Mirror mirror on the wall
Who’s the most cashless
of them all?

Maple Leaf DigitalEach year, the country that U.S. citizens visit most is Canada, our neighbor to the north. Yanks venturing there after 2009 would have noted that Canada had already adopted chip cards, a move the United States would not make until 2105, even then not without hiccups.

Now a new survey from Payments Canada suggests that more than half of Canadians say they’re all for making the big jump to a cashless society. According to Huffpost Canana Business:

A new survey from Payments Canada finds 50 per cent of Canadians are ready to get rid of banknotes and coins. Two-thirds of respondents said they are ready to say goodbye to personal cheques.

Yet From Press Canada points out that Canadians aren’t yet putting their money where their mouth is:

… it’s still a minority segment of the population that has adopted paperless forms of payment, according to the 1,507 Canadians surveyed by Payments Canada and Leger Marketing.

Canadians do only 19 per cent of their shopping online, and only 13 per cent say they have uploaded an e-wallet app, according to the online survey conducted in late March and early April.

“This data demonstrates a natural ambivalence around emerging technological advancements in payments but endorsement from early adopters, which often signifies a tipping point,” said Gerry Gaetz, chief executive of Payments Canada, the organization which owns and operates Canada’s payment clearing and settlement infrastructure, in a statement.

It’s important to bear in mind with surveys that what people say they’ll do doesn’t necessarily mean they’ll do it. And it would be prudent not to rule out inadvertent bias on the part of Payments Canada. Notwithstanding, Canada does seem to be moving steadily away from cash, as are a number of other nations.

As I reported last month, the Republic of India has made becoming a cashless society an official goal. Yet according even to India Today, Scandinavia may be least abashed about going cashless. Cash transactions in Sweden are reportedly down to just 3 percent. In Norway, one bank has proposed eliminating cash, and several no longer distribute cash to customers. And in Denmark, a growing number of retailers refuse to accept cash.

Not that everyone agrees on who the leaders are. World Atlas ranks Belgium as leading the cashless charge (yes, pun intended), followed by France, Canada, and the United Kingdom, with cashless transactions at, respectively, 93, 92, 90, and 89 percent. Big Decisions reports that the top five cashless countries are, in order of cashlessness, Sweden, Denmark, the UK, Canada, and Belgium.

The astute reader will note that while reports vary as to who leads, they are mostly in agreement as to which countries are at the top. Canada is one of them. If the Payments Canada survey reflects reality, we can expect Canada to keep up the trend.

The name Canada derives from an aboriginal American word meaning “village.” Clearly, its humble beginnings as reflected in the name belie the powerful economic force that is Canada today.

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The future under Trump:
Could be good, bad, or a bit of both

BankInno topA few weeks ago I wrote about the future of fintech under the Trump administration. Since then, a flood of articles has burst forth about Trump’s taken and threatened actions in the financial services arena. The consensus seems to be: Could be good, could be bad, or some of both.

Yeah, I’d say that about covers the spectrum.

For a good start on the subject, I commend you to this piece by my friend Philip Ryan. Here’s his opening:

The election of Donald Trump has brought uncertainty and relief to bankers in seemingly equal measure … banks needed just 222 hours to comply with new regulations, down from 809 the previous quarter, a decline of 73%. The incremental cost of new regulations during the quarter was $10,360, down from $53,046 the quarter prior.

But, the article goes on to warn

“… against optimism about repealing regulations under Trump, particularly the huge and complex Dodd-Frank Act.”

To do justice to explaining why, I would end up quoting Ryan’s entire piece. So tell you what: Please click here and read the originalNext week, I’ll summarize views from various perspectives within the financial services industry. 

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Cognitive dissonance
over the fate of cash

thumbs-up-1172213_1280You probably know the term cognitive dissonance. It refers to the sensation of gears inside your head grinding to a halt at the appearance of contradictory data.

