Note: I originally wrote this post before I left American Banker. It wasn’t published because I was unable to shore up some of the facts. Now that I have I’ve decided to publish it here because several folks have asked me about the utility of this particular digital wallet.
A snazzy marketing video. The promise of a true digital wallet that works today. A single card, a Coin, with a rewritable mag stripe, that’s hooked up to several different accounts.
If you have been watching the tech press (read: TechCrunch) over the past week or so, you’ve become acquainted with the device. It’s now on pre-sale. And it’s gained orders worth tens of thousands of dollars.
But there are plenty of reasons why I’m skeptical of Coin.
First, it’s an old idea, based on old technology.
Earlier this year a company, called iCache, was working on a iPhone case. The Geode.
There was a single card came with the case that would be rewritten by a slot in the back. It was funded by kickstarter and separately by investors.
Overall, it was a great marriage of software, security and transactions.
But, read this from ZDNet (May 3, 2013):
I got an email recently that the Geode website was down and that its last tweet was on October 16, 2012, so I decided to look into it. The Post and Courier of Charleston, South Carolina, tracked down former iCache CEO Jon Ramaci — and got some answers.
It turns out that manufacturing problems gave way to a pair of lawsuits (one involving a former iCache consultant and the other a former employee), then in September 2012, Apple released the iPhone 5 with a new form factor (that didn’t fit in the Geode case), a new kind of connector and Passbook, an app that offered affinity card storage, like Geode did. And things seemed to spiral downward from there.
The Post and Courier‘s Brendan Kearney interviewed Ramaci and he revealed that he and many of his top deputies had left the company in November 2012 amid mounting customer dissatisfaction. Many backers left acerbic comments on the company’s Kickstarter page, lacking anywhere else to vent their frustrations.
According to Kearney, Ramaci, Ross, and several other members of the original iCache team left in November 2012. Although Ramaci denied that he was fired, he refused to elaborate on the circumstances surrounding his departure, saying only that after six years, “it was time”.
I also remember seeing an RSA card with a dynamic screen on the front that supposedly spit out tokens several years ago. The technology is from the 90s.
Furthermore, other people have the patents.
Dynamics — which I’m not a big fan of — has a cache of patents related to rewritable mag stripes. The company, which is based out of Pittsburg, is already working with UMB bank on similar, so-called E-Plate cards.
Here’s the abstract from the patent, filled in 2005:
A dynamic credit card is provided in which a secure credit card number (e.g., a secret/hidden credit card number) is encoded based on a timing signal (e.g., an internal counter) to provide a dynamic credit card number. This dynamic number may be displayed to a user via a display (e.g., so that online purchases can be made) or written onto a magnetic stripe such that the number may be processed by traditional credit card merchants (e.g., swiped). At a remote facility, the dynamic number may be decoded based on time (and/or a counter/key number/equation) Thus, a dynamic credit card number may change continually or periodically (e.g., every sixty seconds) such that credit card numbers may not be copied by thieves and used at later times. A dynamic verification code may also be utilized in addition to, or in lieu of, a dynamic credit card number.
Additionally, this thing looks like the world’s greatest card skimmer.
I don’t care how much security you have built into the software. Anything can be hacked. The possibility that this thing gets reversed engineered and used to enter unsuspecting cardholders accounts into a single account is high.
That alone should give a lot of people pause.
Still, that’s not the biggest reason to just naysay the shit out of this company.
Yes, Coin costs cash!
I always have a gripe with folks that are asking me to pay to make a payments. The bank, I get it, they’re charging fees in order to loan me cash or extend me credit. The same with card companies.
But a device — when the device is solely going to be used at the point of sale — I just can’t get on board with that.
For all the reasons I’ve outlined, I’m dubious Coin will ever make it to market. Still, the thought of paying for what amounts to something that just replaces three or four cards in my wallet sounds like a rip off.