Retailers should tread very carefully in direct issuer connections
My focus over the last 18 months has been identity, trust, authorization and assertions. Today I thought we would get under the hood a little on the technology of authorization and the current operational issues with a key network service: 3DS.
~$700B GDV opportunity for breakout volume growth as the network could “double” in scale as every cardholder could become a “merchant” in 20-30 min.
This month was a first! During my 25 yrs in payments, I could accept a card payment (in person) with no additional hardware. Enrolling as a Square merchant took only 30 min and I was then live with Apple Tap and Pay. A fantastic experience! (see Square). This is a tremendous “team effort” by Visa (VAS), Apple (See Mobeewave blog) and Square (as PayFac).
Continue readingMy last blog on topic was less than a month ago Real Time Payments in US – Strategic Shifts (Jan 2023), and also FedNow (Dec 2021). Will thus keep this blog to summary bullets.
The Strategic Innovation Era
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This blog has been sitting at 80% for almost 3 months. Sorry for the delay. This was a 30 page blog that I slimmed down to 16. Thus the long summary section. This blog is focused on networks and their ability to: 1) internally charter their own evolution, 2) grow network of supporting stakeholders, 3) stimulate network growth, and 4) encourage investment/innovation. Why read this? Payment innovation is set to grow Global GDV by 50% (above baseline) over the next 5-7 yrs. Today’s blog is a basis for this hypothesis.
A very long blog with 3 page summary below
Happy After Thanksgiving! Hope everyone was able to enjoy a wonderful time with family and friends. Today is the 3rd installment of the series, a long blog.
The next big network wave is here. Call it web 2.5 or 3.0, but the integration of payments into “everything” is a major event. Payments are the “trust layer” that TRANSFORM anonymous nodes providing uncertain service into known, defined and guaranteed service providers. Effective communities require value exchange and “trust”. The payment trust function enables networks to evolve from “cost free” discovery and information sharing, into transactional resource/service exchange: from read-write to read-write-execute. Sure we could call the wave “trust” but the only ubiquitous “trust network” is payments so I prefer to keep payment wave as the naming convention.
Per my June blog BNPL – Travel Example, I laid out how Airlines were a logical focus for BNPL. It seems that Issuers are either reading my blog, or coming to the same conclusions as SRC is likely to launch first with Airlines.
Continue readingThe Bull Case for V/MA (24 pages).
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Part 1 – US Payments Environment covered the complexity of the US payment environment and the challenges faced by top banks in modernizing their systems (where all systems live forever). There are many types of payments: bill payments, A2A, P2P, wires.. Today the focus is on how banks intermediate commerce. Banks MUST have networks as every bank can’t connect to every consumer/merchant. Effective Bank networks (aka rails) are NOT a commodity service, but one that allows the banks to leverage their unique ability to assume risk.
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 readingAs 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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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.