Big News – Google I/O 2025 – Payments View

Google I/O is going on today and tomorrow and they just announced a vast array of new products and services (Google CEO’s blog). Today’s blog is a quick drill down on payments and specifically what “Buy for me with GPay” means for the payment ecosystem (and agentic commerce).

As discussed in Commercial Models for AI Agents, the network and economics surrounding agentic commerce is far from settled. The lack of a clear commercial model and a robust trust framework has impeded Agentic’s growth as commerce is a multi-sided network. Google’s strategy appears to directly address these deficiencies by deeply integrating GPay as a core component of its agentic offerings. This integration aims to provide the necessary layers of trust, security, and transactional capability that have been missing. It also may provide an additional pricing mechanism for agentic transactions.

As outlined in today’s Stratechery the “lack of payments” were part of the original sin of the internet. A “sin” that Google is fixing in Agentic by creating a complex network that unites search, ML, agent-based action, payments, advertising network, billions of devices, consumer-controlled data for personalization, which will redefine eCommerce (and recapture product search). The price of entry? Merchants need to add the GPay button.

To be clear, merchants will still endeavor to use AI in order to create a better customer experience for those customers that enter their domain. But for consumers, the Google offering will be hard to beat as Google leverages their data and preferences across every device to enable customer interaction through purchase.  While Amazon will likely maintain a solid position, most consumers will not start search within a merchant domain. Agentic originated transactions present a new type of demand, fully qualified consumers with a valid payment instrument and transaction request. A transaction type that should operate in a 100% conversion model (ie no abandonment). With GPay, Google provides the consumer authentication and risk data for merchants to decision the transaction.

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Strategic Bets in Retail Payments

What are the strategic drivers of change?

Where are the profit pools and how will they disperse?

A Maturing Landscape, A Shifting Playbook

Retail payments have been a cornerstone of growth and shareholder returns for decades, delivering TSRs that rivaled the tech sector. But this golden era of easy expansion is fading. Today, growth is slowing and investors are refocusing on unit economics, distinguishing between platforms with SaaS-like predictability and those more exposed to the vicissitudes of consumer credit, deposit spreads, and regulation (see Cap Gemini World Payments Report)..

This change in tone isn’t just financial, it’s structural. Value creation is migrating away from volume and into experience, infrastructure, and intelligence.

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Stablecoins. Breaking down a momentous set of April announcements

Impact of Stablecoins on Banks and Central Banks, the Upside for V/MA.

Stablecoins took many amazing leaps in the last 2 weeks. Key developments include

  1. PayPal’s new Stablecoin (PYUSD) earning 3.7% (in PYPL wallet). 
  2. Circle Launches Cross-Border Payment Network:- Circle Payments Network (CPN) – see CPN whitepaper
  3. Paxos and Coinbase, as well as Circle, are pursuing bank charters
  4. Visa to join Paxos and Robinhood in USDG
  5. EU banks are creating a new consortium around stablecoin with the involvement of ING and others.
  6. ECB flags risk of contagion from US crypto push in new policy paper, similarly the Bank of International Settlements (BIS) also published a paper outlining how Crypto and DeFi may destablize finance. 
  7. Italy’s finance minister warns that the attractiveness of US stablecoins poses a bigger risk to Europe than Tariffs.
  8. Regulatory – The STABLE Act has advanced through the House Financial Services Committee, increasing the likelihood of Congress passing legislation to regulate stablecoins (and New Bank Formation Act). Fed Chairman Powell voiced strong support at the Economic Club of Chicago.
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eCommerce Acquiring – Beyond Tokens – The Next Big Wave of Improvement

Short Blog

© Starpoint LLP, 2025. No part of this site, blog.starpointllp.com, may be reproduced or retransmitted in whole or in part in any manner without the permission of the copyright owner.

Adyen was the largest network “tokenizer” and realized the benefits through enhanced authorization rates and reduced fraud. As I explained in Tokens and Binding 101, this history of tokens in payments is long, with each stakeholder maintaining an ability to tokenize. While all token strategies protect data, network tokens differ in RULES, binding (to a customer and device) and acceptance. For example, Visa’s Cloud Token Framework (CTF) and Mastercard’s Digital Enablement Services (MDES) address 6 key areas:

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Visa Investor Day – The 7 Reasons Why I Invest in Visa

Short Blog

Visa held their Investor Day last week on Feb 20, and I encourage everyone to read through the presentations. Most of you know my strong network bias, V/MA are my top personal holdings. I’m not a financial analyst; my investment hypothesis rests on the strategic need for card networks and their sustainable advantage in meeting those needs. 

Let me provide my top 7 reasons why I am so firmly behind the networks, with references to investor day content and my previous blogs.

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Real-Time Settlement Coming to US Cards?

US Payment Infrastructure is in the midst of completing a major renovation. 

  • The Clearing House (TCH) Real-Time Payment (RTP)
  • FedNow
  • JPM’s ONYX (now renamed Kinexsys)

Let me preempt the #1 question most of you are about to ask “are card volumes at risk”? Nope, why on earth would banks want to walk away from the most profitable retail banking product in the history of man (see Future of Retail Banking)!?

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Winning in Network of Networks: Collaboration

My largest holdings are card networks, and I’m very keen on their continued growth and sustainability of competitive advantage. My confidence is based on five broad themes. 

