Google/TCH Launch – Banks Hire New Network CEO

Something is launching next week (rumor 8/23) with Google, TCH and at least 4 banks. The banks have just hired a new CEO to run it with a “network background”.

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Something is launching next week (rumor 8/23 pilot) with Google, TCH and at least 4 banks. The banks have just hired a new CEO to run it with a “network background”. This is likely a new consortium, and we will see changes in where the assets of TCH, Akoya and Early Warning line up. This CEO will be tasked with creating a new network to “compete with ApplePay” as the premier mobile payment platform.

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Durbin 2 – Short Update

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What are the new Durbin’s legislative prospects? A: Not at all likely (<10% probability)

Top retailers spent this week meeting with Bank CEOs trying to convince them to support the new Durbin legislation. Their pitch was to enable bi-lateral deals, “new products” and avoid network rules (see blog). Banks did not seem to bite, as they remembered the lessons of Durbin 1:

  • Only largest merchants benefited from dual routing
  • Consumers lost in debit rewards (ie keep the change), increased bank account fees, and no merchant pass-through of savings
  • Acquirers/processors did not pass through fee reductions to most merchants
  • Networks recovered lost revenue through merchant fees
  • Large banks lost competitive advantage as smaller “exempt” banks under $10B operated under different rules
  • See WSJ article

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TCH Tokens in Apple/Google – Launch of RFP in US

TCH tokens will be in Apple/Google in next 6 months with Request for Payment as the primary scheme

Part 1 – Current US Routing Rules

Note: Revisions in progress (forgive the typos). This is a long 10 page blog, I realize most of you won’t bother to read, so I’ve tried to summarize. Why should you read this? The top ~25 banks have been working on this for over 10 yrs and now Google and Apple are involved.

As a follow-up to Google Real-Time P2P (Aug 7), this blog evaluates 6 payment flow scenarios likely near term. Key hypotheses

  1. TCH tokens will be in Apple/Google payment schemes in next 6 months (80% confidence)
  2. TCH Request for Payment will be primary scheme leveraging these tokens. To be clear this is a debit scheme, with no integration to credit. (~40% confidence)
  3. RFP will operate in a premium to a non-exempt debit of approximately 150bps. The RFP product will be exempt from Durbin as it does not involve a network, swipe fee with gateway as optional (60% confidence)
  4. While operational, the product and scheme will not gain substantial traction due to a lack of consumer incentives, efficacy of the current payment networks, and inability to define what “problem” this service solves (60% confidence).
  5. Large merchants, with a high credit mix will have the greatest chance to benefit from this scheme (ex Airlines) as they have steering ability and have significant control of their processing.
  6. As Jamie Dimon said “Banks have enormous competitive threats — from virtually every angle,” he said. “Fintech and Big Tech are here… big time!” If banks can’t differentiate the core of banking, they must differentiate the networks where their products operate.
  7. The most logical place to start RFP would be in non-card recurring payments. Google has had fantastic success in India in this category. HOWEVER, given that the banks are working with top gateways I am reluctant to believe that non-card payments are the focus.

Biggest unknowns?

  1. Will focus be non-card payments?
  2. Why would banks want to create a V/MA competitor?
  3. Is it possible that TCH will address bank participation, merchant participation and registered consumers with a network alliance?

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Google – Real Time P2P – Rumor

Free Blog – Google will announce real-time payments in Google Wallet pilot with JPMC and at least 2 other banks this month

Summary

UPDATE – I no longer beleive P2P is focus, but rather Request for Payment and merchant integration. Blog forthcoming today.

—————————

I have no idea what this looks like, so congrats to Google for keeping this locked down. The following is my best “guess” on a pilot, based upon:

  1. What Google has launched internationally (Tez) and GPay through India’s UPI (highly recommended read here)
  2. Changes/Focus Bill Ready put in place before his departure as new CEO of Pinterest. Remember Bill was CEO of Braintree (the most significant acquisition PayPal ever made).  Braintree enabled payment APIs for online and mobile merchants (among other things). 
  3. Prior to Bill, Google’s support and advice for FedNow  (see article)
  4. Understanding of what Banks want to accomplish (ex TCH tokens in mobile phones). 
  5. My short time in Google during the creation and launch of Google Wallet. Particularly the exec team’s desire for a global P2P service.
Continue reading “Google – Real Time P2P – Rumor”

Driving Vision of Durbin? Bi-Lateral Connections?

My latest G2 from people involved in shaping Durbin is that retailers see an opportunity to end-run networks in bilateral deals AND direct (alternate) routing. To be clear, issuers have always been able to strike bilateral deals directly with a merchant. What they have not been able to do is route these transactions off-network. 

I now have 70% confidence in the forces shaping Durbin (still no threat to V/MA). 

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Durbin 2 – Impact on “Wrapping” Rules?

A highly technical “what if” scenario involving a long-sought after change by top US card issuers. What if Durbin credit routing bill were designed to eliminate network wrapping rules?

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A highly technical “what if” scenario involving a long-sought after change by top US card issuers. I’m fortunate to have the exec teams of just about every payment network, processor and FinTech read this blog. I have 3 main drivers for writing today:

  1. Start a community discussion
  2. Assess the potential for a much more strategic driver behind the proposed Durbin bill
  3. Most “change” in US payments is driven by 7-10 players: networks, top issuers, Google, Apple, … etc. These changes have an enormous impact on the FinTechs building around them. I’m hoping to help these small companies plan around these changes as the only advantage of a start is speed.

Note I DO NOT think this scenario is likely, but rather possible (30% probability). Historical context is key and the only reason I’m spending time on this today is that 27 bank CEOs have been discussing this for over 10 yrs.

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New MA Rate Tier for Installments (ApplePay Later)?

Rumor is that Mastercard plans for a new rate tier to support installments and ApplePay Later. 

Quick 18 Aug update to Aug 1 blog below. This new rate tier was confirmed by Bloomberg this week. According to Bloomberg, Settlment product acceptance is optional for merchants (does not operate in Accept All Cards rule). Optional acceptance is quite surprising. I surveyed 3 top 10 merchants (non-grocers) and couldn’t find one that plans to sign up for the product (other than Apple).

Note that card based BNPL (consumer BNPL) has no proven market data showing increased conversions. My inclination is to believe Card based BNPL conversion will closely mirror a normal credit card. See the rationale in my blog Three Flavors of BNPL.


As I outlined in June, Apple Pay Later will be (est Oct)  is the first major launch customer of Mastercard Installments. A large retailer just related that Mastercard plans for a new rate tier to support this product. 

“Somewhere around 300 bps” – Top 5 US Merchant

Continue reading “New MA Rate Tier for Installments (ApplePay Later)?”

BNPL Travel Example – Short Blog

Short blog today on an example BNPL opportunity and the differences between a consumer BNPL solution like Apple Pay Later and Merchant integrated solutions from providers such as Affirm (or SQ/Afterpay see Three Flavors of BNPL).  Today Air Travel and Vacation packages are the focus.

Short blog today on an example BNPL opportunity and the differences between a consumer BNPL solution like Apple Pay Later and Merchant integrated solutions from providers such as Affirm (or SQ/Afterpay see Three Flavors of BNPL).  Today Air Travel and Vacation packages are the focus.

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