McMullin.ca

Priceless Merchant Fees

bill — Fri, 23 Oct 2009 20:47:38 +0000

Processing cost to accept debit card: 19 cents

Cost to handle cash per transaction: 25 cents

Fees to Visa and MasterCard per transaction: PRICELESS

It seems that MasterCard and Visa believe their brand and services are so valuable to merchants and that their market position is so dominant, that they can act like extorting monopolists when setting fees and policy.

Most consumers have no visibility to the complete business model and interworkings of the credit card industry, nor should they really need to IF the big boys and girls at the credit card companies were acting ethically. For those consumers that do care to look into how the money flows behind the scenes on their typical credit card transaction I frankly think they would be in awe.

Visa and MasterCard are playing a dangerous game of “smoke and mirrors” and obfuscation with consumers, merchants and lawmakers. They are not only exploiting their dominance but also the obscure, complicated, and multi-party payer business model where they negotiate service contracts and prices on behalf of payers (the merchants) and these payers aren’t even at the table. I consider myself a quick study on business models, usually able to quickly analyse the participants, money flows and leverage points, but when it comes to the “credit card game” I must admit it took me a lot longer than usual to finally figure it out…and I had a good reason to, as I am a merchant paying those fees.

Behind the scenes: the money flow and business model

The players and participants

Card holder – the consumer
Card issuer – the bank that issued the card to the consumer
Merchant – the retailer that accepts the card
Acquirer – the bank that holds the merchant’s credit card account for deposit
Processor – the company that facilitates the transactions by providing the network for authorization, settlement, etc – sometimes is the same as the Acquirer
Card network/brand – the actual credit card company ie. Visa and MasterCard

Beyond the fees and interest consumers pay for receiving the benefits and credit services, there are a slew of fees paid by the merchant on every transaction. On a $100 transaction, the merchant would typically net between $97 and $98, however, it is the lack of transparency and control with respect to the fees that is the problem, not the amount of the fee. Herein lies the problem: When a merchant accepts a particular card, they have absolutely no idea how much the fee is going to be. From one transaction to the next, depending on the type of Visa or MasterCard that is presented at the point of sale, the fees paid by the merchant can vary dramatically. It is only at the end of the month when the merchant receives their statement from the processor that they know the fees that were levied. To make matters worse, even if the merchant knew how much the fees would be by specific card, the merchants is obligated to accept all cards, and they are also prevented from charging any premium or surcharge to the consumer for using a credit card.

So, on one hand, Visa and MasterCard can operate a brilliant money making scheme (scam?) where they make up the rates and surcharges and blindly and passively stick it to the merchants, but on the other hand, the merchant can’t have a published surcharge to those consumers wishing to use credit cards. Of course, Visa and MasterCard say “merchants don’t have to accept credit cards” or “they can offer a discount for using cash”. Both suggestions are a joke. The vast majority of merchants cannot operate without accepting credit cards. The reality is that Visa and MasterCard have a dominant position and credit cards are integral to most forms of commerce, so their arbitrary setting of unreasonable terms and policy is abusing their dominant position. It really is that simple and the feds need to be on these guys/gals like white on rice before we get completely hosed.

Remember, a small percentage of a big number is a big number, and in this case, the merchant fees, surcharges and “interchange” fees add up to some $4.5 billion each year in Canada.

How credit card companies and their customers work their back room deals

To really demonstrate the abuse one just needs to look at how credit card companies and their customers (the banks that issue the cards) cook up new products (new credit cards).

As you may have noticed there has been an onslaught of new specialty credit cards that offer attractive benefits including “free” air miles, cash back, and other rewards. Where does the money come from to pay for all of these valuable rewards you ask? Where else – the merchant – who strangely isn’t party to the negotiation of the contract that has their name as the payer. For example, in 2008, Visa came up with a nifty new type of card called Visa Infinite that they convinced their customers to start promoting. In some cases, consumers were issued the Infinite card automatically as a replacement. While it didn’t cost the consumer any more to use this card, it definitely cost the merchant more. I call this the “conspiracy of infliction strategy”. You see, Visa gets in a room with say CIBC card products people and they conspire to put Infinite cards in the hands of lots of consumers, knowing that those consumers will inflict those cards on retailers, and each time the card is used, the merchants will pay their regular fees plus a whole lot more back to CIBC and Visa. For example, on my merchant statement received from my processor (Global Payments) in June 2009, the fees I got dinged for accepting Infinite cards were some 50% higher than those for other Visa cards. Think about that for a second. Poof. In a split second, Visa and their customers raised prices by 50%!, unbeknown to the merchant, the recipient of the price increase.

It is important to explain how the fees are divided up on the typical sale. In the case of the $100 transaction mentioned above, the issuing bank (CIBC in this case) would get about 75% of the money or about $2.00 of the $3.00 total fee. This is, of course, in addition to them getting the annual fees and interest too. Now, I am sure you
can see the incentive and leverage the issuers and Visa and MasterCard have in setting prices/fees. They dream up bigger, better and more expensive offers and they get merchants to pay for them. Nice eh? Please tell me what other industries operate this way? If there is one that operates ethically and transparently, I’m in.