For a good example, look no further than prognostications about the impending fate of cold, hard, tangible currency. Depending on who pipes up and when, the future of minted and paper currency is either dismal or glorious.

Last week in a The New York Times piece entitled “Cash Is King No More,” writer Lee Siegel rued the demise of currency:

Cash. Remember? It’s what people used to exchange for things. You can see it sometimes in old movies on TCM. I think Gibbon mentions it in “The History of the Decline and Fall of the Roman Empire.” An old song, “Brother, Can You Spare a Dime,” was actually about a dime. It was not “Brother, Can You Spare an Amazon Rewards Card.”

Siegel is not alone. No shortage of predictions in both the consumer and business press place cash on the endangered species list, and there are plenty of reasons to hold to that view. In my recent ABA Bank Marketing article “Measuring the ROI of Digital Banking,” I discussed a study by Fiserv and Bank of the West showing the appeal that digital banking holds for rising generations, and how that dovetails nicely with the potential for banks to increase share of wallet, loyalty, longevity, and fee income. That’s a clear win-win—unless you happen to be currency, in which case it would be reasonable to fear that your days may be numbered. I mean, come on. Even food stamps are going digital. 

Now for the cognitive dissonance 

But not so fast. An article just published by Fiserv strategic partner ATM Marketplace entitled “Why consumers still love cash” claims that studies “… consistently show the hype about the decline of cash to be inaccurate and wildly overstated.” It goes on:

Despite continuing growth in alternative payment options, consumers still rely on cash as their primary form of payment for gifts, food, personal care, automotive, entertainment and transportation services.

But, with so many “more convenient” options available, why do people continue to rely on hard currency?

By way of answering its own question, the piece suggests that people are loath to give up cash due to concerns about potential hacking, dissociating from hands-on budgeting, loss of anonymity, and merchants who do not accept credit cards or digital payments. While all of those explanations hold water, I’m a little wary of explaining results of “studies” where no reference is cited, for they leave me powerless to check out the claim for myself. As University of Oregon Professor Emeritus of Psychology Ray Hyman observed in what has since been dubbed Hyman’s Categorical Imperative, “Do not try to explain something until you are sure there is something to be explained.”

But then, ATM Marketplace is no lone voice. No less than the venerable BBC challenges the sounding of “the death knell” for cash:

Physical money has been with us for thousands of years for a reason. Cash is essentially untraceable, it’s easy to carry, it’s widely accepted and it’s reliable. If the power goes out, or there’s a blip in the electronic systems that make the online commerce world go round, cash is there. If someone wants to buy something without anybody tracing it back to her, cash is the way to do it. If someone wants to be certain that their form of payment will be accepted, cash is the best bet. Even with advances in technology, some of the aspects of cash simply aren’t reproducible with bits just yet.

There is simply no alternative system of payment that is as convenient, reliable and anonymous.

Speaking of venerable, Georgia State University is of like mind. While many cash defenders echo ATM Marketplace’s reasoning—perhaps they share a common source—GSU offers some unique points. Among them are the fact that not everyone has a bank account (a problem The Republic of India must sooner or later face as it pursues its stated goal of becoming a cashless society); the suggestion that the removal of currency will only spur people to substitute some form of cash by another name; and the fact that the demise of cash has been predicted before. Such was predicted, for instance, with the advent of checks. Perhaps you noticed that cash is still in use.

The not necessarily venerable but not altogether dismissible Huffington Post opines that cash is here to stay. More notably, so does ACI Universal Payments. If you’d expect to find a pro-demise-of-cash bias anywhere, you’d expect to find it there. Yet in a delightfully comic piece that manages to bring rickshaw rides into the picture, ACI’s writer quips that cash “… is almost as good as money,” adding, “It’s universally accepted, there’s no surcharge to use it, and for some, it fits nicely into their fanny packs … ”

I cannot resist weighing in with own thoughts. 

It is, after all, my blog.

