manage their money - all via their TV sets (and other platforms too, including smart phones and game consoles). Plus the pre-paid account offers greater control, convenience and autonomy to potentially vulnerable people.”
Currently at proof of concept stage, a prototype will be developed, and then working in partnership with groups such as Payments Services Providers, charities and Local Authorities the project team will run field trials, initially with older people, in association with Social Landlords. Finally through evaluation, the team will carry out further development of the solution during further field trials.
What’s envisaged is a prepaid “near bank” account with a companion chip and PIN card that can be used to access a range of financial services via the set-top box. One might imagine, for example, that an elderly person might gain access to their account by simply tapping the contactless chip and PIN card to their remote control, thus combining the convenience of the big screen and familiar controls with the security of the chip. I’ll write more about “near banks” shortly, but suffice to say that one of the key roles envisaged for such a service is to handle welfare payments to excluded groups. For such groups the PC and the web are inappropriate and (without, I hope, caricaturing) for the young excluded the mobile is the preferred channel for transactions whereas for the old it is the TV. If we can bring them together, we can make a big difference in the UK mass market for financial services.
We kicked the project off with an evening event in June with Forum friend Sir Brian Pomeroy, Chair of the Financial Inclusion Task Force (and previously chair of the Payments Council), who opened the discussions by setting out some of the issues and opportunities around the dynamics of exclusion, the context of an ageing population, the imminent transition to the new Universal Credits system and so on. We then had breakout groups—including organisations ranging from the Department of Work and Pensions and American Express to Everything Everywhere and IDEO—to talk about different aspects of using digital TV to overcome exclusion and come up with a few ideas for us to feed into our design process. It was an excellent evening, by the way, and I’m very grateful to my colleague Margaret Ford for pulling it all together with our friends from LRS.
This isn’t the place to go into the technology discussion—we’re busy working on that right now—but we hope to have the IPTV box specifications finished later in the summer and then the project will move on to a small-scale LRS pilot with around 10-20 households in East London. The project will then be looking for commercial organisations to get involved (some already are) with future roll-out, so if you are interested by all means get in touch.
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