Short Blog
I’ve had quite a few inbound calls on Durbin and Debit in eCom so I thought it was time for a short blog. Note this is my 90% confidence view talking to 3 of the top retailers and 2 of the top processors.
FRB Durbin in eCom
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Category Archives: Cards
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”.
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.
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
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:
- Start a community discussion
- Assess the potential for a much more strategic driver behind the proposed Durbin bill
- 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.
New MA Rate Tier for Installments (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 readingDual Routing for ?Credit?
Apple Finance – ?Tipping Point?
Bloomberg beat me to the punch with their great article last night on Apple Pay Later and Apple Finance LLC (must read). Well, I was certainly wrong about one big thing in my Project Breakout blog “Apple doesn’t want to be a bank”. Quite frankly I believe even Goldman Sachs was surprised by the scale of what Apple is building. Last night I outlined the key points:
Apple Pay Later – What is it?
Apple announced a new service at WWDC 2022 yesterday (Youtube – ~21:00 in). What is it and how does it relate to their recent acquisition of Credit Kudos?