Digital is taking over, and there’s no reason to imagine that it will slow down. It will become the standard, and, I suspect, sooner than many think. With that said, of course currency will never altogether disappear. Neither have typewriters and rotary phones. The “demise of cash” should not be taken literally but understood to mean “the reduction of cash to a negligible proportion.”

In any case, neither I nor anyone else attempting to predict the future need worry. That’s the beauty of making predictions. If in time you turn out to be wrong, chances are that by then no one will remember that you even made a prediction, much less what it was.

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The trouble with
daring a hacker

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It has become something of a journalistic fad for reporters to invite hackers to, well, hack them. Without exception, they emerge shaken by two observations: Just how vulnerable they are; and just how much sensitive data they’d forgotten about that awaited discovery.

TIME reporter Joel Stein is one of the latest to give it a whirl. He writes about his experience in his column dated March 23. Unsuccessful at recruiting real hackers—those he contacted may have feared embarrassing him or worried about entrapment—he finally cornered a pair of young staffers at the magazine with no hacking abilities, gave them his passwords, and told them to have at it.

“The advice hackers give when looking for dirt in a pile of data,” Stein says, “is to …

… search for words such as pissed or angry. They suggest figuring out to whom the most emails are sent, since that signals a trusted relationship. And to use Facebook to suss out relationships—ex-girlfriends, college acquaintances—to spot dubious interactions. Deleted photos are telling, as are erased emails. And they say to always, always look in the draft folder, which houses the truly horrible stuff people are too smart to send … Using this advice, my two hackers delivered an 18,000-word document of humiliations three weeks later.”

Three years earlier, Telegraph reporter Sophie Curtis wondered,

… is the threat of being hacked something that you or I really need to worry about? And if someone did hack into your computer, what would they be able to do with the information they found?

Over the summer I decided to put these questions to the test. I got in touch with an ‘ethical hacker’ called John Yeo, who works for cyber security firm Trustwave, and asked him to try and hack me.

Curtis had written a good deal about cyber security, so, she wrote, “most of my profiles are fairly locked-down.” But, not so fast. Her hired hackers found indirect ways of learning more about her. Next, they faked an email appearing to come for LinkedIn, a source she trusted. The mere act of opening the email—without clicking links—embedded a single pixel that let her hackers “fingerprint” her computer, that is, identify …

… which operating system the computer is running, as well as which browser I was using, which browser add-ons I had, and which security software might be running on the computer.

That’s where Curtis’s tale turns scary. I recommend reading her article by clicking here. You might also check out this piece by Kevin Roose, who “dared two expert computer hackers to ruin my life.” Roose reported,  “If I had to give myself an overall digital security grade, I’d give myself an A-.” But then he found out that 

… it didn’t matter how good my defenses were. Against a pair of world-class hackers, my feeble protections were about as useful as cardboard shields trying to stop a rocket launcher. For weeks, these hackers owned the hell out of me. They bypassed every defense I’d set up, broke into the most sensitive and private information I have, and turned my digital life inside out.

“Please hack the Pentagon”

According to the Infosec Institute, in the 1960s the word hacker originally meant

… someone dedicated to solving technical problems in machines in a different, more creative fashion than what is set out in a manual … “hacking” just intended to find out a quick way to evaluate and improve problematic systems that need to be optimized.

Yet the potential threat wasn’t hard to anticipate. The Unites States government routinely hired hackers to test online security as early as the 1960s and 70s. Despite such precautions, it caused no small stir when in 1990 three men not retained by the government were indicted for hacking into classified U.S. military data. Meanwhile, the 1983 movie War Games, with Matthew Broderick and Ally Sheedy, had already fanned the public’s fears.

War Games was highly fictionalized, but the threat of hacking is real and continues to grow. This is from Symantec’s 2016 Internet Security Threat Report:

In 2015, we saw a record-setting total of nine mega-breaches, and the reported number of exposed identities jumped to 429 million. But this number hides a bigger story. In 2015, more companies chose not to reveal the full extent of their data breaches. A conservative estimate of unreported breaches pushes the number of records lost to more than half a billion.

