Comments (4)

1. Posts about Engadget as of August 11, 2009 » The Daily Parr

   August 11, 2009 at 10:05 pm

   […] are precisely two ear cups here, we’re somewhat (read: tremendously) skeptical of said claims. The Cheque is back – madrock.net 08/11/2009 I thought we were removing the need for cheque in the electronic age. […]

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2. Kai

   August 23, 2009 at 4:29 pm

   sql injection…

   You have got to be kidding!…

   Reply
3. Wilmar Lay

   February 23, 2010 at 9:14 pm

   Hi Derek

   http://www.rogerclarke.com/EC/Mondex.html, I would love to hear your thought about Micro payment’s smart card like above.

   The big differentiate between this implementation compares to a typical e-money implementation is that the value is stored inside the chip.

   This means the issuer does not know the real value of the card without doing a full reconciliation with the all the smart cards issued. It’s like introducing another version of ‘Derek dollar’. Derek’s Reserve bank prints the money without knowing how much is the true value in the community, your balance sheet can be overestimated (customers lost their e-cards) or underestimated (fraud)

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   • andrew

     February 24, 2010 at 9:40 pm

     Hello Wilmar

     As micro payments is becoming a bigger subject matter every day, lets just focus on your comments re the Mondex model of quasi cash on a card.
     Your comments are correct, the concept of the Mondex model and that of a “Smart” card is that the chip on the card acts as a miniature banking network. The smarts are that the value and transactions are retained within the chip configuration until the card authenticates back to host where the transactions on the card are ‘uploaded’ to the real account and the real account is updated. This is one of the issues regarding EMV – the move away from traditional banking controls concerns many bank decision makers and therefore adoption is slow.

     Imagine the scenario where you transfer $100.00 onto your card (as is the terminology) and then as far as the bank is concerned, $100 has been withdrawn from real account and effectively cash provided (although this time the cash is actually pseudo cash or data on the card). The reality is that the issuing bank still has the real cash in the safe until it is spent! Anyway, as a payment instrument, the chip enables another layer of payment exchange of value between issuer and merchant as the Mondex terminal (or EMV terminal today) recognises the $100.00 and then passes the purchase value to the merchant as per normal EFTPOS and settled normally. As a value add, the cardholder can reconcile their purchases by uploading the transactional data from the chip back to the host at predetermined intervals set by the issuer. Another pro to the issuer is that not all the EFTPOS transactions actually come back to host, say 1:5 is the EMV spec. This reduces the payment traffic on the network and effectively ‘speeds’ up the rest – improving the overall value proposition with the cardholder and merchants start to believe that they are processing faster transactions with this EMV terminal (yawn).

     However, your comments regarding “Derek’s Dollar” is off the mark in this scenario and I’m likely to be on your side in other forums when discussing micropayments, but not today…
     You need to think of mag stripe gift cards and alike to appreciate where Mondex were coming from 10 years ago when this concept was conceived. EMV has standardised much of the ‘stored value’ on a card concept, but lets try to keep some focus.
     If you ‘buy’ a gift card and pay the cashier $100 then she (hopefully) loads $100 onto the card to be used as an instrument of value at any merchant that recognises the gift card (an entirely different story) and then you lose the card – well you have just lost $100 – the equivalent of cash in this micro network.

     As the Mondex and EMV models are closed, miniature networks, the ability to manipulate the data and counterfeit the value has been well and truly countered.

     Just to confirm your balance sheet suspicions, I have successfully counterfeited all the currency plates that print Derek Dollars and now I have many millions of $D in my top drawer – unfortunately, not too many merchants are accepting $D yet but when they do – I’ll be the first to buy, regardless of whose balance sheet I ruin.
     I welcome your feedback and thanks for playing!

     Reply

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