Oh, of the remaining $1.00, the acquiring bank, processor and Visa itself split it up, with the majority of this going to the acquiring bank. Of note is the fact that Visa itself carries no risk in the transaction, as they don’t advance funds or issue credit as that is handled totally by the issuing bank. Visa and MasterCard sit back and watch the profit meter rise while the risk meter goes down!

While competition between credit card issuers is definitely fierce, strangely, there is little price competition when it comes to the fees charged to merchants for accepting and processing cards. Why is this? How can the credit card industry break the laws of free market economics? It is pretty easy to see why they do. I hope our trusty friends at the Competition Bureau see the tactics the way I do and come down hard on the credit card companies.

Heads up – the storm is getting worse

Time is of the essence because Visa and MasterCard are moving aggressively to slam merchants even harder by making their cards dual purpose, that is, the card can be used for debit as well as credit. Whereas merchants pay only about $0.15 cents per debit card transaction today, if Visa and MC get to where they are going they will be taking 2% or more from each debit card transaction, even though they, nor the issuing banks, carry any credit risk in the transaction.

BTW, there is a good story here about the issue written by the CBC.

UPS: United Profiteering Service

bill — Sun, 16 Aug 2009 11:35:00 +0000

This blog entry doesn’t describe some revelation but it further corroborates and exposes a not-so-well-known and annoying money-making scheme employed by UPS to extort money from Canadians receiving goods originating out of the US.

Before getting into the details I have to say that I find it ironic that UPS marketing geniuses were bold enough to ask the question: What has brown done for you lately? Answer: Tried to extort me. (What is the most negative and stinky thing that comes to mind when someone says “brown”?)

If you have ever excitedly greeted the UPS driver at your door, only to be surprised to learn that an additional (exorbitant) brokerage fee stands between you and your goods, you know exactly where I am going. I’ve had this happen to me before and thinking I was smart, I did my homework and took action before my goods got to Canada in an attempt to head the issue off “at the pass”. The result in one word: fail. I actually called UPS and they indicated that there were no brokerage fees if the shipment was personal and valued at less than $1,600, which it was.

Here’s how the scheme works:

You order something from a US merchant
You pay the merchant for the product and also the shipping fee.
The merchant ships it via UPS standard service (this is an important point)
UPS conveniently “clears” the shipment for you through Canada Border Services Agency in their eastern receiving port of Lachine, Quebec. UPS doesn’t call or notify you.
UPS shows up at your door and demands payment of the brokerage fees in return for giving up your goods.

Here are the details about my shipment.

Value of merchandise 579.80
Shipping 37.91

Total 617.71 (US dollards)

Of this total there as $140 in duty, taxes and brokerage fees. The brokerage fee portion was $60, and not at any point along the way (before the package arrived at my door) was I notified there would be a $60 brokerage fee nor was I provided with any alternatives to get the package without paying UPS the $60. Simply put, this is extortion as per the most accurate definition of the word, which I include below courtesy of http://www.merriam-webster.com/dictionary/extorting

Main Entry: ex·tort

: to obtain from a person by force, intimidation, or undue or illegal power : wring; also: to gain especially by ingenuity or compelling argument

Here are the problems with UPS’s money making scheme (scam?)

UPS knows exactly what they are doing. In other words, they are sly. They know that most people will pay the fee out of ignorance, thinking it is some form of tax-like levy, or they (the receiver) will perform the ‘balance of convenience’ and justify shelling out the brokerage fees on the spot because they want the package more than the hassle of fighting over the fees (this is the extortion, plain and simple)
UPS does not provide the consumer with easy or any access to information about the fees. I actually called UPS shortly after the tracking number was assigned to make sure I either would not be charged the brokerage fee or to be provided with alternatives for avoiding the brokerage fee, such as doing what is sometimes called “self-clearance”.
IF brokerage is required and a consumer chooses to use the services of a broker, they should have a choice of who they use. If no choice is available that constitutes a monopoly and gives the monopolizer pricing power, which is exactly what UPS seems to demonstrating.
The brokerage fees charged should be commensurate with the value of the work performed, the risk assumed, and the effort required. I strongly suspect that in the case of my package, it was not individually processed or ‘cleared’ by UPS. Essentially, other than the actual carriage of the box, the brokerage transaction was nothing more than a completely automated process involving database and data network activities. In fact, the only manual process is the
driver collecting the brokerage fee at the door.

