Tag Archives: Jumio

Bitcoin self regulation required to increase adoption

Screen Shot 2014-07-07 at 10.09.44 AMI remember debating the benefits and dangers of the Euro during a Macro Econ class just as the currency was being rolled out. One of the benefits of the Euro is the ability for consumers to pay for goods and services with one common currency significantly reducing costly currency exchange fees. Clearly if you are a citizen of a less economically powerful country, like Greece for example, the Euro is a big boon. All of a sudden your previously lower valued currency is a moot point and you know have equal buying power as someone from a strong country such as Germany. However, there in lies one of the biggest problems with the Euro. Countries of lower economic strength are now at currency parity with stronger countries….at the expense of the most economically strong.Yes, I understand I’m simplifying the issue, but therein lies a real economic problem.

The European Central Bank is very busy managing the EU banking system, stabilizing currency value and convincing the English and German bankers to have faith in the Euro. After all, it is their currency reserves that back the value of the Euro. This is no easy task when England and Germany have been asked to fund monetary policy, such as bank bailouts, to prevent the collapse of the system. Faith in the Euro is what is keeping the system afloat. Faith in the currency and system is what stops England and Germany from pushing for stricter regulations to protect the value of their native currencies and their ability to trade.

Bitcoin

Faith plays a strong role in any currency. The faith is in the government issuing the currency to back up the value with sound monetary policy, a centralized bank, and financial assets. However, I think FAITH plays an even BIGGER role in the latest currency innovation, Bitcoin. Bitcoin is known as a “cryptocurrency” and its origins are mysterious. So mysterious, no one really knows who created the currency.  Not even Jack Bauer can uncover his identity.

Bitcoin is not backed by any bank, can be used to buy/sell merchandise or services, and can be used to transact anonymously. Wait, what? Without the banking system, how can this currency be valued? Bitcoins are bought and sold on an exchange…and forces of supply and demand move the currency value up and down. To further complicate the value, Bitcoins can also be  “mined” through solving complex mathematical equations using certain software programs. I can’t help think that Bitcoin is very similar to how gold nuggets were mined and valued during the California Gold Rush. The big difference, though, is that gold is a precious metal, is tangible and has had value for thousands of years. Bitcoin “gold nuggets” have been created by someone, buried in mathematical equations and has no historical context for valuation.

Clearly this raises the question of how many Bitcoins are out there. If it’s unlimited, Bitcoins will have little value. Whoever invented Bitcoin has limited the amount of available coins to 21 million. According to a recent article, 12 million Bitcoins are in circulation and 9 million remain to be “found” or “mined”. How the Bitcoins got there is still not clear and there does not seem to be a mechanism in place to prevent more Bitcoins from being anonymously created.

Wow. The entire Bitcoin currency concept blows my mind. An anonymous person created and launched a currency. Enough people have enough FAITH in this currency that it will retain value, will remain in a limited and finite supply and will continue to be an emerging form of payment. Faith in Bitcoin sounds INSANELY risky to me….but e-commerce giants such as Amazon and eBay have been considering options to accept it as a form of payment. Strange. However, there clearly remains a high level of suspicion of the cryptocurrency in the Banking industry.

Maintaining customer faith in Bitcoin is the number one priority for all Bitcoin providers, exchanges and related companies. Without a tangible asset and historical context for value, Bitcoin will collapse immediately if people lose faith in its legitimacy. Legitimacy will be lost if a number of factors occur: buying/selling illegal products or services, money laundering, currency value manipulation, counterfeit currency. Yes, EVERY currency and monetary system faces these challenges…but the challenges are addressed through a well established banking and regulatory system. Bitcoin, and other cryptocurrencies, does not have this.

Cryptocurrency providers, platforms and related services must push to self regulate to protect their value and legitimacy. The self-regulation must happen FAST for there is a lot of interest and concern building within governments and monetary systems. Establishing standards that are easily adhered to and adopted will be critical. Providers must engage in conversations to define standards and hold each other accountable in very much the same way Truste worked with websites to define consumer privacy and data usage standards.

