Snippings

Hi Brian,

My family and I are big fans and long time listeners show and I really enjoyed your pop quiz in episode 654 on 18th December. Your question about card payments caught my attention because I am quite a boring person and this is one of the few things that I know anything about. You asked “Which of these three is the riskiest way to use your card?” and gave the three options

1. Using your card via a phone app such as Apple Pay or Android Pay.

2. Swiping the magnetic strip.

3. Using a chip card.

You correctly give the answer B, swiping the magnetic strip, but your explanation is incorrect.

Whether you use a strip or a chip, they both pass your card number to the merchant terminal and from there it ends up in the merchant system although it should be encrypted for safety.

Chip cards do not have an encrypted connection to the bank and they do not use tokens. The reason for using chip cards is that they cannot be counterfeited: even if I steal your card number, date of birth, social security number and inside leg measurement, I cannot create a clone of your chip card because the chips contain a security key that is never disclosed (it is used to create digital signatures for transactions). In case you are at all interested, here’s a blog post I wrote about this a couple of year ago (referencing another blog post I wrote about it a decade ago – I have been boring people about this for a long time).

The “xPay” apps do indeed use a token instead of the card number but it is not a one-time token: when you set up your Apple Pay wallet, the bank sends you a token that is a permanent alias to your real card.

Keep up the good work!

All the best,
Dave.

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Safaricom is being investigated for the Saturday outage of its M-Pesa service that left millions of customers unable to receive or send money.

The blackout is estimated to have cost the economy billions of shillings.

From Safaricom probed over costly M-Pesa outage – Daily Nation.

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CA statistics show that about Sh1.5 trillion moved through the M-Pesa platform in the three months to June, translating to an average Sh16.3 billion per day or about Sh679.3 million every hour.

M-Pesa agents were among the biggest losers in the blackout that stalled their business for hours. Multiple banks have hooked up their systems to M-Pesa.

From Safaricom probed over costly M-Pesa outage – Daily Nation.

 

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Do the math. Suppose there are 100,000 agents with 100 “super agents” (network aggregators) managing 1,000 agents each. Suppose there are 100m customers (there are currently around 20m). Suppose a customer’s M-PESA balance and associated flags/status are 100 bytes.

So that’s 10^2 * 10^2 * 10^6, which is 10^10 bytes, or 10^7 kilobytes or 10^4 megabytes or 10 gigabytes. My phone can store 256Gb. In other other words, you could imagine a distributed M-PESA where every customers phone could store every customers’ balance. You don’t need an M-PESA system in the middle. When you make a transaction with your handset, it gets routed to a superagent who decrements your balance, increments your payee’s balance, and then transmits the new balances (all digitally-signed of course) to the other superagents.

It would be a bit like making an ATM network where every ATM knows the balance of every debit card. Nothing to go down. And if an ATM goes down, so what? When it comes back up 

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Roughly three-in-ten U.S. adults (29%) say they make no purchases using cash during a typical week, up slightly from 24% in 2015.

From More Americans do not use cash in a typical week | Pew Research Center.

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“Does the government have an obligation or a duty to provide risk free money to the general population? Does that duty persist after cash usage drops off?”

From At least 15 central banks are serious about getting into digital currency – MIT Technology Review.

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Even as cryptocurrencies collapse, DRW is not the only company persevering with experiments in both digital currencies, tokens and blockchain.

From Corners of Wall Street remain undeterred by crypto crash | Financial Times.

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A good outcome would be for data portability to encourage and facilitate competition at a layer above these data stewards, amongst the applications that provide direct value to people.

From Data portability: the role governments should play – The ODI.

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The most common answer to the problem of overly powerful firms is to break them up, as U.S. regulators once did to Standard Oil and AT&T. Yet that would destroy much of the value that these digital giants have created and probably do little to improve competition in the long run, since without structural reforms, killing today’s digital superstars would simply generate opportunities for new ones to emerge. There is a better solution: a progressive data-sharing mandate.

From Why Governments Should Force Tech Companies to Share Their Data.

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A cup of Mr Rashid’s tea costs 2,000 Somaliland shillings – equivalent to $0.25 or Dh0.92 – and his customers pay almost exclusively with their mobile phones. “I never see cash,” he tells The National.

From Somaliland’s world-leading move towards a cashless culture  – The National.

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“They estimated between 15 and 35 per cent of all cash is doing its job – allowing Australians to buy everyday goods and services. But that leaves a lot of notes – at least 65 per cent of them – doing something other than being a means of exchange.

Between 10 and 20 per cent have been hoarded by Australians with another 15 per cent sent overseas for cash hoarders there.

The shadow economy, a notoriously difficult sector to measure, is thought to take up between 4 and 8 per cent of the outstanding notes. Between $40 million and $1 billion is held by drug dealers alone at any one time before they convert their earnings to assets.

And then there’s remaining cash that has simply disappeared.

‘This suggests that $4 billion to $8 billion, or roughly 5 to 10 per cent of all banknotes on issue have been lost, destroyed, forgotten about, or are sitting in numismatic collections,’ the researchers found.”

From “Expensive washing? Australia loses $8 billion in cash”.

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“China’s central bank on Monday warned that rejecting cash as a form of payment was illegal, saying that such practices could eventually could cause the loss of confidence in physical money and was unfair to those not accustomed to electronic payments.”

From “China says rejecting physical cash is illegal amid e-payments popularity – Business Insider”.

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