The Problem With Coin

December 1st 2013

San Francisco startup Coin today announced its first product — a credit card-sized device that digitally stores up to eight credit, debit, gift, or membership cards, and lets you switch between them by pressing a circular button on its surface.

It works with conventional ATMs and payment terminals but all is not as smooth as it seems. Here, Banking innovator and founder of Moven Bank Brett King, looks at the potential pitfalls of this product & what it means for the future of banking.

EMV is the global standard for card payments, in fact, the US is now the only country in the world that doesn't have this standard. So if you're American you'll probably say who cares?

Well, if you take coin pretty much anywhere else in the world it simply won't work at a POS terminal, and there are at least 60 million Americans who travel abroad annually who are finding this out.

The biggest problem with coin is that is built on top of a 30 year old Mag Stripe technology.

I think it is a huge mistake to invest in a redundant technology when it comes to payments.

Below I have outlined three serious problems that Coin & its users are going to face:

Security and PCI Compliance

EMV resulted in a 90% reduction in card fraud when introduced into Europe, so the lack of that immediately means that this is a risky proposition.

Coin has also said they are aiming for PCI compliance, but with their current product that would not be possible. Storing the track data on the device, as they have, would preclude them from PCI compliance.

The key problem is still that if you lose the card, someone can use it.

Zero feedback

The problem with existing debit cards compared with, say, a smartphone with a secure element is that debit cards can't tell you anything at all about your bank account, finances or financial health.

They can't inform you of a better deal. They can't help you decide if you can afford to buy something. They give you zero context.

The strongest developments in payments right now are focused on three things:

  1. Context in the form of deals or information BEFORE you purchase
  2. Removing all FRICTION in the payment instance, and
  3. Helping you understand the impact of the purchase AFTER it has occurred

You could argue coin does too to some extent, but it can't compete with a smartphone that can inform you of deals in the area, what your account balance is before a purchase, and how much you've spent this month after a purchase.

Physical payment is disappearing

All of the new technologies emerging in payments today that we'll see thriving in 5-10 years time are technologies that remove the payment instance.

A great example is Uber where you order a taxi/car, you see it approaching via the "App", you get in, you get driven to your destination and you get out. The payment is taken care of at the back-end in the simplest possible form.

You don't pull out your wallet, plastic, a phone... nothing. The payment just enables the transaction behind the journey, it offers no value beyond that.

Coin is still thinking that the payment is where the value is, but it isn't - the value is in what the payment enables.

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The Problem With Coin
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