Screen Shot 2014-07-03 at 4.47.20 PMJumio, a leading provider of identity verification products, is taking the lead in creating such a compliance network. The network is called Bitcoin Identity Security Open Network (BISON) and it’s targeting Bitcoin and Bitcoin related providers to join by agreeing to a set of standards of authenticating the identity of users they are establishing transactional relationships with. This is a great first step in building a compliance standard that is not a stretch for major platforms. The growing incidents of fraud and other criminal activity is the result of anonymous transactions. Requiring user identity authentification will help make the Bitcoin platform much safer.

The big hurdle for Jumio is the willingness of these Bitcoin providers to comply, participate and implement authentification technology.  No easy task.  Jumio is addressing this marketing challenge by building a consumer technology to pull participation by providers. The technology will enable Bitcoin consumers to verify their identity only once and carry these credentials across all Bitcoin platforms. The technology reduces the barrier to use the cryptocurrency and is designed to increase Bitcoin platform registration and trial. Will this consumer benefit increase a large enough lift in a Bitcoin provider’s business? That remains to be seen. But as we all know, the easier a product is to adopt and use, the more likely the consumer is to use it.   Currently eight Bitcoin providers are part of BISON at launch. It will be interesting to track who joins next and if there is enough consumer demand for one-time consumer identity verification. Of course, this will all depend on consumers using multiple Bitcoin platforms.

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Mobile payments innovators must eat more fast food

Like a good citizen of the FinTech community, I downloaded the major payments apps to my iPhone including PayPal, Square and Dwolla. I also searched for opportunities to add loyalty cards to my phone’s Passbook. I deposited a small amount in each payments app and added my Starbucks card to Passbook eager to make a payment with my mobile device. Unfortunately, each of these payments apps and features remain unopened after a year from downloading. I have not been successful in finding stores in my local area that accept payments from Square or PayPal or have a loyalty card compatible with Passbook, aside from Starbucks.   To make matters worse, I typically just open up the Starbucks app directly and avoid Passbook all together!  Clearly the mobile payments or wallet value chain is broken and innovators are struggling with defining how customers and businesses want to use the mobile device to drive their purchases.

Screen Shot 2014-03-31 at 3.45.39 PMThose of us who follow FinTech closely are well aware of the struggle for defining the mobile wallet correctly. “Wallet” is a loose term these days.  Most people believe payment apps are wallets even though a wallet typically includes feature or cards beyond just payment tools.  If this wallet perception is true, then why are apps like Square and PayPal NOT the driver of mobile wallet ubiquity? I think getting closer to the correct definition of the mobile wallet requires us to pay close attention to what’s happening at retail…specifically at the fast food franchise level.

National fast food chains such as Burger King and Wendy’s are launching mobile apps that enable customers to order and pay for food using a credit card.  These apps are retailer specific mobile wallets that will enable the brands to build deep customer relationships by understanding buying patterns to then reward customers with specials offers and discounts. Frankly, I’m a little surprised it has taken the fast food guys so long to build and launch these apps. Starbucks has been doing this for over two years. Over the past few years Starbucks has clearly won my loyalty as they guide my purchasing through bonus star offerings. There are significant implications for mobile payments innovators if the Burger King and Wendy’s apps are widely adopted and are successful in generating more revenue and creating deeper customer relationships.

First of all, consumers are saying they want brand specific apps that enable them to pay and reward their loyalty. Think the Starbucks app.  These mobile applications are essentially loyalty cards.Screen Shot 2014-03-31 at 3.44.39 PM Secondly, consumers are also saying they are willing to pay with their credit card through the application…and don’t need a new payment platform. For example, the Burger King and Wendy’s applications require the consumer to enter in credit card information upon sign up to make purchases. The consumer makes purchases on the same Visa, Mastercard or AMEX platform used to make all their online and offline payments. These mobile payments will also be covered by the policies defined by each credit card to protect against fraud. Given the entrenched credit card payments system and fraud protections, there is really no consumer need to sign up and manage another payment platform.

Brands and retailers will be monitoring closely the success of these fast food applications. If these applications continue to be effective payment empowered loyalty cards, what role does the mobile device play?  Similar to a real wallet, the mobile device is the holder of the many branded loyalty and payments apps.  Does this put the mobile devise in a unique position should these retail brand specific apps be successful?  Yes, for the mobile device IS now the mobile wallet.  No one should have a heart attack and die from digesting this concept.  It’s nothing new and is a recurring theme a several mobile payments conferences.  Daniel Mattes, the CEO and founder of Jumio, articulated his vision for the mobile device as a wallet at Money2020.

