Guest post today from my General Counsel and Chief Privacy Officer Russell Schrader. For those of you who don’t know Russ, he spent 18 yrs with Visa as their first Chief Privacy Officer.Russ just got back from almost 3 weeks in Asia Continue reading “China Payments – Field Trip with Russ”
Apple announced Apple Pay Cash yesterday at their WWDC (see recode article). Summary.. Apple gets an A+! I love the simplicity and the intuitive nature of how this works in a messaging metaphor that customers are familiar with (ie not introducing another app). Continue reading “Apple Pay Cash – Gets an A+”
Its tough to find time to Blog as a CEO…. Most of you my blogs are sometimes snarky and tactless (making NOT offending someone a new consideration).
I was taking a look at JPMC’s latest investor presentation and noticed that ChaseNet is gone.. Why? I’ve written on JPMC and ChaseNet a number of times over last 6 yrs. Today I’ll cover my views on the latest developments and my views on JPMC’s ChaseNet strategy. Lets recap first: Continue reading “Chase Net 2017”
No one reads my long blogs.. so my 2017 resolution is to break them up into smaller thought “chunks”.
I can’t believe its been 2.5 yrs since I wrote Brokering Identity. The central element of that blog, and today is to take a “trust” view of Network and Platform strategies. The rules, standards and processes by which trust is managed are critical to the success of networked businesses and markets from eBay to Visa/MA to the NYSE. Continue reading “Trust – Part 1”
I’m super excited about ApplePay in browser (my last blog)… and how it works with the touch ID in the new Macbook. Online merchants have only a few days of effort (see Stripe) to integrate into online checkout flows. ApplePay eCommerce will blast past POS volume in 18 month (from today). Continue reading “ApplePay Math”
50% of my readers are friends .. it is my way to communicate.. For those wondering what I’ve been up to, we have our first webinar next week (below) and a fantastic article in Marketing Land. Continue reading “First Webinar… First Product”
I’m excited to announce the launch of our first product, databridgeTM. It’s no secret that banks, retailers and mobile operators have great data. The challenge for these companies has been in how they let their data “play” in a privacy-centric model that controls both WHO can use the data and HOW the data is used (see Data Leakage). This is the core of databridge, with an initial focus on enabling transaction data to measure marketing effectiveness. Continue reading “Commerce Signals Launches databridge”
Money 2020 was a little short on big announcements. My #1? Visa/Chain announcement. Chain will open its entire platform (software core) to developers enabling distributed innovation (ie investment) by hundreds of start-ups and bespoke networks looking to connect. My #1 bet is that the first focus area for Visa/Chain will be in replacing SWIFT. For those not familiar with the intricacies of global commercial money transfer via SWIFT see my youtube video.
SWIFT is a global messaging network that enables all member banks to communicate in common language, it handles no funds, nor does it manage settlement. Swift sends standard messages to banks to settle funds. In the SWIFT model the instruction is normally sent by the originator of the payment to a beneficiary. Originating banks can determine which set of correspondent banks to use (think routing control).
- Real time gross settlement (RTGS) is only possible if all parties have funds in a common settlement entity.
- Fedwire, NYSE, ..have real time settlement as all “members” have funded accounts for a net settlement (think daily margin calls).. but all other US payment networks are messaging only, with settlement handled as a (daily) back end process.
The idea of Blockchain “replacing” SWIFT is not new, Ripple has been working with Santander, Bank of America and others (see Finextra). Ripple is both messaging, and real-time gross settlement system (RTGS in XRPs). Ripple’s messaging is called the Ripple Transaction Protocol (RTXP) or Ripple protocol, it is built upon a distributed open source Internet protocol, consensus ledger and native currency called XRP (ripples). Think of Ripples as a private bitcoin. One of the most common criticisms of Ripple is that Of the 100 billion XRPs created, 20 billion XRP were retained by the creators, who were also the founders of Ripple Labs.
