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..

Continue reading “US Payments Environment – Something Big – 5 Part Series”

Bank Opportunity – Binding

Given the importance of proprietary networks to bank profitability, I see banks operating as the obvious authority in binding digital identity (of assets, accounts, businesses, …etc) to the physical records of ownership. Banks largely do this today, but few externalize or standardize the services/records.

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

© Starpoint LLP, 2022. No part of this site, blog.starpointllp.com, may be reproduced in whole or in part in any manner without the permission of the copyright owner.

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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Apple Finance – ?Tipping Point?

A tipping point for consumer finance? Apple is doing much more than creating a consumer finance arm (ie in the model of GM/Ford) they expanding consumer access to credit beyond their products, based upon the unique “instant” distribution they have and their knowledge of the consumer.  This platform will support the distribution of their own unique products (Apple Pay Later) as well as partner products (Apple Card with GS) and instruments core to how consumers pay (V/MA/Amex and domestic schemes). 

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:

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CBDCs – Growth Opportunities for US Banks

My view is that CBDCs offer banks a transformational opportunity to reinvent payments and retail banking. The attributes that make CBDCs great are different, and in conflict, with today’s retail banking. But these differences are not necessarily a threat. What do banks see in CBDCs that causes them to go into defense mode? Why should you look at them in a different light?

The future for a US CBDC is uncertain. While President Biden signed an executive order in March 2022 directing the government to “Explore a U.S. Central Bank Digital Currency (CBDC) by placing urgency on research and development of a potential United States CBD”, US banks seem dead against it.

This is my third blog on CBDCs, today the focus will be on the societal benefits of CBDCs, current bank resistance, and the opportunities for banks if they embrace it. The previous 2 blogs are blow and I’ll try not to repeat myself:

  • Digital Dollar (March ‘21) – Inventory of Central bank efforts and drivers with key detail on China’s digital yuan. 
  • Case for CBDC – Market Efficiency (June ‘21) – Is focused on the benefits to the unbanked and in reducing friction in low-value payments. 

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Trust Assertions – Identity Will Define the Future of Payment Networks

How others accept and validate our identity is core of payments (see Trust Networks and Authentication in Value Nets). The structure, exchange and assertions associated with identity are also defining: web3, DeFi, Crypto, CBDCs and the Metaverse. These are not separate silos, but rather overlapping ecosystems that must interact, thus the importance of bridging identity across networks/domains (see Blog – Trust is domain specific). 

©Thomas Noyes, May 2022

My blogs last week have me thinking about the changes going around in Identity. This will be a long blog. Typo warning.. I’m still revising. 

The number one thing I look for in payments is change: volume, technology, behavior, data, …etc. Effective networks are notoriously hard to change, but they are also very resilient (see blog). Small changes in data flows, can lead to significant changes in margin and “control”.  Margin and control guide both public and private investment (see Evolution of Visa and Mastercard Beyond Payments). 

Identity is our most important asset — it’s literally who we are

Our complete “identity” is known to no one, as each entity we interact with has a partial view of us based upon what we chose to give them and what they observe. How others accept and validate our identity, and how others share insight about us, is the core of payments (see Trust Networks and Authentication in Value Nets). The structure, exchange, and assertions associated with identity are defining: web3, DeFi, Crypto, CBDCs and the Metaverse. These are not separate silos, but rather overlapping ecosystems that must interact, thus the importance of bridging identity across networks/domains (see Blog – Trust is domain specific). 

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DeFi, CBDCs and Web 3.0

My perspective has been evolving as I work to build out infrastructure for “when Crypto grows up” in my new Company. I’m pleased to report that Accept Payments (acc3pt.com) went live this month and is expanding our private rollout as we fine tune all of the CX. Thought for the day… Its about trust.. 

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Square in Crypto/DeFi

#1 Today DeFi and Crypto in Commerce (POS and eCom) are in need of a “core” that can manage either compliance and connections to existing financial services, or operate in critical mass with minimal interaction to banks (ex – custody, exchange, platform, consortium-diem).

From Bloomberg yesterday 16 July

https://www.bloomberg.com/news/articles/2021-07-15/square-building-new-bitcoin-inspired-financial-services-business

Why is this a great thing for Square and DeFi?

#1 Today DeFi and Crypto in Commerce (POS and eCom) are in need of a “core” that can manage either compliance and connections to existing financial services, or operate in critical mass with minimal interaction to banks (ex – custody, exchange, platform, consortium-diem).

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Retail Banking’s “Blockbuster” Moment?

Sandy Weill’s financial supermarket vision is coming to an inglorious end…. The Blockbusters of Banking…

Last week, in his annual shareholder letter (page 28), Jamie Dimon stated “Banks have enormous competitive threats — from virtually every angle,” he said. “Fintech and Big Tech are here… big time!”

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Digital Dollar – Biggest Threat to V/MA (and USD Hegemony)

Over the last 20 yrs, most countries have implemented an RTGS system. A CBDC is a generational leap: Money itself becomes an immutable digital object that is assigned and can’t be destroyed or created without the specific direction of the Central Bank.

I doubt if this blog will be beneficial for the crypto and CDBC experts. But for my friends, I’ve linked several very detailed articles and reports… which I’ve tried to summarize.

With respect to payments, let me start with the quote of the week

“Tom look at the pace of change in China as a model. 15 yrs ago they were cash. 7 yrs ago they were China Union Pay, Now they are Alipay/WeChat Pay.. 3 tremendous changes in 10 yrs.  I believe change will happen much faster than anyone could imagine.”

– Top 5 US Retailer

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Plaid – Quick Take

My quick read on Visa’s acquisition of Plaid

I’m back to blogging after a successful exit last month. The Plaid acquisition is a great way for me to jump back in. Why read this? A key to understanding payments, banking and data is to balance historical knowledge with a network of people that know what is really happening behind the scenes. As the former head of two direct banks, former Senior Director of Oracle’s advanced technology solution’s practice and Yodlee’s first customer I have an informed perspective on the market for this one. 

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