The revolution will not be televised.

The revolution will not be brought to you by Xerox In 4 parts without commercial interruptions.

The revolution will not show you pictures of Nixon blowing a bugle and leading a charge by John Mitchell, General Abrams and Spiro Agnew to eat hog maws confiscated from a Harlem sanctuary.

The revolution will not be televised.

- Gil Scott-Heron

So you ask: what does the seminal song above have anything to do with the Google announcement at its I/O keynote yesterday?  As with many things in life, it is often the things that happen behind the scenes that have the greatest potential impact.  Google spent pretty much the whole day talking about everything from Maps to its new music streaming service. But the one announcement that was the most revolutionary of all was made behind the scenes on their blog. Essentially you can now email money to your friends, just like you would email a photo or Word document.

Once you have registered for a Goggle Wallet account and linked it to your bank account, sending money is as simple as attaching any other form of digital data. In fact, you can even link your wallet to a debit or credit card but then you will have to pay 2.9% which is what Google pays to fund the account.

This is classic Google: complementing and substituting to drive search revenues. What Google is interested in is not the ability to make money on payments but to be able to capture the data around the payments.

By creating this functionality, it has essentially killed the wire transfer business of the banks and any business model around Peer-to-Peer payments initially at a domestic level. It also calls into question the ability of the likes of PayPal to charge money for these kinds of transactions.

The value of this data cannot be emphasised enough. Google wants to know what you are actually spending money on, so it can create even more targeted advertising. Ask a retailer what they are willing to pay to increase conversion rates and you will be surprised how high they are willing to go. If you think Google adwords are expensive, think about adwords where Google takes a revenue share on a successful sale of a product or service and you can just imagine how big the opportunity is.

The biggest issue so far with Google Wallet has been adoption. But they are solving this problem by making it instantly available to the 425 million active Gmail users. In addition, integrating it into their new wave of Android devices will also ramp up adoption.

In terms of wider industry impact, I think that incumbents will have to completely rethink how they make money around payments. The revolution is already happening: Innovative companies such as LevelUp are already giving away the payment leg of a transaction and charging for geo-located offers/loyalty applications which merchants are willing to pay for and MCX (Merchant Customer Exchange) is capturing data and creating a free, closed loop ecosystem amongst retailers.

The revolution will not be televised.

Members of the Jury consider where the innovation comes from, the impact of technology, mobile payments and the need for integrated payments programmes amongst a host of other issues.

The participants have all held executive roles at major payments organisations and many have had significant commercial success with their own payments companies. All jurors are still actively involved in payments.

The Payments Innovation Jury Report was launched on the 11th of March and received the following press coverage:

Venturebeat, Rudebaguette, PaymentsSource, PYMNTS.com, FS Tech, HuffPo

Payments Innovation Jury Report by John Chaplin

The Underbanked Financial Services Forum provides an opportunity for a multitude of players to showcase their successes, and their challenges. The event features provocative speakers, stellar panels, and engaging entrepreneurs who share a focus on innovative, high-quality financial products and services. The audience will comprise 750 bank and credit union executives, technology entrepreneurs, retailers, investors, regulators, nonprofit providers, and consumer advocates to discuss the market opportunities in serving the financially underserved and to advance innovative efforts to the next level.

Anthemis founder Sean Park will be participating in the Future of Money panel on Friday the 7th of June, 2013. To find out more, click here.

Now in it’s 21st year, the International Payments Summit is one of the leading payments event in Europe that attracts more than 400 senior executives from banks, corporations, technology and infrastructure providers, regulators and service providers from around the globe.

This year’s conference, from 9th to 11th April, has a wide-ranging scope, from the burden of regulation to the disruptive technologies changing customer behaviour and hence business models, from cloud computing to payments hybridisation.

Anthemis Founder Udayan Goyal will be giving a keynote address on how the future of banks depends on their engagement with customers.

