A UK competitor for Apple Pay?

2 Nov
An iMac computer displaying 'hello' on the screen, an iPhone 13 laying on a surface, a sign for the Competition and Markets Authority (CMA), and the silhouette of the Big Ben clock tower in the background.

Okay, I admit it – I am a big, big Apple fan. I acquired my first Mac computer in 1996 and I’ve been worshipping at the shrine ever since. The Apple stuff just works. Unlike a certain other platform I could mention.

So I was curious to see that the UK’s Competition and Markets Authority (CMA) was consulting on widening fintech competitors’ access to Apple’s digital wallet.

There is a lot of technical stuff here – Near Field Communication (NFC) protocols which enable tap-to-pay, Secure Elements (SE) versus Host Card Emulation (HCE) etc etc – but fundamentally the issue comes down to one of consumer behaviour. If Apple played nicely, allowed a fintech HCE access on FRAND (fair, reasonable, non-discriminatory), and a fintech launched a competing wallet would consumers switch to using it?

Well, they would need some incentive. Perhaps the fintech could partner with (say) a Tesco or another grocer and offer extra Clubcard points? Mind you, the grocers have already tried their hand at banking and decided it wasn’t for them.

There are also some interesting arguments on incentives to corporate innovation. NFC was not an Apple invention – in fact, they were late to the party. But as so often they have packaged innovation brilliantly and are continuing to develop Apple Pay capabilities. How will any FRAND terms reward that innovation?

More fundamentally, is a competing wallet what we want? The EU has gone down the CMA route and Apple now offers EU fintechs access to its NFC capabilities. Vipps in Norway (already well used for Account to Account (A2A) payments) has launched a competing wallet, and hit 1m users – but to do so it needed to offer Visa and Mastercard on its wallet. Competition in the digital wallets market – even if successful – might not do much for any competition issues in the cards market.

Perhaps the good folks at the CMA have been reading Kierkegaard? “It is better to try something and fail than to try nothing and succeed”

Tags: , ,

The AI-enhanced Singer sewing machine

8 Oct

I posted Tim Harford’s piece on AI & Singer sewing machines on LinkedIn today – https://lnkd.in/p/eWXkSh4b

But my ChatGPT-generated picture didn’t come out well in comments – so here it is. Zoom in to read.

Is Bill Gates right on AI – especially on speed of adoption?

3 Sep

So Bill Gates has posted an interesting piece on AI on his GatesNotes – see https://www.gatesnotes.com/a-turbulent-ai-era-and-critical-choices-to-make

Several of his arguments have been rehearsed before, but the one that caught my eye was on the speed of adoption. Bill writes:

‘We have no experience with a technology that can be adopted quickly or that can think and move like a human. When the PC came along, it took twenty years to significantly change how we worked because the software had to be developed, the price had to come down, and people had to learn how to use the tools and incorporate them into their business processes. AI, on the other hand, runs on the devices we already have, and it uses natural language.’

Essentially he’s saying: we don’t have to wait for an investment roll-out – that’s happened: it’s called the PC and the internet. We just have to stick a bit of very clever but pretty cheap code on top to access these LLMs, and significant productivity gains open up. While this is not true for all AI uses, it is true in areas like professional services and software development.

And a little random sampling at networking events and among colleagues suggests he’s right. As Irving Berlin could have written ‘Everyone’s doing AI now’

AI and the Von Neumann photocopying paradox

26 Feb
Technology & Human Productivity

So I have my technology guy on board – Burkhard: German, very hard working & diligent, a whizz at maths, physics and computer science – and at his latest subject, AI. He brings with him a supa doopa AI Training Platform he’s honed on a couple of clients already.

We are pitching for some work at a consulting firm helping them develop their approach to AI & upskill their staff. So I start thinking: how does AI differ from other technology changes I have seen as an economist & management consultant over the last fifty years?

Not that much, I reckon. Thinking about AI has brought back to mind the endless hours I used to spend in the 1970s sending handwritten manuscripts to a place called Eastcote (by overnight van) for the typing pool there to do their worst. The key question was: how many times would you send it back with corrections in red ink before you gave up and resorted to snopake? Fixed with modern laptops, spellchecks et al – so technology improving both productivity and quality, just like AI.

Okay, but what’s this got to do with Johnny von Neumann – inventor of Game Theory and all-round bright guy – and the photocopying paradox? The phrase was invented by a colleague of mine – John Hawksworth – to describe our practice in the 1990s in a major accounting firm of recruiting bright young things from elite institutions and then asking them to do incredibly low-value clerical tasks: photocopying, formatting footnotes, and dicking about with PowerPoint decks. If today AI is beginning to dissolve that paradox – isn’t that all to the good?

A threat to the bright young graduates? I don’t think so – removing the drudgery will allow them to add more value earlier in their careers, and develop important skills – team working, dialogue & communication. And perhaps educate their superiors in the wonders (and potential pitfalls) of modern technology.

Tags: , , , , , ,

Worth a look – the Entrepreneurial Operating System (EOS) Academy

28 Jan

I forget now where I first came across this – but the book Traction by Gino Wickman is certainly worth a read, and I see they have now launched a new EOS Academy with some free tools and training courses on line – see the image below – to bring people up to speed with the concepts.