Now, I should tell you that I didn’t pay the $60 extortion fee and I still got my parcel. How you ask? Well, ironically, when the parcel arrived at my door, I was not home. My nice mother-in-law was there and she intuitively rejected the notion of handing over $140 in “COD charges” as she did not know the parcel was coming. This was a good thing. The driver told her he would try and make a delivery attempt the next morning, which I would then prepare for. In preparing, I called UPS to express my concern for and rejection of the exorbitant brokerage fees. Initially, the nice lady said that there is nothing I or UPS can do. I asked if I could self-clear/broker the package myself and she said no because that would need to have happened at the port of entry, which is over 1,600 kms away in Lachine, Quebec. Hearing this, I then politely expressed my concern that UPS is now holding my package for ransom. I indicated that this was unacceptable and that I would like to have my request escalated. The nice lady put me on hold momentarily then returned and offered to lower the brokerage fee to $20 as a one-time “goodwill” gesture on the part of UPS. She did stress this was a one-time thing. (oh, thanks UPS). I accepted this fee and paid it when the package was delivered the following day.

In researching my entry, I came across the following popular post from a David Ross, where he explains his story. David makes note of a couple of class action lawsuits against UPS for the practices described herein.

http://www.rossde.com/UPS_sucks/index.html

In summary: shame on UPS. The executives and marketeers at UPS should be embarrassed to be taking gains on these practices of extortion. If you folks don’t have the skill and ingenuity to create a profitable model based around transparency, choice and value for money, then you don’t deserve the positions of power you hold.

Jurisdictional Inefficiency

bill — Thu, 23 Apr 2009 22:10:49 +0000

Here are some provocative questions for one or both the constitutional and business efficiency experts in the audience.

Why is employment insurance a federal program but workers compensation insurance provincial?

What is the basis for having a separate crown corporation or equivalent to manage workers compensation in every province?

What was the logic used back when these organizations were created?

Are the injured workers in Nova Scotia different than those in Manitoba or Ontario, for example? Are their needs different? Why should they be treated differently?

How much information, administration, infrastructure, and policy duplication is there from having distinct and separate organizations

How many collective ‘CEOs’ and executive are there amongst ALL the workers compensation entities across Canada?

Ok, while I’m at it, and to make sure I’m being efficient, lets expand the discussion and look at other areas of government.

How many lottery commissions do we have across Canada? Why do we need a separate commission for each province or region? Are there regional differences in how those scratch and break-open tickets work?

It is interesting that a few years back some logical and bold leader suggested that there need only be one securities regulator/commission for the entire country. This person must have figured that money is money, share certificates are share certificates and fraud is fraud, no matter what provincial soil you walk on.

In the modern economy, whether government or private sector, the ‘products’ in the services sectors such as insurance, securities, and finance to name just a few examples, are increasingly virtual. In a previous post about banking I made the point that the almighty dollar, the ultimate currency, is represented digitally, and moved around at the speed of light. Last I checked none of the major banks or insurance companies have distinct and separate companies, with their own leadership teams in each province, and I doubt they ever will, as the trend has certainly been one of centralization and aggregation in the name of operational efficiency. Sure, there are regional and provincial differences that justify separate and distinct policies, but I’m not convinced that completely separate physical operating entities are required. Think about it. Insurance for example, whether employment, workers compensation or general home and auto, is seemingly non-existent, that is, the average constituent doesn’t see the overhead, infrastructure and work manual effort that combines to justify the cost. As the saying goes “out of sight, out of mind”, which is part of the reason I think so much inefficiency is tolerated.

Since while we are on the topic of efficiency and since I’m in Nova Scotia, here are a few other questions and factoids.

Did you know that the Province of Nova Scotia has its own gaming ‘corporation’ complete with (another) CEO and a full complement of vice presidents, including a veep of “Business Innovation”. Does that sound like a title for an individual working in a government department to you?

While on the topic of gaming, would you believe that the Province of Nova Scotia also has the Alcohol and Gaming Commission, of course, complete with its own CEO and suite of executive underlings.

Hmm, where there’s smoke there’s fire, right? I think the smoke here is caused from the long-burning fire of our g-notes that keep the government club room cozy. Just to be clear, I don’t think anyone, named or otherwise is doing anything wrong or with bad intent but those that know me know what I’m going to say next – the road to hell is paved with good intentions.

Why do we let this kind of inefficiency continue?

I think I know why. Here’s my theory. First and foremost, the kind of people that have the desire and credentials to ‘upset the applecart’ aren’t on the inside.

Second, the politicians that could lead a mandate of efficiency are insulated from the gory details (to put it politely) about what is, could be and should be going on within government departments and agencies. And, since our political leadership gets turned over more often than I do in bed at night, and shuffled around more than a blackjack deck at the casino, even the most well intentioned don’t have a snowball’s chance of affecting real change. Finally, the bureaucrats, including the ‘DMs’ and ‘ADMs’ aren’t likely to be popular amongst their peers for suggesting any form of consolidation, whether it be intra or inter-jurisdictional.

Ok, back to the plethora of CEOs issue.

A simple Google search: “Province of Nova Scotia” and the letters “CEO” turned up even more fuel for the fire. Lets see how many more CEOs and ‘corporations’ I have come up.

