Just read David Marcus’ blog on Beacons, HCE and Alerts. I agree with him on just about everything… except Paypal’s opportunity in the physical world.
Why do Banks love tokens? HCE – Now the preferred contactless approach addressed this in Feb. HCE aligns to everything that Banks and Networks do today:
- Manage Risk and Fraud
- Manage Consumer Authentication
- Intelligence with bank and network
- Trust is in the network. Networks ARE the TSMs (or rather TSPs)
- Banks leverage 4 years of investment in TCH token scheme (ex Token Service Provider)
- Banks expand mobile app capability with payment
- Banks are in complete control of who can use their cards where
- No more TSM, Payment is in the OS, No more dedicated NFC chipsets, and the MNO lock is gone.
Now imagine Paypal’s role here
In this world.. Banks make nothing (for ACH funded transactions) and merchants get stuck with 210-180bps for everything.. this is the “Blended rate” deal. Is there any wonder why merchants aren’t running to enable contactless?
As I wrote in my blog.. at least Google has a value proposition charging the merchant a maximum of 160bps and paying Banks the full rate of interchange (see Google/TXVIA, and Tokens, Rules, Wrapping and Acquiring).
Google/TXVIA is actually the only production physical POS “token” solution in the market. Osama Bedier made this happen through the TXVIA acquisition…. a brilliant move. It works today.. and I’m still struck by the insanity surrounding Banks and Network plans to kill it. It makes no sense at all!! The only production token platform, providing value to everyone.. yet the Banks HATE IT.. why? They don’t want google to see transaction data. You can only imagine the odds against Paypal as they work to serve their own interest.
To be a successful payment provider you must have a solid business case to AT LEAST 2 of the parties: Consumer, Bank, Merchant. Visa and MasterCard built theirs around consumer and Bank, Starbucks on Consumer and Merchant. Oystercard on Consumer and Merchant. PayPal….? Consumer and ??? Well it is NOT delivering revenue to the Bank.. and given its cost it is NOT delivering value to the merchant. The reason PayPal succeeded in its early days was it solved a real problem: card acceptance online. It has no chance of competing in the much more hotly contested POS world … particularly without any value proposition.
Yes Paypal will be a payment option in the new Apple Payments scheme (it fought very hard for this win). As I stated previously Payments have moved into the Operating System and Payal DOESN’T HAVE ONE. But this is not a win at all.. they still must convince both consumer and merchant to use Paypal… it is just an option.
FYI… see the new card present standard on tokenization EMVCo Tokenization, Mar 2014.