Chain on the other hand is blockchain infrastructure (great WSJ article) open for innovation. Chain powers distributed ledger(s) for multiple uses. Think of Chain as enabling each bank to have a local copy of a indisputable record… an incorruptible and infallible accounting ledger. Fund transfer certainly needs such a record, but for “accounting” to be effective there must be trust and settlement. Note that Ripple handles this settlement problem (XRP ownership ledger) trust, but has issuess in conversion to the “common XRP currency”.
Trust among financial intuitions is historically managed by networks and operating rules. For example there are operating rule for NACHA, Visa, Mastercard, … etc. Operating rules also are governed by laws and regulation (ex WHO can transact, how are transactions reversed, how are participants certified). I would argue that a payment network’s greatest asset is Trust among parties (and devices, form factors), with each participant governed by complex sets of rules, terms, certifications, operations, standards.
Important to note that Blockchain doesn’t require trust to properly record transaction, but rather rules to take action upon the ledger’s data. In other words, it is technically feasible to give a copy of the transaction ledger to every participant (who owes what to whom every day). However it is very hard for banks to take action on the ledger’s data (Transferring money – ex net settlement) without a trust/settlement network. The common ledger is a must improved messaging approach, that still requires a operating rules (Trust) and a Settlement Approach.
Mastercard’s acquisition of Vocalink (the UK’s Settlement network) enables them to lead in commercial (and debit) transactions for both UK and US. This is a brilliant move, but certainly much more of a traditional technology/architecture approach. The challenge with Vocalink is that innovation is constrained by existing customers and services.
Chain/Visa has the opportunity to disrupt the commercial payment landscape, particularly when viewed in combination with Visa’s existing card network and a new settlement system. For example, most Visa transactions were settled at end of day through JPM Chase (every Visa member had settlement account). For cross border transactions, Visa’s settlement “hubs” have correspondent relationships.
If Visa created a new Chain settlement infrastructure, or had member Bank support to leverage current infrastructure, it could quickly replace SWIFT with a far superior product which would offer transaction clearing times in 24 hrs (vs the 2-7 days with Swift). The biggest unknown is what part of Visa’s current operating rules could be leveraged to create this new settlement infrastructure. For the economic opportunity see this Fed Study
Each year, I make predictions about what to expect during the Money20/20 Conference in October. This year, I expect to see innovation in the following areas:
- New merchant value propositions
- Delivering value beyond the payment transaction
- More collaboration
- Payment in the OS
- Transformation of commercial networks
My blog was upgraded to recode today.. see link below
Looks like I was wrong… I’m now 80% confident that Paypal has struck deal with at least one network to tokenize. Congrats to the Paypal team for reducing risk and creating opportunity to compete at parity with Apple, Google, FB and others.
What to expect Thursday? Paypal will tokenize, commit to no steering and share transaction data.
- Elimination of the staged Digital wallet fee (or equiv circa MA 2012)
- Ability to benefit from 3DS 2.0 (Shift liability, and Reduced Interchange)
- Reduced risk and certainty in Network/Bank relationships
- Transaction Economics/Take Rate as consumers will chose default payment option
- Each issuer can decide to tokenize per VDEP/MDES. If no issuers take part there is not 3DS 2.0 benefit
- Consumer Choice in Payment (Increased Volume)
- Reduced Risks from Cards on File
- Standardization of Tokens
- Competition to Network Wallets at Parity (Visa Checkout/Masterpass)
- Consumer Choice/Volume (Card vs ACH)
- Control over tokenization/rate to Paypal
- Ability to structure bilateral deals with PayPal (risk and rate)
- Reduced ACH
- Issuer branded wallets
My guess is that Paypal moved earnings call to articulate the take rate implications to steering elimination. Paypal must give up steering and transaction economics in the hope that Issuers will agree to tokenize. This puts Paypal at Parity with others like Google. Whereas Apple has been able to extract 15 bps from issuers to gain the privilege of being in ApplePay, Google continues to work to convince issuers such as Chase to be part of Android Pay. JPMC actually asked google for payment to tokenize.
Summary here is that issuers have a new control point in pricing with Paypal. My guess is that Paypal will come out with at least one major bank supporting them. Given JPMC is Paypal’s acquirer I would expect a deal here.