Filed Under: History and future, Money

E-cash in the attic

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[Dave Birch] As part of the debate around NFC at BAFTA, Forum friend Tony Moretta from Weve went up into his attic and dug out some amazing props to bring along. I won’t bore you with all of them, but check this out: it’s a vintage Mondex phone (Tony said that when he showed this to his son, his son asked “was that the first-ever telephone?”) of the type I last saw in my parents’ house circa 1997.

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Why did my parents have one of these when Mondex was piloted in Swindon-City-of-the-Future a couple of decades ago? Well, I pulled a few strings so that they could one to play with. I have to say that they loved it. The main reason why they loved it was nothing to do with Mondex: it was because, in those pre-smartphone days, it was a way of seeing your account balance without having to go to the bank or phone the branch. Thus, they could see when salaries had been paid in and when bills had been paid out. This was a genuine time- and labour-saving invention to them, and they were very sorry to see it go. The only thing they actually used Mondex for — and my Dad certainly did value it for that — was for car parking, where putting in the card (there was no PIN as, like everyone else who said that they wanted card lock/unlock devices all over the place, he never bothered locking) instead of searching for change was a really significant convenience play.

Tony had a Mondex wallet with him too, and took great delight in opening up the back to show… a Secure Element (as we now call them). Hhhmmm… a keyboard, a screen and a secure element… reminds me of something…

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So why didn’t it work? Well, one explanation is that it was The Mark of the Beast. Another is that while it turned out to be easy to give people Mondex cards, it turned out to be difficult to get a large enough base of installed terminals to make acceptance wide enough. This is a problem that no longer exists. Today, instead of special-purpose Mondex terminals, we would use a mobile phone and an app. Come to that, instead of Mondex cards we would use a mobile phone and an app. And instead of a Mondex wallet we would use a mobile phone and an app. And instead of a Mondex lock/unlock device we would use a mobile phone and an app.

It’s important to remember what worked and what didn’t work. Too many people just white-out things that didn’t work and forget all about them rather than learning the real lessons. Mondex is where I learned a very valuable lesson. I’d done some work comparing the cost of payments, and I’d worked out that the marginal cost of Mondex payments was a tiny fraction of the cost of (say) credit or debit cards. Since Mondex transactions cost essentially nothing, I assumed that they would quickly become the dominant fraction. I mistakenly assumed that cost was everything.

“It will become ubiquitous – it’s the cheapest way of moving money around,” says Dave Birch,

[From 2.12: E-Money (That’s What I Want)]

You see the same things being said about Bitcoin today. This turned out to be absolutely and utterly wrong. And it still is. I paid my taxi fare over to BAFTA using Hailo. I don’t know what it cost the driver (I think 10%). When I paid at the car park this week I think I was charged an extra 40p to pay using my mobile phone. I didn’t care. Was my bus journey cheaper or more expensive because I paid using my Arriva app. I have no idea. Cost? No, convenience trumped everything else. Mondex was inconvenient.

In the case of Mondex, for example, you had to have a bank account (ie, you already had a debit card) in order to get one: you couldn’t just walk into a bank with twenty quid and walk out with twenty quid on a Mondex card. Looking back, there were some technical limitations as well: balance reading, for example, was a pain because you need to use a keyfob or electronic wallet to find out how much you had left on the card. And the ATM implementation was plain crazy: you had to put your ATM card in, then put your Mondex card in (most people never did: they just drew out cash).

[From Digital Money: Money museum]

In retrospect, that last point about ATMs seems particularly bizarre. There must be someone out there who can remember the NatWest thought processes around this, so I’d love to hear from them. The real point that I want to make, though, is that all of the factors that made Mondex inconvenient have vanished in a world with mobile phones, perhaps there is a kid in basement somewhere right now cooking up a bastard son of Mondex and Bitcoin and the e-cash revolution is, after all, just around the corner.

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers

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5 thoughts on “E-cash in the attic”

  1. AP@tedipay.com' Alexander Peschkoff says:

    Another bizarre things is MasterCard’s Money Send (http://www.mastercard.com/in/consumer/money-send.html). It takes up to 48 hours… Whilst a conventional MC transaction is processed in seconds.

    Faster Payments provides positive confirmation of the transaction in 15 seconds. Funds transfer is then completed in 2 hrs max.

    Surely MC could act as a “bridge of trust” between two individually trusted parties (sender’s bank and recipient’s bank who are both MC issuers) to do the same trick worldwide to remove the speed bottleneck.

  2. jim.self@btinternet.com' Jim Self says:

    In response to Alexander Peschkoff.
    Visa has a money transfer platform that can make funds available on the the receipent’s card account immediately. Although they artifically limit it to within 30 secs so as to allow fraud systems to do their thing.

  3. AP@tedipay.com' Alexander Peschkoff says:

    JF, the same reason we don’t ditch mobile phones in favour of biometrics when it comes to mobile payments – courses for horses. What you going to do with a phone with a dead battery at midnight to catch a taxi back home? Payments are about ubiquity, convenience and flexibility. But I do like Mobino-like concepts. (http://www.finextra.com/Community/fullblog.aspx?blogid=7564)

  4. jfg@mobino.com' J.F. Groff says:

    Dave, I fully concur that convenience trumps pricing. Ease of use is obvious to assess when you hold the device in your hands and execute the process, however it is quite difficult to deliver consistently (especially when you have to cater to a legacy ecosystem). I’d love to get your feedback on our mobile payment app: install Mobino from your favourite app store and let me know what you think.

    Alex and Jim: we could also get rid of credit cards entirely. Why bother digitising a piece of plastic when we can build digitally-native payments instead, thanks to direct connections to banks (SEPA, Faster Payments, etc.)

  5. noel@softcard.com' Noel says:

    Mondex being mentioned in 2013!!!

    Maybe I should dust off my Mondex incorporation “T” shirt just in case?

    As you say Dave the mobile has removed one of the most significant barriers so keep your eyes peeled for youngsters emerging from basements with new payment instruments. grin.

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