Banks Launch “Wallet” (again)

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Short Blog

Per the WSJ Article this AM, US banks have launched a new wallet (again). For frequent readers of my blog, very little new news. Also, I’m just wrapping up a 15-page part 4 “Innovation in Networks” that will be out very soon. 

Quick Summary

  • TCH Banks have been contemplating a mobile wallet and a new network for 13 yrs (I have over 20 blogs on topic, see overview here). 

  • Today we gain clarity that Banks gave up on their latest Authentify Wallet launch and jumped on board a “white label” SRC wallet led by Visa (See 23Jan2023 WSJ). I outlined this in my SRC blog (Sept 2022) and TCH RTP Update.  

  • Inital pitch for this wallet was not well received by big retailers at Money 2020. It entailed a liability shift if wallet was offered and all COF were tokenized (see blog)

  • The wallet is not owned by EWS, but a new payment network led by James Anderson. The ownership of this new network is the same at EWS (see blog ). Lets call this wallet EWS SRC to shorten the name. 

  • Competitor is Apple.. the banks want to own the mobile payment experience. Google is working with the TCH banks and is also working with FedNow (long blog coming on this one). It is likely that Apple is not involved in any of these activities, yet Google is working to pilot both FedNow and TCH RTP to leverage their India UPI success.

  • Now that the largest TCH banks have jumped on board SRC, the TCH RTP effort focus has shifted to commercial flows and bill payment.

  • i provided a detailed strategic discussion on the reasoning behind this move in Part 2 – The Power of Bank Networks.

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Google’s Browser Tokens Payments

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Short Blog – Chrome AutoFill 

I missed a key development 6 months ago: Google’s Chrome autofill began using network tokens in May 2022 (see article) after the Google Wallet relauch which was announced as part of Google I/O. Google now allows issuers to provision cards to the mobile device and to the browser desperately (see Web Push Provisioning) using network tokenization services (VTS/MDES).  I discussed this in detail in my 2016 post Browser Tokens. 

A Correction to previous blogs. Google’s Chrome autofil has network tokens, but (within the US) does not obtain a liability shift. For Google autofill to get a liability shift (within network rules), they would need to enable the 3DS 2.2 authentication features. Exceptions to 3DS 2.2 are where Issuer has provisioned card with Cryptogram (ie ApplePay card provisioned into wallet by bank). See Mastercard API doc for detail.

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Debit, Routing, Tokens and Liability Shift

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Short arcane post. Dual routing of debit in ecom is much more complex than I thought. A puzzle and my head is spinning. Hang with me here as I don’t want to write a novel. This only applies to debit in the US.

The key take away? Competing PIN networks have new headwinds in tokenized PANs. Tokenization with a liability shift will protect Visa debit.

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Part 3 – Internet 2.5 – The Next “Wave” is Here

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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.

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Random Thoughts – Modularity and Trust

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Trust in a transaction. In another one of my favorite books  (Design Rules: modularity) there exists the concept of trust between physical components of an integrated system. This book stands in contrast to Nobel Economists’ work in defining the “Firm” and organizational boundaries in Transaction Cost Economics (TCE). But the technical theory of modularity is amazingly consistent with the concepts of “boundaries” in TCE. In modularity, there are 4 core rules for separating technical components:

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Part 2 – The Power of Bank Networks

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The Bull Case for V/MA (24 pages). 

© 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.

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.

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