The book and (I assume) the EOS Academy do a good job of packaging up the more useful business school thinking into useable chunks and approaches. A couple of examples: there is a very good Organisational Checkup tool on the website which has twenty questions designed to highlight the strengths and weaknesses of your organisation – ‘It measures how well you are applying the Six Key Components™ of EOS: Vision, People, Data, Issues, Process, and Traction’ – to use the Academy’s own words. We have used the Checklist several times in our business coaching work.

The second example is a YouTube video ‘Compartmentalising your business’ published by EOS Worldwide (sorry, I couldn’t easily get the weblink to work – you will have to search for it by yourself). Again, it provides some useful guidance on how to prioritise your actions as an entrepreneur/small businessman so you don’t have to everything, everywhere, all at once.

Amongst the myriad of self-help business books and approaches I think this one stands out. As I say in the title – it’s worth a look!

RIP PSR – the Payment Systems Regulator is no more

12 Mar

The reports of my death are greatly exaggerated

…as Mark Twain once cabled to the US press, his obituary having been published a touch early. Alas, no such reprieve awaits the PSR. Having been created by the Conservative coalition government in response to the great abolition of cheques imbroglio, it is now to be merged into the Financial Conduct Authority by Labour. See https://www.gov.uk/government/news/regulator-axed-as-red-tape-is-slashed-to-boost-growth

Should we shed a tear? It has done useful work in encouraging direct participation by smaller banks in the Faster Payments system and BACS, and the declining use of cheques has been made more efficient by the new Image Clearing System. But some of its other priorities could happily live elsewhere. Sorting out Authorised Push Payments looks very much like an FCA task, and its worthy work on cards and merchant acquiring could surely be done by a specialist sub-panel or committee of the Competition and Markets Authority.

The irony is, of course, that any sector regulator – Ofgem, Oftel etc – can happily be abolished when its sector has become ‘competitive’ in some sense and no longer in need of regulation. To misquote St Augustine, perhaps the sector regulator’s prayer is ‘O Lord, make my sector competitive, but not yet’.

Tags: , ,

Déjà Vu – the Future of Payments Review

8 Dec

Keen readers of the Autumn Statement will have noticed, in paras 4.44 and 4.45, the heralding of this Review:

‘The government is also committed to growing the UK’s world-leading retail payments sector. That is why the government supports Joe Garner’s independent review into the future of payments. The government is acting to implement the review’s core recommendations…’ [see https://bit.ly/3Rm6jz1 for the Review itself]

Like the curate’s egg, the review is good in parts. But it has a few curious features which are worth some comment.

First, it makes no mention of the last vision and strategy produced by the Payments Strategy Forum (PSF) in November 2016 from which the diagram above was taken. Indeed, as the review acknowledges, Pay UK are still busy implementing key elements of this – notably the New Payments Architecture.

There is certainly a case for reviewing and updating the PSF’s work – for example, it makes no mention of cryptocurrencies or Central Bank Digital Currencies. And it is unfortunate, to my mind, that the Payments Strategy Forum itself was wound up once it had produced its work. Had it continued to function as a forum, it could have shed some useful sunshine and challenge from all payments stakeholders on the more technical workings of Pay UK.

Second, it suggests that the vision and strategy should be led by H M Treasury (p29):

‘We considered where the creation of such an overriding vision and strategy should be led from and concluded that only HM Treasury has the influence and oversight to provide leadership to the entire payments landscape. To be successful, HM Treasury needs to allocate an adequate level of resource to develop the blueprint and to ensure its delivery.’

‘An adequate level of resource’ neatly summarises the problem – I suspect they will find that, when they open the resources cupboard at HMT, they will find it pretty bare. And what resources there are will be required to carry out the Review’s other recommendations – like monitoring digital exclusion (Recommendation 3, p11).

It would be far better to my mind to revive the Payments Strategy Forum to update its 2016 work – and readers might be interested in watching this video of its participants commenting on its approach: https://bit.ly/3N9JVGj. But perhaps that’s too ‘open government’ for the current administration, and they would prefer it behind the closed doors of HMT?

The final comment to make is on account to account payments being ‘too clunky’ because they rely on using sort codes and account numbers. While the ‘clunky’ epithet is true enough, the Review makes no mention of the key reason for this: unlike countries like India, with its Unified Payments Interface (UPI), we have no digital identity system in the UK. As The Banker made clear in a piece on this in early November, this is key to India’s success with UPI:

‘The basis for UPI’s success had been laid long before 2016. The Aadhaar digital identity (ID) system was introduced in 2009, with the aim of providing every Indian and foreign resident with a unique 12-digit identity number for use across a range of services….[see https://bit.ly/47Neudk for the whole article].’

The UK doesn’t have any national ID system – the last attempt at it was scrapped by the incoming Conservative government in 2010 by one Theresa May. Without it, P2P bank transfers are bound to be clunky.

It will be interesting to see what happens to the Review. The government seems rather keen on setting up Reviews which produce worthy reports which then sink beneath the waves – for example the Penrose Report on competition policy (see my bog from February 2021). It would be a pity if the same fate befell this Review.

