| By Jim Bruene on November 7, 2008 4:27 PM | Comments (9) |
I've communicated with Privier founder Charles Polanco a number of times over the years. He's a Wachovia alum who's been working on a financial startup for several years. The company launched a suite of payment services on Oct. 16 that aims to get the plastic card out of the ATM business (press release).
Privier's value prop is straightforward and compelling: Enable money transfers from any device at any time with the cash delivered through the worldwide ATM network.
The system initiates transfers in three ways:
- ATMsend: ATM to ATM
- iTransfer: Web to ATM
- mPayment: Mobile phone to ATM
In Privier's model the ATM card is replaced by a one-time authorization code that recipients key into the ATM to withdraw transferred funds.
Analysis
From a usability perspective, it's a great idea. After all, what's not to like? Consumers need to send cash. ATMs have cash. Why not let folks authorize a remote ATM withdrawal from the comfort of their own home or office. A proposed fee in the $7 range beats most alternatives for long-distance money transfers.
However, from a practical standpoint there are two massive roadblocks to overcome:
- Retrofitting ATMs to accept a keyed-in code instead of a mag stripe for authentication
- Convincing banks to add ATM-transfer capabilities to Web, mobile and telephone services
It will likely take an organization the size of Visa, MasterCard, or Bank of America to pull this off. To ensure that those behemoths work with it, Privier has a portfolio of patents pending on the business process.
What it means for Netbankers
It may take decades, but eventually, the Web married to mobile will eliminate the plastic debit/credit card; however, unless you are a major bank or payments company, this isn't likely anything you need worry about for a number of years.
A better short-term solution for smaller financial institutions is to enable P2P funds transfers using PayPal so you can send money to anyone with a PayPal account (see note 1).
Privier's Web-based interface for sending cash to an ATM (5 Nov 2008)
Note:
1. See our latest, the Online Banking Report 2009 Planning Guide, for more info on project priorities for this year and beyond.
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Sounds like a great idea. Did they disclose if any machines are currently available?
John
@John
No machines deployed at this point. Right now, it's just a good idea, albeit one with patents pending.
The product makes complete sense. I did not notice an Investors Page on Privier. Is Privier actively seeking investors? Or is it a venture capital only firm….
Interesting concept. I agree with the hurdles - they are huge. Another hurdle not mentioned is consumer education.
The normal method of authorizing a transaction at an ATM happens, as you mention, by using information on the consumers card to identify the cardholders bank. The ATM switch (processor) routes queries the cardholders banks ATM processor for an approval for the transaction and then dispatches instructions to the ATM to either dispense cash or not.
Without knowing the exact technical details of how the process works, I would imagine a couple of technical challenges that I'd be interested in learning the solution. The first is - how does the recipient of the money initiate the transaction? All ATMs are currently activated by a successful card read. The second would be how will the network processor/switch have to modify their software (or if they will at all) to handle this new type of transaction? In effect what is happening is that the person WITH the money is conducting a fairly normal ATM transaction except that rather than receiving the cash at their current location, the processor would instruct a different ATM to dispense the money somehow pairing up the two ATMs together as a part of one transaction.
Very interesting indeed.
@scott
Good analysis. Privier proposes to add a "get cash" button to the ATM menu which would then use a x-digit auth code in lieu of a card swipe to initiate the transaction. And it seems there would be significant programming at the switch level as well.
@Eliot
They are not venture funded as yet, but I'm guessing they will be looking for funding soon.
The plastic card is not only a support for magnetic stripe, it is a security part of the system. For example in Europe ATM are reading chip of the card. I mean that typing numbers is may be not sufficient to have a good authentication. May be using a mobile phone (for One time Password) to increase the security level of this new system, is may be a good proposition.
@Jim
Switches are notoriously backed up with requests such as certifying new models of ATMs and making screen mods for customers.
If Privia can show the switches how adding this button will generate fee revenue for the ATM owner as well as the switch, the process might be expedited.
Deep pockets may be required just to survive the wait. It seems that in order for this to work, not only will a "get cash" button be needed on the receiving end, but a "send cash" button will be necessary on the sending end. This means that both sender and recipient will need to find ATMs that support the complete end-to-end transaction. If I were Privier, I'd target FIs that fit this profile:
1. Own a large number of ATMs
2. Own their own network switch (drive and switch their own transactions and have programmers in-house)
3. Own ATMs located in areas where the consumer fits the demo of people needing cash or with no bank accounts (??)
A most insecure banking idea, this is. This idea means that if an attacker is able to place trojan software on the client machine, all this trojan has to do is wait for the client ordering a transfer with the trojan than noting this action, the code and the amount. Next the attacker receives this information and withdraws the money from an atm before the person who is supposed to get the money. One factor authentication at the ATM is the only thing standing between the attacker and the money!
Absa Bank in South Africa (part of the Barclays Group) introduced a product called "CashSend" it allows Online and Mobile banking users as well as ATM users to send money to a recipient who can draw the full amount at an ATM without using a card. A sms is sent to the recipient who uses this code in combination with another code given to him by the person making the payment. The two codes are entered into the ATM and the full amount is paid out.