EPI – Quick Take

16 banks in Europe just announced the European Payment Initiative (EPI) to tackle retail payments.

In November 2019 the Eurosystem relaunched its retail payments strategy, calling for increased collaboration between European stakeholders to provide payment services that meet the needs of European customers and strengthen the autonomy of the European retail payments market

European Central Bank, PR July 2 2020

What are the drivers? The ECB asked banks to do it… thats just about it.

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Finicity, Plaid, Tokens and Network of Networks

Summary

  • Primary driver of finicity/Plaid deals is not open banking, but in support of the “network of networks” strategy.
  • The owner of the consumer directory, will rule payments. Tokens are the central battle field for trust networks (and payment network) consolidation as well as new services. 
  • MA lost out on the Plaid purchase, but is likely to end up far better off for it. 
  • The Visa/Plaid deal is likely to fall through as the retain consumer credentials for 5yr (claimed by class action).
  • V/MA will likely own the payment token directory 
    • Visa is leading – 1B tokens issued by Visa (acquisition of BellID/Rambus)
    • Mastercard Track  successfully leads the market in global B2B Least Cost Routing
  • V/MA have substantial hurdles in expanding the directory beyond payments
    • Few direct consumer or merchant relationships
    • Bank and Apple/Google leadership in Customer Identity/Trust
    • Trust is the core of bank risk management (and Bank margin)
    • Network effects decrease transaction costs for established services and increase value (acceptance). However they have the reverse effect on new services.
    • Value/Margin is migrating to the ends of the network and many new networks are forming. 
    • The energy to manage participation in multiple networks is dropping (with Mobile). Enabling specialized networks that cater more finely to precise needs of each node. 
    • V/MA will see substantial growth in core payment volume with continued network effects and the breakdown of Payment silos.
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PayPal Threats – 2020

I’m a big fan of PayPal, but as they approach 100x earnings I’m on the look out for risks. While PayPal is BEST positioned as the ONLY company to solely focus on eCommerce payments AND A UNIQUE ability to “own the rules”as a 3 party network, they are not without significant risk. 2020 has 2 major threats that can hit them very very quickly.

#1 Apple Pay in Browser

I’ve been writing about this for 5 years and it is finally here. While I was certainly off in my projected 2016 timing, I was not off in the user experience. Take 2 minutes to do the following

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EU probe of Apple Pay

17 Jun 2020

Short Blog today. Before jumping in.. I’ve been working on 2 significant blog series

  1. Consolidation in Financial Services. Given convergence of several forces, we are in the midst of a consolidation of networks, and services. The pandemic has placed new strains on sub scale players, which will provide the basis for significant M&A. My involvement in the deal flow has slowed the writing down.  
  2. Big Tech, Neo Banks and Financial Services. Looking to give the “inside baseball” look at what is really happening.

I’ve got over 100 pages of material… hope to get it out in bite size chunks in a few weeks.

EU and Apple Pay

From today’s WSJ and also on Forbes, the EU announced 2 investigations:

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Payments in the Pandemic – Paypal

Paypal is very well positioned to capture new volume both short term and long term growth

First off, best wishes to you and your family during these challenging times. I had intended to get this out last week, but found the need to invest in family. My family is doing fine, I’m fortunate to have all of my children, grandchildren and parents within 10 miles of Davidson North Carolina. We are like the rest of you, navigating needs for family support and volunteering in our community.. All of which has changed up our schedules. My hope is that we all find some way to create good out of this terrible event. 

In this Blog

  1. Massive disruption in Commerce has created fundamental changes in payments and consumer behavior. 
    • Discretionary and T+E spend is dropping 40-80%. Visa and Mastercard have both revised growth from mid teens to low single digits. Paypal has maintained low end guidance. 
    • eCommerce is clear winner right now, estimate that Paypal’s core eCommerce TPV could be 40-60% above average 
    • Consumer behavior changes driven by the pandemic will rapidly accelerate the move away from physical retail (See 1 April WSJ).
  2. Paypal is very well positioned to capture new volume both short term and long term growth.
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New Bank Consortium Created Around Akoya

WSJ Thursday 2/20 – Fidelity Spinning out Akoya

Much more than a spin out.. 12-18 banks got together and purchased Akoya with FMR retaining some of the equity. The new entity will have a BOD and Advisory committee comprised of banks. 

Akoya is the “data middleman” between bank platforms and aggregates. For example, if JPMC or Bank of America had an existing OFX service, Akoya could wrap that bespoke integration, add tokenized credentials and be the common integration point for PLAID, Intuit or Yodlee.

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Apple Card

Short blog on the Apple card and Apple’s history in bringing ApplePay to market

21 Jan 2020

iPhone showing Apple Card and stats.

I love my Apple Card.. both the physical card – with its wonderful “feel” – as well as the virtual card and how it is integrated into the Apple Pay Wallet. These payment jewels are all part of a Services Business growing at 20% CAGR that could be worth $650B by next year (MotleyFool).

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Adios Visa Checkout

17 January – Good news.. the right thing just happened.

branding nascar

This week we finally saw the “official death” of Visa Checkout and Mastercard’s “Masterpass”. Do you remember all those Superbowl commercials with Arizona wide receiver Larry Fitzgerald? Per my April 2018 blog, this “branded button” approach makes no sense at all at a time where Visa/MA are positioned to play a much more critical position as the central token directory. This means we will no longer see the “NASCAR like Checkout” I referenced 5 yrs ago when JPMC launched the much ridiculed ChasePay. Visa’s top 5 brand will no longer have an appended “checkout” on it (which no one used or understood).

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Plaid – Quick Take

My quick read on Visa’s acquisition of Plaid

I’m back to blogging after a successful exit last month. The Plaid acquisition is a great way for me to jump back in. Why read this? A key to understanding payments, banking and data is to balance historical knowledge with a network of people that know what is really happening behind the scenes. As the former head of two direct banks, former Senior Director of Oracle’s advanced technology solution’s practice and Yodlee’s first customer I have an informed perspective on the market for this one. 

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Big Moves in Payments

21 March 2019

Happy First Day of Spring! I don’t know how many people still read this silly blog. I’m in a CEO time warp and just realized I haven’t written anything since NOVEMBER!! This will be a short blog with some random thoughts.

Big moves in Payments this quarter.

  1. Visa, Mastercard, Paypal, Global Payments and others are at ALL TIME HIGHS today.
  2. Worldpay to be acquired by FIS for $43B
  3. First Data to be acquired by Fiserv for $22B (all stock)

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