We have, in no particular order;

InNOVAcorp headed by CEO, Dan MacDonald

Nova Scotia Business Inc, with CEO, Stephen Lund

Sport Nova Scotia, CEO, Jamie Ferguson

Nova Scotia Liquor Commission, CEO, Bret Mitchell

Now, I know many of the named and unnamed people in this post, and to be completely honest, I actually like them personally and think they are very capable. Obviously I do have some issues (yes, I know how that sounds and it’s true) with the structure and operations of so many government ‘departments’ and crown corporations. I can’t apologize for asking what might seem like provocative and leading questions. Have you ever seen anyone ask these questions? If they were, I’d shut up and follow along politely in support.

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Oh, and just one more nugget before I give my fingers a rest. How in good ole Celtic Nova Scotia could we forget the “Office of Gaelic Affairs”. You guessed it – it has its own CEO too.

In closing, I want to say that I respect diversity and strive for transparency, so if you have a view, contrary or otherwise, please do write it down and send it along for publication, with attribution, of course.

Google Street View in Bedford, Nova Scotia

bill — Mon, 20 Apr 2009 19:33:38 +0000

This morning around 11:00AM my office went abuzz when Mike Cairns (chief geek) at ServicePoint said “hey Bill, look at that”, pointing out the window on the back of our building in Bedford, which is suburb of Halifax, Nova Scotia. Sure enough, driving slowly, then parking in a big empty parking lot it was the Google Street View car and driver.

I couldn’t resist. I just had to try and track this car down and get up close, not so much to be part of the imagery but just to satisfy my curiosity (and give me an excuse to write a blog entry!). So, I ran down 5 flights of stairs and jumped in my car and went live on the cell phone with Mike who was calling the play-by-play from the 5th floor to make sure if ‘he’ started moving again that I would have a bead on him. Sure enough, he leaves the parking lot and Mike loses sight of the car but not before seeing his last turn toward Dartmouth, but there are two Bedford neighborhoods between where he turned and the highway connecting Bedford to Burnside, Dartmouth. Hmmm. I first make sure he actually didn’t go to Dartmouth so I break the speed limit to catch up to him on the highway and confirm that he, in fact, didn’t go to Dartmouth. I come back to Bedford and prowl the two neighborhoods for 15 minutes without luck and finally give up and go back to the office depressed. I still think I missed him in either of the neighborhoods though…..and I was right. While taking off my coat begrudgingly and staring through the trees up into the Eaglewood subdivision, what do I spot but ‘the car’…again. Out the door I go again and race to Eaglewood Drive.

BINGO! Found him driving up Eaglewood Drive. I follow him with cell phone video camera running for a few minutes as he turns onto a side street and then he pulls over. Perfect. My chance to get up close to the “Google car”. Now, my next move might surprise you but get this….I asked the driver if he minded if I took a few pictures of him, the car and cameras!

Go figure. Google is capturing terabytes of imagery without asking permission (which I don’t believe they need) and I decide the polite thing to do is ask for permission to take some shots of the Google Street View car and driver!. Nuts I know. Turns out, the driver “Steve” had no problem with me taking pictures and even answering a few questions. I think I set him at ease by telling him I loved everything about Google and Street View.

I asked him if he was from Halifax and he said “yes”.

I asked how he got the job and he said “I got a call from a temp agency. They said they needed a driver and that if I wanted to do it I had to go to Toronto for training and to pick up the car” He drove the car from Toronto to Halifax.

I asked if he’s been followed or bothered by people and he said, “not too much, most people just stare but I’ve had the media following me for hours, and it can be distracting. I have to concentrate on what I am doing.”

Steve indicated that he has to “send the hard disks to Toronto” regularly. I can imagine there is a *lot* of data. I didn’t ask any questions about the technology on the roof of the car as I suspected that might be off limits and it was likely already reported online, which it was.

As has been reported, Google has been roaming the roads of major cities across Canada recently building its ‘street view’ database, who’s imagery will be soon incorporated into Google Maps. Once complete, the possibilities are near endless as to how this imagery can be used and most of the potential is positive.

Simply put, it will give the world the chance to virtually visit every street in every major centre across Canada. Since this blog is about ‘efficiency’ I don’t think it is a stretch to suggest that Street View can be a significant contributor to efficiency in many scenarios. Street View is essentially the geographic equivalent of video conferencing. It enables people to gain many of the benefits of presence without the need to physically be present. In fact, it makes some things possible that are practically impossible, unless you have “eyes in the back, sides, and top of your head”. The technology employed by Google to capture this imagery is pretty sophisticated stuff. There are 9 cameras, 8 giving 360 degree coverage and 1 pointing upward to capture the view that people would normally get if they were to look upwards in a downtown with larger buildings. There are also super-sensitive lasers attached to the camera stack which I understand enable 3 dimensional imaging of things like commercial streetscapes but also to remove people from the images! Yes, thats right. Google appears to have employed a laser scanning algorithm that automatically removes pedestrians from the pictures whenever possible. Lots of privacy advocates have been whining about being captured by the “Goog”, which, I guess, is the modern version of the “borg”.

