Apple Launches High Yield Savings

Apple and Goldman Sachs announced the forthcoming launch of high yield deposit account focused on increasing the value of Apple Card’s Daily Cash rewards. Operating as a kind of rewards sweep account, customers that register for the new account will have “their Daily Cash [move] into a new high-yield Savings account from Goldman Sachs”. 

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US Payments Environment – Something Big – 5 Part Series

Part 1 – Assessing the Environment and Setting the Focus  (part 2  – Power of Bank Networks)

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Must read FT article “How JPMC’s plan to kill credit cards split the bank”. The article discusses Jamie Dimon’s internal mandate to drive a new payment network. I was shocked with the level of internal org quotes here.  In my view, Jamie is the best bank CEOs in history (based on performance and talent coming out of JPMC). As a former banker, I know how hard it is to move the ship.  However, FT is wrong. Chase’s efforts ARE NOT about killing credit cards, but rather creating something much bigger.

This is a long blog..

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TCH Phase 1 – eCom Wallet

Short blog – 80% confidence

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Phase 1 of TCH’s token efforts will be in SRC model. A bank branded “wallet” acting in the DCF role for TCH PIs . Just as VAC has enabled the elimination of physical hardware for acceptance, issuers see a plastic-less future for cards. They want to own the issuance of cards and want much more than a token, they want the entire “wallet”.

Go to market is either as:

  1. TCH as SRC System, or
  2. Visa as the SRC System for all TCH banks (V and MA) with TCH is a “unique role” managing all consumer data, registration, payment tokenization, …
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Apple – #1 Payment Innovator

As Apple is set to launch the iPhone 14 today, I was thinking about the significance of ApplePay’s innovations to V/MA and how these innovations benefit the entire network of merchants and consumers. Making payments easy is hard… Apple is the lead “innovator” within the V/MA networks at the consumer touchpoint (with Google, Samsung, PayPal and others in the mix). Their “wallet” and branded integration into both POS AND mCom is unrivaled and represents 93% of all mobile wallet payments in the US (2021).

This 2021 Pulse Network Debit Whitepaper provides the best public view on performance (US Only), with TPV CAGR over 50%. Quite frankly, when it comes to mobile payments, it’s silly to talk about anything else by ApplePay in the US

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Pay By Bank – Where does it work and why?

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Friday I was a tad “let down” in the Sionic/TCH/MX release of Pay-by-Bank. Per my blog on Google/TCH launch and Google P2P I was anticipating something much bigger. To be clear I firmly believe that TCH is working on an “ApplePay Competitor”, which will entail TCH tokens inside of Google’s phone, but this will be 3-6 months out.  Per the blogs above, I see neither pay-by-bank nor TCH Tokens in Google Pay as a threat to V/MA. 

Today I thought I would drill down into “pay by bank”, the dynamics of why it works in some markets, and why I see little threat to V/MA in replacing core cards in eCom or at POS.

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Bank Opportunity – Binding

Big picture thoughts on a key service where banks will lead in the future

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Existing businesses spend significant energy on remaking things that work. Moore’s law has justified this investment in chipmaking, as has Tesla’s investments in batteries and manufacturing processes. These area of focus are where products performance is critical to the customer and incremental capability provides differentiation. But what about banking and payments?  What provides differentiation? Which investments are driving performance critical to the customer? or operational efficiencies? (see Changing Economics of Payments

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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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Driving Vision of Durbin? Bi-Lateral Connections?

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?

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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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