Category Archives: payments

Payment Generic Discussions

TCH Phase 1 – eCom Wallet

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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

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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

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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?

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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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New MA Rate Tier for Installments (ApplePay Later)?

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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

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