The above closeup photo of the camera is courtesy of:

http://ekstreme.com/thingsofsorts/fun-web/chatting-with-a-google-street-view-driver

Passport Canada – Now With Less Online!

bill — Thu, 09 Apr 2009 12:00:01 +0000

(updated May 8 with new facts, events, and comments)

Back in December I wrote about Passport Canada and how most of its $300 million annual budget goes to pay (a lot of) humans to do poorly what less expensive systems can do much better.

Since then Passport Canada has been running around the country with “roving clinics” of people flown in and housed for a few hours or days to help clear backlogs in various cities. ”More people” seems to be the answer to a lot of challenges at this “special agency”.

In the last month or so, a few things have changed at Passport Canada.

First, they have a new CEO – M. Gérald Cossette has been replaced by Mme. Christine Desloge while M. Cossette heads up the G8 summit in July of next year. How do I know this? I received an auto-reply to an email I sent to M. Cossette advising him of a serious security problem in his forms. (more on the forms later).

So the CEO leaves and there is no press release, no backgrounder on the new CEO, nothing on their website. If an agency is “special” enough to have its own CEO, shouldn’t it be important enough to warrant a press release?

That brings me to number two – a press release on April 3rd warning Passport Canada customers to beware of and avoid “swindlers” – which in their definition seems to be anyone trying to offer more online resources to accurately and quickly submit a passport application. May 8, 2009: Update on “the swindlers” - Well, the swindlers either went away and or someone at PPTC fell asleep at the switch (likely). Mysteriously, the warning about us bad guys is still there but when you click on it you get the 404 error indicating the presence of incompetence. Wait! Maybe the swindlers took it. Hold. Let me check. Nope, we didn’t take it.Why are online service providers offering basic “fill in the blanks” services suddently the bad guys? Because Passport Canada just turned off its own online application preparation service!

That’s right, their online service is GONE. When was the last time you saw an organization go backwards by removing an online service in favor of paper? Rather than improving the online service (it was poorly designed) to make life easier for Canadians paying $87 for their passports, Passport Canada concluded that paper forms are better for you. They are now promoting what they call “a new generation of interactive forms” which have a “bar code” and are “more secure” and “easier to use”. Really? These forms are, to quote Shane Schick, Editor-in-Chief of IT World Canada, “a technique that was last considered innovative in 1998″.

Whatever is really new is obviously really hidden because the forms are nothing more than same unintuitive PDF forms they have been using for years, save for maybe a few more embedded tips and suggestions to help further clutter the already poor layout. You still have to print the things and show up in person if you want to achieve the shortest turnaround time of still two weeks, that is, of course, unless you want to pay a big premium for rush or urgent service.

Now, back to the so-called “secure” bar code. This bar code is anything but secure as my company ServicePoint recently revealed through our testing. The first problem is that it is not a “bar code”, rather a “QR Code”. QR stands for “Quick Read”, which is exactly why the code represents a serious security breach waiting to happen, if it hasn’t happened already. Bar codes typically contain static information such as a product or tracking number, not Canadians’ personal information.

QR Codes are essentially billboards that present information in a way that allows it to be read quickly by software. In fact, in some countries, the codes are actually billboard size and people capture pictures of the Code with their cell phones, where the picture is instantly converted into textual information. This is exactly what people can do easily with the “code” on your own Passport Canada form after you fill it out.

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When Canadians fill out their passport application by entering information into the PDF document, some of their most personal information is stored in the QR Code that is printed on the form. Using simple, free, and widely available software, anyone who found this juicy little leftover from a torn up application or snapped a picture of your code from over your shoulder while in line at Passport Canada, could steal your personal information.

If you want to see a demonstration and explanation of this, check out the video and presentation we put together.

Strangely, back in March, Passport Canada said the information in the bar code was “encrypted”, then in early April they said it was secure, now on April 9th they stopped saying it was secure in their FAQ, but continued to say it was secure elsewhere on their site.

Update: Later in the afternoon on April 9th they changed their site again!

To see the evolution of their claims check this out.

So Passport Canada, does the “bar code” “secure” the applicant’s personal information? The forms haven’t changed over this period but Passport Canada’s statement’s about security, or the lack thereof, certainly have. Why can’t they just tell consumers in simple language that their personal information is represented in the “bar code” and it is not secure? In fact, if Passport Canada is concerned about being accurate, they should stop calling it a “bar code” because it isn’t a bar code, it’s a QR Code. Yes, many Canadians, if asked, would call it a bar code, but those same people wouldn’t think this seemingly innocuous little square of black and white blocks contains their personal information.

To help you understand the issue, check out the presentation and video available at this page which describes and demonstrates just how insecure we think their “new” and “more secure” forms really are.

Why can they operate this way? The simple answer is because we let them. Seriously, it takes a real concerted effort to even get their attention. Just read the many bloggers online complaining about the lack of response to even the most simple things – like finding out who runs various regional offices. This is not the way a $300 million “company” with a “CEO” should be run.

