From blog yesterday I had several friends ring me. Turns out the card networks and individual banks are SEPARATELY pushing Token ideaS.. unfortunately none of the token schemes has individual adoption, no less interoperability.
Per my blog yesterday, ACH debit tokens can work, particularly if the consumer doesn’t have to enter them. Also in ACH, banks are in a position to influence acceptance. Consumers could even go to the online bank to permission the payment instrument in the first place. This is the model of V.me and Google wallet (w/ the new Saveto API). In this model the consumer never enters anything.. the BANK enters the customer information in the wallet. Of course banks DO NOT want consumers to use ACH.. there is no revenue here.
Therefore Banks don’t really want consumers to choose… not really… they will make their favored option seamless and ensure friction with everything else. This is normal business behavior, but payments are a networked business which supports Commerce. Banks SHOULD be neutral here.. they DO NOT direct commerce but support it. Their partnering approach is thus completely broken…
Thus the conundrum. The network where banks have the most influence is ACH, yet they don’t want to encourage ACH use as there is no revenue. We have a world where consumers can enter information directly, or ask their bank to enter it for them (V.me and Google).
One bank even seems to be creating a scheme that blends both ACH tokens AND Credit card tokens… in the hopes of being the “master directory” of payment information in a consumer’s wallet. Their dependency: consumer, merchant and wallet participation (ie. when pigs fly).
Why would any merchant want to give up card information and exchange it for tokens? Well there could be some incentive with reduced CNP rates.. and fraud liability shift… but isn’t that 16 digit card number already a token? Any approach must start out by being invisible to consumers (like V.me.. yes I am saying something nice about Visa).
I was talking to the KC Fed a few months ago.. brainstorming a little.. like what if you opened up Fed Wire to non-banks (ie regulated MSBs). That would really throw a wrench in all these future token plans… well I guess there would be one little problem… fraud.. but if an entity could crack the authentication/authorization nut this would be a great approach.