By Udayan Goyal

Dispersing cash in a country as large as India has traditionally been hugely problematic due to the way the financial services infrastructure has developed in the country. In effect, the inability to service low value customers due to a systemic cost problem with the industry (driven by both regulation and staff unions who have opposed many measures to increase efficiency in the past, including ATMs) has resulted in a very urban-centric distribution coverage by the industry. As a result, reaching the beneficiaries of benefit payments in rural areas has been particularly difficult and beset by corruption and inefficiencies. Some countries such as South Africa, have tried to address the issue in partnership with private enterprise by using biometrically enabled stored value card technology (Net1) and India has tried to replicate such initiatives with companies such as Fino. However, in a country with such a large population and diverse geography, such methods are difficult to scale without being quickly rendered uneconomical.

Indian retail has itself been going through difficult times. Real estate has become increasingly expensive leading to rental costs rising significantly. In addition, the Indian government recently won a significant and controversial vote in the Parliament to open up the country’s highly-protected retail industry to foreign chains, a move that has been criticised as being a death threat to the already declining profitability of the Indian retail and domestic industry. With the elections looming in 2014, the government has a major incentive to boost small industry and one of the ways it has done this to leverage the Business Correspondent (“BC”) framework which has given the retail sector a potential source of additional revenue by effectively becoming an extension of traditional branch banking. The legislation allows retailers to explore cash dispersal as a way in which to remain profitable.  However the current system only covers basic bill payment, simple domestic remittance and mobile top up, and is not leading to a large enough revenue stream to cover the costs of becoming a BC, particularly the cost of funding the cash float.

With this in mind, we at Anthemis have been working for the last 18 months to see how this model might be redeveloped to broaden the range of services that retailers can offer to include international and domestic remittance services, welfare payments and to generally act as the “last mile of payment” for consumers. By broadening the product set available to retailers and allowing them to reuse their cash float (which they need to pre-fund to minimise risk) for multiple cash in and cash out products, it is possible to build a business model which creates a reasonable and sustainable revenue stream for the retailer. In addition, the implementation of the Aadhar scheme in India (Aadhaar is a 12 digit individual identification number issued by the Unique Identification Authority of India on behalf of the Government of India which is linked to a record of three biometric characteristics of each individual — face scan, fingerprints and iris scan) ensures that BCs will be able to function without some of the other cash related KYC (‘know your customer’ information) issues seen in other markets. In our mind, the key to a successful business model is not just the product set itself but the underlying processes that are implemented at the retailer level. Maintaining a certain standard amongst the BCs ensures that the sponsor banks (each BC needs a sponsor bank) are comfortable that a bank grade retail network is operating as an extension of their own network. Finally, the Reserve Bank of India has created regulations that have allowed the interoperability of BCs so that any payment can be made with any BC regardless of both which bank they work for and the recipient bank account. This has resolved one of the main barriers to creating a sustainable network – interoperability.

All of this has significant ramifications for financial inclusion in the country. The ability of a retail affiliate network of agent shops, supporting both the disbursement of benefits and providing an array of services around cash acceptance and disbursement allows the wider populous to get access to electronic money, which has huge positive implications on efficiency and growth. Part of the reason I got so excited about such a project was a chance meeting with Anand Shah who is the CEO of an amazing initiative in India called Sarvajal. Sarvajal was funded by a private company foundation in India with the vision to bring clean drinking water to every corner of India in a sustainable way. The company developed a water purification plant that could be placed in a village, run by self employed franchise owners to provide clean drinking water to the villagers who in turn were happy to pay a fair price for the water. This allowed the entire venture to become self-sustaining with cash flows funding new plants in new villages. Anand told me that their biggest impediment to large-scale expansion was the inability to transmit the cash collected at the village level up the distribution chain to head office so that it could be used to fund new plants. They developed a clever solution using a prepaid card based system that made franchise owners purchase credits to use the plants from distributors but this was really a band-aid solution. The provision of last mile distribution of cash that allows cheap and easy transmission would immediately solve such a problem. This is only one example of how development can fundamentally be accelerated with such services. Philosophically, I believe that any such system needs to be self-financing and self-sustaining and therefore this becomes a very critical part of what we are trying to design and implement. I believe the confluence of regulatory changes and political influence will finally makes this possible.

