Card Holder Present Update

Presented yesterday at KBW’s annual Payment Conference.. have a few updates in the rumor mill..

I predicted September of this year for CHP in in previous blog Card Holder Present last month. Issuers don’t like this one bit.. as there is no upside.. Merchants with large numbers of cards on file (Amazon, Google, Paypal, Walmart, …) will not tokenize until they obtain a risk based rate (Companies like Amazon manage fraud down to under 3bps).

Rumor is that one large issuer has been quite vocally against the new CHP rate coming into effect. My guess is that the issuers just funded $60M at The Clearing House (TCH) for them to create a new token utility based upon Bell ID…. and the banks want to use this beyond “faster payments”….

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Last Mile Redesign (Processor-Merchant)

21 Jan 2016

My favorite blog of the year was written by famed UK computer scientist Paul Graham – The Refragmentation. Paul’s blog aligns very well to the work of 2 Nobel prize winners in economics: Oliver Williamson (2009) and his mentor Ronald Coase (1991). Both were focused on the factors governing the “nature of a firm”. (particularly Transaction Cost Economics).  I covered how TCE relates to the sharing economy and the future of collaboration in my August blog Collaboration and the “Sharing Economy”.

If I were to pick the proof point for ‘refragmentation’ and TCE within the payments industry it would be processing. If payments is a network business.. processing is undergoing open access (think MCI/ATT), nodal redesign (think iPhone vs rotary), big data (democratized access), enterprise software (ERP/CRM), and direct sales (amazon) … ALL AT ONCE.

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Cardholder Present – September 2016

Update 2022 – this never happened. While the networks have the facilities in VTS/MDES and the new SRC standard with EMVCo.. the rate tier has not taken hold.


As I outline 16 months ago in mCommerce/eCommerce Convergence, there is a new V/MA rate tier coming: Card Holder Present (CHP). CHP is coming by summer 2016 (70% probability), and can be thought of as a remake of what was VBV and MSC in 2006/7 using the new token utilities built for ApplePay.

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Quick Blog on Apple, P2P and Clusters

12 Nov 2015

Apple/P2P

  • Most of you have seen today’s WSJ today on Apple P2P. 
  • Apple has 4 options here: FIS/Vocalink/Paynet, Mastercard, Visa, ClearxChange/Early Warning. News here is that Apple asked the BANKS for help. Banks responded that they would like for Apple to be first non-bank customer for ClearXChange (the 4 yr old bank owned P2P utility formed initially between BAC and WFC with ownership now spanning all top 6 banks). ClearX has a new owner as of Money2020: Early Warning Services, the #1 bank risk and fraud utility in the world. It is not often I compliment everyone.. but this makes sense.. for Apple, For Banks, for Consumers. The same service I use at Bank of America online to pay anyone (ex email or phone number) would be within the Apple platform. The challenge of P2P is risk management. As one of the first customers of Cashedge pop money (2005), the advantage POP had in operating the service was ACH risk management. Now the banks have that in EWS… times 100!
  • P2P in general.. what an awful space… littered with the corpses of failures. It never makes sense as a standalone service. P2P can increase the value and stickiness of existing networks (ex Facebook/Whats App, Google, Apple, …) but it is a loss leader. Google has been doing free P2P for over a year.. my guess is less than $500M in volume (at a 25bps loss).  The ULTIMATE GOAL (of free P2P) is the data associated with connecting social networks, commerce and payment networks. Early days see spot successes for specific needs. For example Venmo is almost a “banking lite” for college campuses.. it has a critical mass there, but doesn’t do well in the ROW (rest of world).  Consumer behavior is VERY VERY sensitive to pricing on P2P.. even $0.10 will make consumers jump to something else. So why would the banks want this service? The ClearXchange model is probably the best answer. The big owning banks are at either the initiating (ODFI) or the receiving (RDFI) of 70%+ of all transactions. They created an “on we” utility where payments to each other would be free, and payments outside of this group would cost for either RDFI or ODFI.    So the small banks incur the costs of ClearX.. and the large owning banks make the money..
  • Apple is apparently quite upset with Visa/MA eliminating their 15bps (through VDEP/MDES) and may be hoping to eventually enable a new V/MA competitor. They have indeed said this. However P2P will not be the place to start here. Remember Banks make money in the V/MA networks. It is one of the few models where thousands of businesses invest billions of dollars to make work. Yes there are 100 other ways to do payments, but there is no other model that has proven effective in getting an industry to INVEST IN. For example, Bitcoin is better at P2P everything (anonymity, risk, authentication, validation/acceptance), but no one has developed a scale-able way to make money from managing bitcoin… or creating the acceptance infrastructure to support it. Given Apple’s market position and global presence wouldn’t that be cool..!? Governments would go absolutely nuts.. global bitcoin platform with no way to track interaction. I see this in 5 yrs…
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The Day “Big Data” Died…

 

Long Live Federated Data™…… ( by Tom Noyes with contributions from Russ Schrader)EU Seperation 2

Big news “across the pond” today as the European Union’s highest court struck down the Safe Harbor Agreement. The court offered no grace period for firms to establish their new arrangements before safe harbor ceases to be valid. The court also declined to give extra time to the European Commission, which is currently renegotiating new terms with the U.S. See following stories for more detail:

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