Speaking of the CEO, specifically their former CEO, Gerald Cossette, I refer to an interesting letter I received from him in July 2008. It is posted here. The reason I received this letter is because my company, ServicePoint Inc., had developed and introduced to Passport Canada a completely integrated self-service kiosk that would facilitate the preparation and submission of a passport application in one 10 minute session. These kiosks were so inexpensive they could be deployed in hundreds of locations across Canada, essentially eliminating the need to go a passport office. To cut to the chase, after six months of trying to get Passport Canada to even look at the kiosk in person and test it, I got the letter from the CEO which essentially said ‘go away’. Some will find the rhetoric and my response an interesting read as it provides some insight into how the government ‘thinks’. If you want the details about the kiosk and our subsequent work to develop our online service, Passport Wizard, read on. You might find that interesting too.

Introducing the “Avro Arrow” of Passports – the ServicePoint Kiosk

The “ServicePoint” kiosk addressed one of the biggest problems in the passport application and submission process which is the acquisition and submission of the applicant’s passport photo. The kiosk was able to take a digital passport photo, instantly display it to a centralized photo adjudicator (to make sure it was compliant), then accept the submission from the applicant.

As many people are aware, passport photos are one of the most common reasons applications are rejected by Passport Canada. The logical approach was to make sure the photo was compliant at the point it is taken, not when the applicant gets to the service counter after waiting in line. Further, in the age of digital photography, it makes absolutely no sense to continue the

process of taking a photo, printing it out on paper, taking it to Passport Canada only to have them scan the photo back into digital format. Not only is this highly inefficient, the photo quality is compromised when it is scanned. Also, as the passport is suppose to be a highly secure and reliable ‘breeder’ document, leaving the applicant in trusted control of the photos creates the potential for tampering.

The development of Passport Wizard

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Without the cooperation of Passport Canada the kiosk was not feasible, as it relied on electronic photo and data submission, so we decided to try and salvage our efforts without their cooperation by developing an online preparation service called Passport Wizard (available at www.passportwizard.ca). The service helps Canadians prepare their passport renewal (60% of applications are renewals) and it also directed people to a nearby passport photo provider. What does Passport Canada think of Passport Wizard you ask? They have never contacted us directly about it, but they did post that nasty notice “Don’t Get Swindled” on their site in early April, calling any outside parties aiding Canadians with preparing their passport applications “swindlers”. As I said in my letter to news site www.soonews.ca, ““what looks to be more criminal is Passport Canada getting away with charging Canadians $87 to renew their passport using outdated, expensive, manual processes that are keeping thousands of Canadians employed in government jobs doing basic administrative tasks.”

It is important to mention that Passport Canada has never had an online service that assisted Canadians in preparing or submitting a request for a passport renewal, although they did (past tense) have a way to a prepare a completely new application. This, of course, makes absolutely no sense as those renewing their applications have previously had their identity and citizenship verified, so the application process should be little more than submitting updated photos. Strangely, it costs the same $87 fee to renew a passport as it does to apply the first time. And for those of you who never used the Passport On-Line service, it was simply a way to fill out your passport application and submit the information to Passport Canada. You still had to show up in person at one of the few Passport Canada offices across Canada, with the printed version of the form and present proof of citizenship and identity and, of course, your passport photos. The benefit of using Passport On-Line was that you were put in the so-called “fast lane” at the passport office, and when you finally got to the counter, processing was speedier, because your application was already in ‘their system’. That’s now gone.

There were some obvious issues and limitations with their online system. First, it discriminated against anyone who wasn’t within a reasonable drive of a Passport Office. The former CEO of Passport Canada claimed (in his letter to me) that 95% of Canadians are within 50kms of a Passport Canada office. The next problem was that you needed a Government of Canada ‘epass’, before you could proceed to use Passport On-Line, and getting an epass was a separate and daunting process, full of techno-bable and dire warnings. As a result, people took one look at it then bailed, – according to a Passport Canada spokesperson, only 1% of people applying for passports used the service. No wonder. And finally, probably the biggest issue, it was only for new applicants. People renewing their passports using the “simplified renewal” method couldn’t use Passport On-Line. So, when the PR pros at Passport Canada throw out impressive statements and statistics like “only one percent of applicants were using Passport On-Line” and “it wasn’t as convenient as the paper forms”, you should turn your head from side-to-side.

If you want my opinion, whether by design or accident, Passport Canada designed their online service to fail. Remember, they have a huge $300,000,000+ budget that they have to burn through, they need a lot of offices, people and infrastructure to eat up that much of your money.

As many Canadians have correctly speculated, “there must be a better way.”