On 13th of March, the Retailer Briefing at the Cards & Payments Thought Leadership Conference, in association with Vendorcom will explore the role of cash, cheques, cards, mobile and other forms of payment to assess their relative value in the consumer payment process for retailers. There will be discussion about how, in such a changing landscape, the retailer can have confidence in choosing the right options – understanding the winners and losers – in the battle for the future of consumer payments.

Anthemis Group Director, Gerald Kitchen will be participating in a panel discussion and Q & A about the issues mentioned above.

Over 250 senior business leaders will gather to help foresee how advancements in technology may affect businesses operating environment, customers, competitors and business models.

Technology Frontiers is driven by The Economist. Click here for more details.

Technology has moved beyond simply transforming how we live. We are entering an era where technology will redefine who we are. It is no longer just a question of what technology can do for us, but also what should we allow technology to do.

Technology Frontiers looks over the horizon at where technological innovation is going and how business can prepare for that today.

Anthemis founder Nadeem Shaikh is attending Technology Frontiers 2013.

By Udayan Goyal, Founder, Anthemis Group

Dispersing cash in a country as large as India has traditionally been hugely problematic due to the way the financial services infrastructure has developed in the country. In effect, the inability to service low value customers due to a systemic cost problem with the industry (driven by both regulation and staff unions who have opposed many measures to increase efficiency in the past, including ATMs) has resulted in a very urban-centric distribution coverage by the industry. As a result, reaching the beneficiaries of benefit payments in rural areas has been particularly difficult and beset by corruption and inefficiencies. Some countries such as South Africa, have tried to address the issue in partnership with private enterprise by using biometrically enabled stored value card technology (Net1) and India has tried to replicate such initiatives with companies such as Fino. However, in a country with such a large population and diverse geography, such methods are difficult to scale without being quickly rendered uneconomical.

Indian retail has itself been going through difficult times. Real estate has become increasingly expensive leading to rental costs rising significantly. In addition, the Indian government recently won a significant and controversial vote in the Parliament to open up the country’s highly-protected retail industry to foreign chains, a move that has been criticised as being a death threat to the already declining profitability of the Indian retail and domestic industry. With the elections looming in 2014, the government has a major incentive to boost small industry and one of the ways it has done this is to leverage the Business Correspondent (“BC”) framework which has given the retail sector a potential source of additional revenue by effectively becoming an extension of traditional branch banking. The legislation allows retailers to explore cash dispersal as a way in which to remain profitable.  However the current system only covers basic bill payment, simple domestic remittance and mobile top up, and is not leading to a large enough revenue stream to cover the costs of becoming a BC, particularly the cost of funding the cash float.

There is certainly scope for investigation into how this model might be redeveloped to broaden the range of services that retailers can offer to include international and domestic remittance services, welfare payments and to generally act as the “last mile of payment” for consumers. By broadening the product set available to retailers and allowing them to reuse their cash float (which they need to pre-fund to minimise risk) for multiple cash in and cash out products, it is possible to build a business model which creates a reasonable and sustainable revenue stream for the retailer. In addition, the implementation of the Aadhar scheme in India (Aadhaar is a 12 digit individual identification number issued by the Unique Identification Authority of India on behalf of the Government of India which is linked to a record of three biometric characteristics of each individual — face scan, fingerprints and iris scan) ensures that BCs will be able to function without some of the other cash related KYC (‘know your customer’ information) issues seen in other markets. In my mind, the key to a successful business model is not just the product set itself but the underlying processes that are implemented at the retailer level. Maintaining a certain standard amongst the BCs ensures that the sponsor banks (each BC needs a sponsor bank) are comfortable that a bank grade retail network is operating as an extension of their own network. Finally, the Reserve Bank of India has created regulations that have allowed the interoperability of BCs so that any payment can be made with any BC regardless of both which bank they work for and the recipient bank account. This has resolved one of the main barriers to creating a sustainable network – interoperability.