Tags:

Central Bank Digital Currencies (CBDCs) – does the emperor have any clothes?

5 Dec

I have been meaning for some time to write a blog on the subject of CBDCs, and am spurred to put finger to keyboard by an excellent article by Barry Eichengreen in today’s FT (5th December) – ‘CBDCs- a bad idea that won’t go away’.

I won’t repeat his arguments. But it is worth thinking for a moment about how a CBDC – say a digital £ – would actually work. It’s digital, so you will need open a digital account (with the Bank of England?) so you can buy your digital £s, and perhaps add them to your Apple or Google Wallet.

My basic problem with CBDCs is this: if you already have a bank current account, what is the difference between your digital £s and the £s in your current account?? For us happy souls who, in the UK at least, still enjoy free in credit banking, the answer is none.

Eichengreen’s article also deals with the financial inclusion argument. It is a little different in the UK, as major banks are required to offer a no-frills no fee no overdraft ‘basic bank account’ which does require credit checking. There are now over 7m of these in the UK.

Arguments about the costs and inefficiencies of existing bank payments rails are amusing, if nothing else, and Eichengreen is especially good on the cross-border issues. But when you start to think of the build and roll-out timescales and costs of CBDCs, you rapidly start to see a payments version of the HS2 fiasco. Will the Bank of England build something itself? Hopefully not, if the CHAPS experience is anything to go by (Chaps is the UK’s wholesale payments system for payments over £30,000). When it fell over for a day in, I think, 2016, the backup system was deemed too poor to use. Various enquiries followed, but it is not a happy precedent. Perhaps the Bank will outsource its build? Perhaps to Pay.UK, who are still trying to implement the New Payments Architecture first referred to in 2017.

But build and rollout are only part of the problem – the greater one may well be adoption. If people can’t tell the difference between a CBDC £ and their current account £, why will they alter their behaviour and use CBDCs?. What customer protections will be offered if you use your CBDCs to purchase goods and services? What will the dispute resolution process be?

Hence the Day Kaye picture at the top of the article. The ‘magic suit’ of CBDCs is about as useful as the emperor’s new clothes. Any do watch the Danny Kaye clip on YouTube: https://www.youtube.com/watch?v=VQQ3LCWZJd4

Tags: , , ,

‘Your career is on a roll’

20 Jan

A couple of developments have made me think about careers recently. First, LinkedIn has started emailing me telling me that my career is on a roll – a little odd, as I’m pleased to say I am now in receipt of the state pension 😎.

Then I saw in yesterday’s FT that Sir Alan Budd had passed on. He played a major role in monetary and fiscal policy in the UK, and his obituary in the FT (see https://on.ft.com/3GReexL ) points out that he is survived by some of the public policy institutions he helped establish – including the Office for Budgetary Responsibility. But aside from this, he also played a minor role in my career, as he interviewed me for the Government Economic Service.

The obituary quotes Andrew Bailey as saying his “overwhelming memory of Alan” is “how he combined thoughtfulness and great kindness to staff. He always seemed to appreciate what staff did, and find time to express it.”

So his career was not just about himself and climbing the greasy pole – he clearly had time for others. It’s a challenge for all of us – not just how we advance our own careers but how – perhaps through informal encouragement or more formal mentoring arrangements – we help others develop their own careers and interests.

Bean counters and the living wage

30 May

Colleagues at Business Fights Poverty have recently published a new report – The Case for Living Wages (https://businessfightspoverty.org/register-the-case-for-living-wages/ ). It shows that, for many companies, it makes sound business sense to pay a living wage rather than either a (lower) statutory minimum or whatever market conditions will let companies get away with. Offsetting a higher wage bill are benefits of higher productivity, lower turnover, greater loyalty and a potential sales uplift from socially aware consumers. It’s a good report.

But if it’s ‘good for business’, why don’t companies do it? For example, think of the UK Post Office, where paying low wages seems to trigger very high turnover (see https://morningstaronline.co.uk/article/b/royal-mail-plagued-by-disease-of-high-worker-turnover). Even worse, why do some companies do a “P & O” and end up with ferries they can’t operate and a hostile government and press?

So somehow companies seem to be paying sub-optimal wages – which benefit neither the business nor the employees. Searching for reasons, the drive to cut costs without thinking through the consequences looks likely to be high on the list. The dreaded bean counter with his red pencil may not be optimising his companies profitability at all.

There are a couple of points worth emphasising here. The first one is highlighted in the report – it is easier if there is a collective push towards a living wage rather than piecemeal implementation – as Julie Vallat from L’Oreal says, ‘I always convey the message internally and externally that we should not be competitive on this issue. We will not achieve anything alone, if we are working in isolation on a systemic endemic issue’.

The second issue isn’t touched on in the report, but is important – the interaction of living wages with the tax and benefits system. A key reason businesses can get away with not paying living wages is that they look to the state to bail them out via the social security system. But this creates a massive hit to public expenditure and creates all sorts of bad incentives. Time for businesses – and the consumers they serve – to pay the living wage.

Tags:

← Older Entries