There is a better way to apply for a new or renewed passport but it isn’t necessarily the labour-friendly way. The structure, policies and service levels of the current system as defined by Passport Canada are masterfully designed as if the intent were a make-work project. The reason that the majority of applicants show up in person is because doing so achieves the ‘shortest’ turnaround time of two weeks. Delivering your application to Passport Canada by any other means results in at least double the processing time. Other means including dropping off your application at one of the 150+ “Receiving Agents” (like Canada Post and Service Canada), and, incredibly, also for the ‘mobile passport clinics’ they wheel around the country. Yep, Passport Canada has made the process so complicated and cumbersome that they needed to deploy an outreach ‘clinic’. It is important to point out that there is no requirement to show up in person to apply for a passport, but if you want the fastest turnaround time, you do need to visit a nicely appointed, inconveniently located, Passport Canada office.

Another non-obvious contributor to the volume of people showing up in person is the need by many applicants to retain their original identity and citizenship documents, rather than sending them in the mail and hoping they don’t get lost. In the case of people renewing their passport, they don’t have to have their identity or citizenship verified again but they do have to surrender their existing passport or have it invalidated by cutting off a corner. This one little policy creates a massive amount of workload and lost productivity. IF Passport Canada removed this requirement, huge savings would be in order all around. There are many reasonable approaches to dealing with this, one of which is being trialed in Peter MacKay’s constituency. (Peter is the Minister of Defense). Specifically, in New Glasgow, Nova Scotia, the Service Canada office has ‘special’ powers that allow them to verify identity and citizenship documents and then return them to applicants on the spot, alleviating the applicants from surrendering t
he important documents to Passport Canada. Could it be just a coincidence that Passport Canada just happened to try this in the riding of a Minister?

Oh, and if you are wondering what Passport Canada’s response has been to the media attention we have brought them, this is the best most scandalous part of this whole saga. Shortly after we brought the bar code issue to their attention last week I noticed an odd entry in the web logs of my web server that serves up the pages at mcmullin.ca. Someone inside the walls of Passport Canada initiated a Google search for the words “bill mcmullin bad news”. Below is the log file verbatim to prove it. The IP address resolves to Passport Canada as you can see below. Why would someone inside Passport Canada be searching for such information???

198.103.211.131 – - [06/Apr/2009:17:54:01 -0300] “GET /2009/03/the-bad-news-blog.html HTTP/1.1″ 200 33459 “http://www.google.ca/search?hl=fr&q=Bill+Mcmullin. bad+news&meta=” “Mozilla/4.0 (compatible; MSIE 6.0; Windows NT 5.1; SV1; .NET CLR 2.0.50727)”

NSLOOKUP Result for 198.103.211.131

131.211.103.198.in-addr.arpa name = int1.pptc.gc.ca.

131.211.103.198.in-addr.arpa name = int1.ppt.gc.ca.

Canadian banks: Overpriced data warehouses?

bill — Wed, 04 Mar 2009 07:19:21 +0000

I must admit up front that I’m more envious than critical of the success of Canadian banks because of how they have kept this little secret under wraps for so long.

The reality is that banks have essentially become the world’s most expensive data warehouses and hosting companies.

Think about it for a minute. Banks are now as much about the electronic movement and storage of “money” and automation as they are about dispensing hard cash and loans. What is money? Money in electronic form is just data – data like all other day except for what it represents to the person who is looking at the numbers. So what banks have really done is made Canadians feel confident that the numbers on the screen or ATM slip really are the numbers. This confidence is a very important element of the value they deliver because without confidence, we would have the US financial system.

Clichés Gone Wild

bill — Mon, 02 Mar 2009 20:34:15 +0000

Unless you just arrived from another planet, you’ve probably heard a lot of clichés describing the ongoing collapse of the stock market. It seems the TV pundits and writers, mostly from CNBC of course, will stop at nothing in an effort to keep viewers entertained and the advertising revenues rolling in to the GE coffers (which, by the way is a $7 stock).

Through an unintended effort to perpetuate the crisis and profit from it, the paid pundits just keep the clichés coming. Since most of them are old and boring, my brother Greg and I decided to create some new ones to add a little levity to an otherwise not-so-enjoyable situation.

If you have some good ones, be sure to comment.

“The future has been canceled” (Greg McMullin)

“There are no more good ideas” (Canacord Adams newsletter)

“Things are worse than the worst case scenarios” (Unknown)
“Nobody saw this coming” (Countless Wall St. executives who ironically sold just weeks before the crash)

“Irrational pessimism”

“Negative sentiment is now in overdrive”

“Don’t bet on the end of the world – it only happens once”

“The light at the end of the tunnel has gone out”

“If Buffett can’t figure it out what makes you think you can?”

“Too big to fail”

“Cramer’s got your back” (sure CNBC, are you kidding?? explain this then: http://online.barrons.com/article/SB123397107399659271.html)

“Take a little money off the table” (there is none left to take off buddy)

“The bottom has fallen out of the market” (ok, so where’s the bottom then?)

“The market didn’t come through the surgery very well. It’s now terminally ill”

Waste in waste

bill — Tue, 27 Jan 2009 18:41:20 +0000

Have you noticed how inconvenient and complicated it is to be friendly to the environment in the disposal of your household ‘trash’?