All of this has significant ramifications for financial inclusion in the country. The ability of a retail affiliate network of agent shops, supporting both the disbursement of benefits and providing an array of services around cash acceptance and disbursement allows the wider populous to get access to electronic money which has huge positive implications on efficiency and growth. There is an amazing initiative in India called Sarvajal, which was funded by a private company foundation in India with the vision to bring clean drinking water to every corner of India in a sustainable way. The company developed a water purification plant that could be placed in a village, run by self employed franchise owners to provide clean drinking water to the villagers who in turn were happy to pay a fair price for the water. This allowed the entire venture to become self-sustaining with cash flows funding new plants in new villages. I had a chance meeting with the CEO of this project, Anand Shah, a little while ago, who  told me that their biggest impediment to large-scale expansion was the inability to transmit the cash collected at the village level up the distribution chain to head office so that it could be used to fund new plants. They developed a clever solution using a prepaid card based system that made franchise owners purchase credits to use the plants from distributors but this was really a band-aid solution. The provision of last mile distribution of cash that allows cheap and easy transmission would immediately solve such a problem.

This is only one example of how development can fundamentally be accelerated with such services. Philosophically, I believe that any such system needs to be self-financing and self-sustaining and therefore this becomes a very critical part of what we are trying to design and implement. I believe the confluence of regulatory and political changes will finally make this possible.

The GSMA Mobile World Congress is a world class thought leadership conference featuring visionary keynotes, panel discussions and 1500 exhibitors. The mobile ecosystem is expanding at lightning speed, with endless innovation and new applications of mobile technology.  From contactless payments and augmented reality to embedded devices and connected cities ­– mobile technology is changing the landscape. The impact mobile will have on the world is limitless. The GSMA MWC is where the mobile community gathers to learn, network and engage with peers, customers and innovators.

Anthemis Group Founder Sean Park is participating in the panel titled Hi-Growth Mobile Tech Investment: From StartUps to IPOs, which explores the current state of mind in the investment community when it comes to mobile tech start-ups, from venture capital, private equity, accelerators, entrepreneurs and large corporations.

For more information, please click here.

Anthemis Group founder Udayan’s Goyal’s blog on predictions for banks in 2013 was picked up by bobsguide and formed the entire section of their retail banking section. You can read the full article here. Below is Udayan’s excerpt.

2013 will see a host of digitally native banks, which aim at tech-savvy customers and youngsters, start to take market share from more traditional retail banking institutions that are still relying on branch, phone and online banking while ignoring social media, the mobile channel and other ways to connect with customers. Unlike vertically-integrated ‘old FIs’ with high fixed costs, these ‘digitally native’ challenger banks are built from the ground up combining the philosophies of bank 2.0 and social 2.0 technologies.

Financial institutions such as Fidor Bank, Movenbank and Simple are designed for the digital consumer. They focus on design-led user experience, transparency and simplicity. Simple, for instance, offers sophisticated mobile applications giving customers access to a full range of banking services on their iPhones, enabling users to easily track their expenditure, disposable income and saving goals on a single screen. Fidor Bank provides banking services for the social generation – interest rates are dictated by its number of Facebook likes and a single interface shows all your holdings from precious metals to virtual currencies like World of Warcraft Gold. Movenbank is the first bank designed to be used on your mobile phone with sophisticated analytics which will allow customers to track their spending against their usual patterns as well allowing them to modify behaviour based on instant feedback.

Digitally Native banks have extremely streamlined business models. They have very low fixed costs, are not lumbered with legacy IT systems, have few employees and usually no physical branches. Some firms like Movenbank and Simple do not even have risk capital: they use other institutions’ banking licences. They are not real banks as such but offer a banking experience for what is becoming the only part of the consumer banking process that matters – customer interaction.

Some digital native-focused banks are already successful. Simple only recently launched but has on-boarded 50,000 customers and has another 250,000 on its waiting list. Fidor Bank has 250,000 live customers but operates on just over 30 employees. This spectacular growth is set only to continue in 2013 and is likely to be a seriously disruptive force in the global retail banking industry.