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Digital Wallets – Core Functions and Competitive Strategies

What are the core functions of a digital wallet and what will the future bring now that Apple has opened up their Secure Element (see blog)?

I’ve been writing about wallets for over 12 yrs. Let me recap some history

  1. In 2006, mobile operators had control of what “apps” could operate on a phone. In the US Qualcom bought Firethorne in an effort to create a single bank application, where banks had to pay $1 for every balance request. I’m not joking.. Open app stores destroyed this model quickly, but so the MNOs pivoted to the SE and SIM card. 
  2. In 2010, Mobile Network Operators (MNOs) had control of the encryption keys for secure elements. Their pitch to Google was, “Give us a billion dollars, and we’ll give you the keys”. The absurdity here was only surpassed by Doug Bergeron (CEO of Verifone) marching into Google the next year and asking for a “Billion dollars” for Verifone to support contactless (I was just outside the meeting room).  Of course there was no economic model for Google to make a single penny off of payments back then. Even worse, there were 12 parties in the NFC ecosystem, all looking for economics, yet there wasn’t a dime to share between all of them (blog). Now wrap all this silliness into a MNO consortium with the name ISIS.. yep.. What a great brand!
  3. From 2008-2014 the GSMA had a global vision for managing the phone’s secure storage (see blog) and monetizing it for the MNOs. MNOs could control either the secure storage within the SIM card with Single Wire Protocol (SWP) or within the secure element.
  4. ApplePay’s 2014 launch did several things that changed the game. 1) Ripped away control of the SE from MNOs and OEMs, 2) integrated payments and security into the OS (Card in SE, biometrics in Secure Enclave), 3) required a card to activate a new phone, 4) Created economics with the networks for payment (see blog).
  5. From 2007-2014, US Issuers wanted to only enable credit cards for contactless (a premium experience). 27 Issuers (led by Citi’s Paul Galant) were working on their own wallet, to “own” mobile payments (see Civil War). In 2014 launch of ApplePay, Apple forced the Issuers to enable debit at parity to Credit, and also gave Issuers a take it or leave it revenue share (15bps in US, 7bps in EU and ROW). Charlie Sharff (then CEO of Visa) also established a fundamental network rule in “no wrapping”. You can’t wrap a Visa card with another number and let it operate. A rule that was ahead of its time and also more formerly established with Durbin regulations.
  6. The 27 bank project thus floundered for 16 yrs until last year when saw  the light of day in PAZE. Paze is Gen 5 of this effort, and really a white label version of SRC. A wallet that abandons the POS and focuses on eCom with Visa given the reigns as the lead architect only last year (see eCom Politics and Scenarios)
  7. Today, Issuers classify Apple as “enemy number 1” because of the 15bps fee that the Issuers voluntarily signed up for. Their renewed complaint is that merchant discounts (ie 45 bps and Costco, Walmart and Target) puts them upside down on transaction economics. Apple’s position (anecdotally)  is “you knew what my fee was when you gave the discounts.. You voluntarily signed the agreement.. And now its successful you want a discount”? (see 2022 US Payments Environment)
  8. Visa and Mastercard have become the identity infrastructure for the internet because of the binding of identity to payment. India’s UIDAI and UPI have shown the power of separating identity from payment. Europe is working to build a new digital identity infrastructure (and wallet) in eIDAS. Commerccially, Fast Identity Online (FIDO) is at the heart of new eCommerce experiences that will massively disrupt investments in risk and fraud infrastructure. These services are in Card Networks Payment Passkeys, PayPal’s Fastlane and others. These first generation identity services will be surpassed by 2nd generation identity solutions with hardware bound credentials. Google’s Seccure Payment Authentication (SPA) is the best in class authentication solution globally. (also see Adios 3DS hello FIDO2). 
  9. While the tech changing eCom is amazing, there are only 3 options for organizing it into a successful platform: 1) Government Led, 2) Standards Led, 3) Commercial (payment) Network. Of the 3 only V/MA have established an economic model where participants can invest (see Identity Models and my new blog this week on topic)
  10. Wallets have grown substantially from “payments” to the consumer interaction point for “everything” between the virtual and physical world. Door keys, concert tickets, boarding passes, DLs, loyalty cards, student IDs (see Apple’s list of UC’s it will support). 

     

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Visa Expands the Pipe

Flexible Credentials

© Starpoint LLP, 2024. No part of this site, blog.starpointllp.com, may be reproduced or retransmitted, in whole or in part, in any manner without the permission of the copyright owner.

Background

Visa’s network is the largest commercial network in the world, moving over $15T in volume over 4.3B cards in over 200 countries. Visa’s core is called VisaNet, a real-time messaging network between banks. They don’t move money but send instructions to and from banks, merchants, consumers and other approved third parties. The banks move the money, primarily through net settlement on ACH.  The beauty behind Visa’s network is its operating model, which allows thousands of partners to invest billions of dollars. To defeat Visa, you not only have to create a better network, but you must also create a better economic model for EVERYONE to switch, AND overcome the combined investment of all current stakeholders. This is why SEPA failed (see Power of Bank Networks). 

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Short Blog – DOJ/Apple and Visa/MA Settlement

Apple/DOJ

Updated 3/28 to cover Honor All Wallets

Most of us saw the news on Friday that “The Justice Department, 15 states and the District of Columbia sued Apple on Thursday, alleging the tech giant makes it difficult for competitors to integrate with the iPhone” – WSJ 3/21

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