Sydney Morning Herald & Melbourne Age on e-Wallet

October 26th, 2011

Story from, interviewing Peter Cook, CEO of Novatti

Is that an e-wallet in your pocket or is your iPhone just happy to see me?
Reported by Nate Cochrane
October 26, 2011

Australian electronic payments technology speeds mobile commerce innovation.

If you have ever topped up your mobile phone, downloaded a console video game or shopped on Amazon chances are you have an electronic wallet but now an Australian company wants to bring it to transactions as diverse as disaster relief, public transport and social security payments.

It could even be applied to the aboriginal intervention program in the top end, according to Peter Cook, chief executive officer, of Australian company Total Tel International.

Cook says Total Tel redesigned e-wallets that traditionally dealt with cash only: his would allow for goods and services to be credited to the account holder.

The Commonwealth Bank’s Katching app launched on October 25, 2011.

E-wallets are not new. Microsoft’s much-vaunted Wallet launched in 1995, became Passport and then Windows Live ID. PayPal has an e-wallet and a payment gateway. Others were stymied by lack of terminals. But growth in mobile phone sales especially in the developing world has spurred renewed interest in e-wallets. Total Tel has even sold its technology to South African telco MTN and the Fundamo mobile financial services platform, Cook says.

They are particularly attractive to telcos and ISPs, who can become financial services providers pursuant to prudential regulations, and it lessens banks’ weight in the equation because direct transactions can take place with a transport operator, charity or agency.

“If government wants to pay someone, they make that person go to a bank and the banks aren’t that happy because they have these accounts with $300,” Cook says.

“But what if government wants to give a token to say that I’m entitled to five blankets or emergency meals? You can use a wallet system for non-cash purposes; take the flood emergency.”

E-wallets can also control how people spend money. “If you don’t want people to buy alcohol, the balance can’t be used in certain stores for certain purchases (or) it could be the type of merchant you go to or use it for more than 20 per cent of its value in any one day.”

PayPal, the best-known e-wallet, last week posted a record $US1.1 billion ($A1.05 billion) on payment volume of $US29.3 billion for the past quarter – 10 per cent more than the previous quarter and up a third from the year-ago quarter. And it projected revenue of $4 billion for the year ending December 30.

Cook says e-wallets will spur more innovation in financial services as non-bank actors such as supermarkets start to participate.

“It will always be from a trusted brand; what you would think is that most telcos around the world would be contemplating using their brand to offer a financial service based on wallets and mobility.

“We provide a flexible, core wallet system for someone else to launch a disruptive service from where they are not reliant on credit card providers.”

Smart cloud

Total Tel’s e-wallet system is hosted on IBM’s SmartCloud, instead of on the company’s own purchased or leased equipment.

Cook says this gives Total Tel the freedom to dial capacity on demand, wherever it is needed in the world.

Its proofs of concept sit in IBM’s Singapore data centre but migrate to the countries in which e-wallets are deployed.

“In the past, we struggled to run proofs of concept – if I want to do one into Malaysia I had to ship equipment there and do work on their equipment but now with a few days’ effort we can fire up.”

Bump, I just bought that

As more financial services providers toy with mobile payment technologies such as near-field communications (NFC) for low-value buys at places such as delis and hairdressers, the speed of rollout to prototype services will increase.

NFC is an emerging area of payments and identification where two devices come into proximity to share details. It includes MasterCard’s PayPass, a contactless payment system, that has 42,000 reader terminals at merchants in Australia. Shoppers simply “bump” their card on the terminal instead of swiping or inserting it. No PIN is required.

Yesterday, the Commonwealth Bank put its finger in the air with Kaching, an iPhone app and hardware accessory for iPhone 4s to allow person-to-person transactions over social networks and purchases using near-field terminals at merchants.

Commonwealth Bank executive general manager of credit cards David Lindberg was coy on when Kaching would be available from the AppStore but indicated it would be before Christmas.

As the iPhone lacks near-field capabilities, the bank will sell $50 phone cases with an NFC chip built-in to those who install the app on their smartphones.

Lindberg said the bank had 5.5 million online banking customers with some 1.9 million using the Netbank mobile app. He expected this to rise to three million users in a year on the back of Kaching.

The app’s Facebook integration would allow users to pay each other through the popular social network, he said.

“This is the first step of integrating payments with social media,” Lindberg said.

“You’re all meeting all around the world and the country and the question is who will front the money? Social payments really will be the future.”
Kaching would work with any acquiring bank or third-party terminal, he said, and payments could be sent to people who were not Commonwealth customers with an extra authentication step.

Analysis: Future deployment

The spread of m-payment infrastructure – terminals including smartphones and networks – should see a big rise in mobile payments.

Commonwealth Bank says Kaching loses it money by cannibalising higher-value services but that remains to be seen because according to the Australian Payments Clearing Association about a third of transactions that “underpin our economy” are for what are typically cash sums – the sweet spot at which near-field and mobile payments aim.
Spreading such emergent technologies at cost-recovery parallels early bank efforts with ATMs and EFTPOS to encourage early adoption.

The spread of electronic payments into social networks is a natural and burgeoning area – banks’ “Pay Anyone” systems are clunky at best. But the ability to transact financially and socially online and on the run with friends is fraught with considerations such as repudiation (“I don’t want that concert ticket now”) and trust (“How do I know you are REALLY my friend?).

Social networks are porous to scams and this is an area phishers will no doubt exploit once the payments spigot is opened.

The challenge for financial services providers and merchants will be to maintain consumers’ trust while for regulators it will be to wrap their heads around the fact that people are now transacting online financially and directly with each other and the new business cases to emerge.

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