The myriad of rules, requirements, regulations and directions regarding proper recycling are simply too much for the average individual to follow. Inconvenient and complicated are two characteristics that you do not want associated with any new behavior that you would like consumers to adopt. If the environment is a priority, then regulators and lawmakers could do it a favor by rethinking the overall approach. There is no arguing the goodness and intentions but counterbalancing the benefits are many not-so-obvious unintended consequences.

The old concept of curbside garbage collection for almost everything was super-convenient for consumers but super-bad for the environment and almost as bad for municipalities. Garbage separation and ‘streamlining’ is expensive laborious work and someone has to do it. Municipalities have opted to try and get consumers to do more of it, offloading the cost in the process. The problem with solid waste starts at the moment of intent when a person wants to get rid of something. I didn’t say ‘throw it in the trash’ because I suspect that in a material percentage of these moments, the individual’s first priority is to get rid of it. Figuring out the right place or way to get rid of it is usually a secondary decision. Most consumers won’t spend much time figuring out ‘the system’ and will opt for the easy way out, even if it means putting things in the landfill that are not yet at the end of their useful lives.

As for how garbage is collected, it use to be a really efficient system with everything at the curb and a garbage truck going up one side of the street and down the other. While the garbage trucks still utilize the efficient pickup system, unfortunately in most cities, this efficiency is lost when consumers/households must individually perform the ‘run-a-round’ for the ever-increasing number of items that can no longer go in the regular garbage stream. I live in the Halifax Regional Municipality and here we are known for how high level of ‘diversion’ which means we supposedly divert a larger than normal percentage of garbage away from the landfill. While I accept the top level and sexy statistics about diversion I believe (as I always do) that simple statistics are usually misleading and the ‘devil is in the details’. For example, what is the cost to the environment from the millions of car trips made annually by consumers individually driving their garbage and recyclables to the myriad of depots? Just off the top of my head I listed no less than five drop-off locations, each for their own type of garbage. For example:

Otter Lake Transfer Facility: For regular garbage and large items when you miss the right garbage day. This facility is over 50kms round trip for most people in HRM.

Hazardous waste: For oil, solvents, batteries etc. Located in Bayers Lake Industrial Park but only open on certain weekends and hours.

Electronics: Separate drop-off locations around HRM.

Refundable containers: Yet a different location again (and usually a grungy one)

Compost materials: Two locations only in all of HRM available to commercial haulers.

Construction & renovation debris: Three different locations, yet again, in HRM.

So, if you happen upon a pile of garbage or junk in the woods along a pristine trail, you can guess why it’s there. Getting rid of garbage is too complicated, expensive and wasteful a process. Too many people throw away too many things that are of value to others and ‘the system’ does not provide a facility that addresses this opportunity.

Typing toward higher productivity

bill — Mon, 12 Jan 2009 17:55:08 +0000

According to Nielsen/NetRatings there are some 1.5 billion Internet users in the world. With that many people behind computers, there is a whole lot of typing going on, but is it enough? Our computers and networks keep getting faster but has our typing improved? What is the gross economic cost of lost productivity due to the lack of typing skills amongst the world population of Internet users?

There is a well known golf adage that says “a good club can’t fix a bad swing”. No truer words have been spoken about the game but that hasn’t stopped people from trying to buy one! Bottom line: A faster computer doesn’t make the operator type any faster.

According to my rough calculations, workers around the world type some 2,700,000,000 (that’s trillion) words per day. To get to this number I factored out 50% of the Internet population that I figure doesn’t use a computer to generate economic output (ie. work) and of those that do I assumed that they spend 25% of their day actually interacting (ie. typing) on their computer. I assumed that the average computer user can type at a rate of 30 words per minute. The end result is that workers spend some 375,000,000,000 (that’s billions) hours per year typing.

Now, if everyone who uses a computer to generate economic output were to improve their typing skills such that the average typing rate increased to 40 words per minute, that would result in a massive increase in productivity to the tune of 100,000,000,000 man hours. I am certain that economists and analysts could blow holes a mile wide in my simple analysis but my analysis would have to be as flawed as the numbers are big to be completely invalid and irrelevant.

So, how could a skill so vital to productivity in the modern information-based economy not be baked into our education and training systems?

Prelist: a more efficient approach to selling your home

bill — Fri, 26 Dec 2008 17:46:52 +0000

My article “Meet Agent MLS: The most successful realtor in Canada” described some of the inefficiencies and waste in Canada’s real estate services marketplace. On one end of the spectrum the online MLS system at www.realtor.ca is exceptionally efficient at marketing homes while on the other end, realtors are exceptionally inefficient at marketing themselves.

Why isn’t there an efficient online marketplace that matches homeowners looking to sell with agents looking to list – the equivalent of ‘online dating’ where homeowners shop for agents?

Good news. One is on the way and it’s aptly called “PreList”. A teaser site is up at www.prelist.ca.