New Decoupled Debit – Affirm/Plaid/Marqeta

Riding on my blog Plaid and Decoupled Debit.. It looks like Plaid and Marqeta just created a new product with Affirm as the first customer. 

Affirm Debit Card – https://www.affirm.com/debit

Oh the banks will love this.. I do notice there is no network brand on these cards (I can see). When Target did this (2010) they had to create their own network as neither of the networks would allow it.  Google also did something similar in 2012 with Discover, but it wrapped other “cards” and paid full interchange to each bank. The Affirm debit is a decoupled debit that hits ACH. My guess is that Affirm is taking the risk.. Given they are already underwriting the consumer… and it MAY be running on a PIN debit network however the website says it is Visa (hard for me to fathom).  

“In-store or online, Debit+ gives you payment flexibility wherever Visa is accepted.”

From the website

Banks had better act fast or a brand new payment scheme will quickly deploy given the ability of Marqeta/Plaid to scale decoupled debit with other players. 

Can the banks “stop this”? Yep.. Top Actions Banks can take:

  1. Educate consumers on loss of consumer protections. 
  2. Do not share your online banking credentials and turn on 2 factor authentication
  3. Block Plaid from scraping
  4. Block the ODFI initiating the transaction
  5. Take action with Visa or PIN debit network (or sponsor bank allowing this). 
  6. Launch Pay with Zelle to gain consumer mindshare and establish behavior.

I know how the Banks reacted when Google Launched (I was there).. And can tell you their energy level is very high given plans around RTP, Zelle and organic card initiatives.  If V is card sponsor.. the SH&* storm that will hit them for issuers is going to be something to behold.

Thought for the day.. In this model you don’t even need a NeoBank that runs on a card platform. This model relegates Banks to owning all the compliance and costs.. while a FINTECH skims the revenue. A much better model if it holds. Who needs PSD2 (when you have Visa).

Big Picture

Over the last 10 yrs the networks have wanted to push innovation and take a role in Fintech only to have been told “no” by the issuing banks. Strategically Visa has to make a bet on the future.. either continue to listen to issuers.. or bet on supporting FinTech. The reason this product is “big news” is that it has just exposed Visa’s hand: betting on Fintech. Mastercard will have to follow suit here.. leaving Issuers no option.. this is a dramatic power shift. This dynamic also brings clarity into WHY Banks continue to work toward creating their own network.

V/MA have a brilliant model which enable millions of businesses to invest with defined: economics, standards, certification, compliance, …etc. Whereas PSD2 and “open banking” is regulatory driven (defines interoperability with NO economics), a V/MA approach would have all covered. These next few years will be a period of flux and muscle flexing as Banks work to stymie efforts that they don’t drive. I would encourage banks to be more than “sand in the gears”. Top recommendation.. launch Pay with Zelle.. today (they are ready).

I can’t help but also think of the years of effort PayPal made in “issuer peace agreements” where they walked away from steering to ACH and took the hit on interchange. 10 yrs ago PayPal was the only entity capable of assuming risk on an eCommerce/mCommerce ACH transaction. Now there are others can manage AND Visa is supporting it (the PayPal ACH model). Wow how times change.

Investor Considerations

  1. No Visa GDV loss, but potential loss of Issuers to MA if they don’t support decoupled debit
  2. Improved profitability for Affirm
  3. Significant impact to Retail Bank NRFF (Durbin Banks)
  4. Growing importance of Identity and Fraud in distributed payments. 
  5. Merchants will lose Durbin pricing as debit mix changes. 

5 thoughts on “New Decoupled Debit – Affirm/Plaid/Marqeta”

  1. Debitman would be proud!
    In addition to Visa, I think one other unaffiliated PIN debit network must be supporting this (otherwise merchants will not have the transaction routing options they are entitled to under current regulations).
    Some interesting items on the FAQ list:
    – Can I use Debit+ abroad? Right now, the Affirm Debit+ card is only accepted in the U.S.
    – Can I use this card at ATMs? The card currently doesn’t support ATM withdrawals. [What about cash-back at the supermarket?]
    – How do I add my virtual card to my wallet? Simply open the Affirm Debit+ app, select the Account icon, and tap Add to Apple Pay or Google Pay. [Is Visa the TSP?]

  2. Hi Tom, thanks a lot for another thoughtful post. I’m a big fan of the blog and I appreciate all you do for us readers. Quick question for you: with such high levels of innovation going on in the payments ecosystem, what are your thoughts on the direction of the networks’(V/MA) moats? Thanks! Rodrigo

      1. What about the moats of V and MA? Seems like, so far, fintechs have opted to mostly use their rails. Understand the banks are very vulnerable, but my question was more around the networks.

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