A snarky blog. My views on why the role of card networks will grow in the midst of this change (along with Network VAS).
Buckle up buttercups, because the commerce, banking, and payments world is getting a facelift so extreme, it’ll make a Kardashian look like a Luddite. If you thought Web 3.0 and its decentralized pipe dreams were the next big thing, bless your heart. AI and Agentic Commerce are the actual party, and they’re about to flip the table.
The Opaque Kludgy Old Commerce World is Going Fast
For ages, Visa and Mastercard were the bouncers of the internet, the de facto identity infrastructure. Sweet gig, and it involved a lot of HARD work with many difficult parties. Banks won BIG TIME because Visa and Mastercard provided the network, messages, services, governance, and rules that kept banks in the leadership position. However, that cozy bundle of identity and payments is under siege. Not because some scrappy startup built a better mousetrap, but because Large Issuers are getting delusions of grandeur, thinking they can cook up their own walled gardens. Adorable.
Let’s be real: traditional banking products like checking and savings accounts are dinosaurs. They’re rigid, clunky, and desperately need a makeover. Maybe that’s the secret sauce in Capital One’s Discover play – finally letting an AI do the banking because, frankly, the current setup is a mess. Core banking platforms? Expensive, inflexible, and about as agile as a glacier. While other industries innovate at warp speed, banking is stuck in the mud. Money needs to flow, connect, and integrate, not sit in archaic digital shoeboxes. Visa’s PISMO acquisition? A clear sign they know modern, hosted platforms are the future.
And fraud? Don’t even get me started. For years, “sophisticated” eCommerce fraud analysis meant looking at an IP address and browser version (ie device analytics, see blog). That’s not a consumer credential; it’s a crude joke.
2025 – The Tech Tsunami
But fear not, the cavalry’s here, and it’s armed with silicon:
- AI is Eating Software: Tools like Anthropic’s Claude aren’t just cool; they’re revolutionizing software development, making everything faster, smarter, and more adaptable.
- Agentic – Commerce becomes both automated and conversational on any connected device. So much for all that kludgy device based fraud detection it won’t work. Oh, for retailers that means there is no checkout page.. You get an order with a payment instrument (see blog).
- You’re Connected to Everything: Your phone, your Alexa, your TV, your Android Auto, your watch, your smart toaster – they’re all potential commerce points. Every appliance is a checkout counter waiting to happen.
- Identity Gets Real: We’re finally moving beyond digital breadcrumbs. Standards like FIDO and government-issued digital credentials (think digital driver’s licenses and passports) are changing the game. We’re Separating Payment and Identity in a secure, sensible way.
- Phones are Fort Knox: Your pocket computer, thanks to things like Apple’s secure enclave and Google’s Titan M2 security chip, is a vault for secure credentials.
The “Duh” Moment: Why Card Networks Will Dominate
Here’s the kicker: “All of the components to do something GREAT are spread across multiple innovators. The challenge is NOT the technical wiring, but in the commercial terms of interaction (by the entities driving each of these innovations).”
And that, my friends, is where Visa and Mastercard play their trump card. It’s not just about slinging transaction data. They provide the payment rails, the identity framework, standards AND the governance – the rules of engagement that make it all work. They connect all consumers, all merchants, and all banks with an ECONOMIC MODEL that, shockingly, makes people want to participate.
Visa, in particular, has been smart, collaborating with Big Tech and FinTech. Collaboration must happen. The insanity of naming Apple “enemy #1.” It’s baffling. Apple is the most card-friendly Big Tech player on the planet precisely because the card economics give them a juicy incentive to invest and play nice. Talk about biting the hand that feeds you!
The Real Fight: Keeping Everyone in the Boat
The challenge for Card Networks and Banks isn’t the tech; it’s politics and inertia. It’s about keeping everyone rowing in the same direction during this hurricane of disruption. Banks need to wake up and enable these agentic solutions now, before local domestic schemes or some shiny new stablecoin gain serious traction.
Europe will be the proving ground. The ECB is already making noises about alternatives. And yeah, nimble little networks like Sweden’s SWISH can innovate like crazy, especially with AI coding tools. But Card Networks have global ubiquity and deep ties to the US tech platforms that are driving much of this innovation. These are massive advantages, but they’re useless if Issuers keep throwing tantrums and resisting crucial network upgrades like FIDO, SRC, and Cloud Tokens.
In my view the future looks like a network of networks, and guess who’s best positioned to be the grand central station?
The Inescapable Conclusion
All this upheaval? It’s going to make card networks more critical, not less. Building the tech is the (relatively) easy part. Building the scalable economic model and the active governance for global identity and payment? That’s the Mount Everest very few have proven capable of climbing. The non-card success stories, like India’s UPI, required a decade of national ID groundwork, government mandates, currency re-issuance, and supporting laws. Good luck replicating that in the fragmented West.
So, Visa and Mastercard will absolutely expand their value-added services. They’ll provide new centralized services for Agentic Commerce and eCommerce because they are the only players with the reach, the rules, and the revenue model to make it all hang together at scale. Everyone else is just bringing a knife to a gunfight.