However, there has been such focus around the mobile wallet being an individual application that many people think of Square and a few others as being wallet innovators.  This is starting to change as people digest what Apple may be doing in the payments space.  Thinking this through, Steve Jobs may have had a similar vision. Passbook is a feature to store tickets and loyalty cards. It’s not a stretch to envision storing encrypted credit card information and ID on the device. I think it’s safe to assume that Apple will not be entering just the payments business….but will most likely be defining and enabling the iPhone to be a true digital wallet. Expect Samsung to follow a similar strategic path.

The big question will be how long it will take for the mobile payments vertical to evolve to this point. A lot of money has been invested in Square, Flint and PayPal to invent another platform. However, Visa and Mastercard will be active and well funded suppliers in the mobile payments war. It will be a matter of time until the right mobile device features emerge that enable the major credit cards to easily plug themselves in to mobile transactions. Once the right device feature emerges, the mobile payments vertical will be locked up quickly.  Unfortunately, this means many payments apps will become part of those “hey, do you remember….” so common at cocktail parties.


Banks, make account opening easy from a mobile device and win customers

SimpleFinancial technology bloggers have written a lot recently about the implications of BBVA’s acquisition of Simple and Facebook’s acquistion of WhatsApp.  I know, what does the WhatsApp acquisition have to do with FinTech?  Industry pundit, Jim Marous, points out that the WhatsApp acquisition points to an ENORMOUS industry trend that sends a huge warning signal to all financial institutions.   That trend, and this should be no surprise, is the significant shift for consumers from the desktop to the mobile device in not only social media, but in banking too.  The warning signal? Consumers want to engage with their bank through the mobile device as the primary channel of engagement.  Banks need to get their mobile house in order or customers are headed out the door, through the windows and maybe even through the ATM.  The most salient mobile app feature that banks must get right to address this trend is account creation.  Banks who make account creation easy from the mobile device will turn the tide …and will attract more customers away from banks who do not embarce mobile.

Marous sites, “While Facebook was built for the desktop and migrated to mobile, WhatsApp was built for mobile first, giving the network an advantage in today’s marketplace.”  Similar to Facebook, a bank’s consumer products and user experience has been desktop based and is gaining momentum to migrate to mobile devices.  I am a Wells Fargo user and have downloaded the mobile app that offers a snapshot into my bank account online.  Aside from remote deposit capture, the application offers very little additional value that leverages the power of my mobile device.  As I’ve mentioned in previous blog posts, there are many FinTech innovators who are creating banks and banking technology that put mobile first.  GoBank, Moven and Simple are prime examples.

The most significant opportunity to drive mobile banking adoption is to fully leverage the camera feature on a  smartphone.  Yes, most banks do utilize the camera by enabling mobile deposit capture and photo bill pay.  However, the camera needs to be enabled for a much more significant  functionality: The ability to capture the PII needed to open a bank account without asking the consumer to key it in using a device key pad.   Without this feature, the mobile channel will always be secondary to the online banking channel where consumers create and manage banking relationships.

Jumio Netswipe

Financial technology innovators Jumio and Mitek  are making great strides in leveraging the device camera to capture customer data. Jumio recently launched at FinovateEurope a technology that uses the device camera to scan an ID and extract the needed PII to open up a banking account. The technology then “deposits” this needed data into a bank account registration form.  Wow.  Cool. The technology addresses the significant consumer pain point of using a tiny device keyboard to open up an account ….which is a process filled with typos, frustration, and high abandon rates.   The Jumio platform makes opening a bank account fast and easy.

 

The mobile camera ID scanning technology sounds great…however, from the consumer perspective I can identify several potential hurdles or concerns that have to be addressed.  Where does the picture of the scanned ID go?  Is the image in my device photo stream?  If I lost my phone, could the thief see this data? If the ID image lives in a cloud, who’s cloud is it?  What happens if the cloud provider is breached?  There are so many questions here that need to be addressed!  One thing is for sure, innovators need to have the data security technology locked down and messaging at the ready to educate customers on why this ID verification technology is safe.  After all, consumers don’t readily distribute copies of their ID to just anyone offline…and it’s no different in the online world.


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