The threat of nefarious hacking has increased the demand for “ethical” hacking. Last year, a call went out from no less than the Pentagon seeking hackers to try to penetrate their defenses. Of course, applicants had to pass a background check. Even that’s a little unsettling, since more experienced, not-so-ethical hackers usually don’t bother submitting to background checks before setting to work. In any case, according to USA Today, the program …

… launched in April and the Pentagon said it would [offer] prize money awards and other recognition … The Pentagon has acknowledged that its networks are under daily assault by hackers and securing the systems are [sic] a high priority. Last year, an email system used by the Joint Chiefs of Staff was penetrated by hackers and had to be taken offline in order to cleanse the system.

Somewhere in all of this are important takeaways:

  • Vigilance is a must. Even with good security in place, you must never assume you’re invulnerable.
  • Most of us have no clue as to the sophistication of determined hackers.
  • Just opening an email can be dangerous, even without clicking on links.

It creates something of a juggling act for an industry like banking, whose markets demand digital services. The trick is to keep clients forewarned and forearmed while avoiding frightening them so much as to lose their confidence. Perhaps paradoxically, the proper presentation of information on staying safe from hackers can increase client confidence by dont-post-it croppedconveying that a financial institution is knowledgeable and cares about its customers.

In the meantime, a bit of good advice for us all is summed up in a cartoon, which, out of respect for copyright laws, I shall not post. But I can link to it.

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Catch my presentation on Zelle at PAYMENTS 2017

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I hope you have already marked your calendar for April 23-26 and booked a flight to Austin, Texas. (Unless, that is, you live within driving distance.) You surely do not want to miss NACHA’s PAYMENTS 2017 convention.

This year, it will be my honor to take the stage at the event on Tuesday, April 25, at 8:31 a.m. I’ll be talking about Early Warning’s Zelle network and provide an inside look at how Fiserv is delivering the first turnkey version.

In an October 2016 press release, Fiserv reported that the Zelle network …

… will be offered by many of the country’s leading financial institutions, and will provide consumers with a faster way to send and receive payments within the security of their financial institution.

Fiserv will offer the first turnkey version of Zelle to simplify integration for financial institutions of all sizes. It will offer all the elements of the Zelle solution in a single platform to reduce costs and speed time to market for financial institutions.

The media have been heralding Zelle as banks’ answer to P2P payments threats from nonbanks such as Paypal’s Venmo. Personally, I think that trivializes just a little. I suspect that, more than just answer alternative P2P payments threats, Zelle will absolutely set the standard. Consider a few of Zelle’s competitive advantages:

  • Zelle lets just about anyone with a valid deposit or demand account send funds to just about anyone else. Even if their bank isn’t a participant. Which their bank should be, especially with Fiserv making it easy for them.
  • The Zelle app is intuitive and easy to use.
  • Financial institutions can brand the Zelle app.
  • Even so, the Zelle app presents all users a consistent look and interface, regardless of whether they access it via their financial institution or download it directly from Zelle.
  • Funds availability is lightning fast, thanks to Zelle’s unique, rapid-fire funds verification technology.
  • Zelle is incredibly versatile. For instance, it lets users easily split the check at a restaurant.
  • Zelle is secure.

Aite Group’s Retail Banking & Payments analyst Talie Baker summed it up nicely: “The launch of Zelle gives banks a chance to establish a foothold as the provider of choice for person-to-person payments and even take back their share of the market from non-FI providers.”

Fiserv is a global leader in financial services technology solutions and happens to be my employer. Early Warning is a leader in financial technology that protects and advances the financial system. NACHA, which is much easier to say than “National Automated Clearing House Association,” is a not-for-profit, self-regulatory association of “ … nearly 10,000 financial institutions via 11 Regional Payments Associations and Direct Membership.”

If you attend PAYMENTS 2017, please grab me and say hello.

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