US Payments Environment – Something Big – 5 Part Series

Part 1 – Assessing the Environment and Setting the Focus  (part 2  – Power of Bank Networks)

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Must read FT article “How JPMC’s plan to kill credit cards split the bank”. The article discusses Jamie Dimon’s internal mandate to drive a new payment network. I was shocked with the level of internal org quotes here.  In my view, Jamie is the best bank CEOs in history (based on performance and talent coming out of JPMC). As a former banker, I know how hard it is to move the ship.  However, FT is wrong. Chase’s efforts ARE NOT about killing credit cards, but rather creating something much bigger.

This is a long blog..

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Pay By Bank – Where does it work and why?

Pay by Bank (aka Push Payments) are tremendous efforts driven by local market bank groups. Their core success is in cash replacement (ex P2P) and where there is high consumer-merchant trust (ie bill pay/recurring payments). Data clearly show that Push Payments are NOT a threat to V/MA but part of a rising electronic payment “tide” that lifts all boats. 

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Friday I was a tad “let down” in the Sionic/TCH/MX release of Pay-by-Bank. Per my blog on Google/TCH launch and Google P2P I was anticipating something much bigger. To be clear I firmly believe that TCH is working on an “ApplePay Competitor”, which will entail TCH tokens inside of Google’s phone, but this will be 3-6 months out.  Per the blogs above, I see neither pay-by-bank nor TCH Tokens in Google Pay as a threat to V/MA. 

Today I thought I would drill down into “pay by bank”, the dynamics of why it works in some markets, and why I see little threat to V/MA in replacing core cards in eCom or at POS.

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Google/TCH Launch – Banks Hire New Network CEO

Something is launching next week (rumor 8/23) with Google, TCH and at least 4 banks. The banks have just hired a new CEO to run it with a “network background”.

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September 7 BEFORE YOU READ. This blog is dated. 3 key updates

  1. The launch was a very small TCH RTP effort. Forbes Article on Launch of Pay by Bank using TCH. Google’s role seems to be limited to hosting servers in the Google Cloud. This was NOT the big announcement I thought was coming. It looks like the TCH tokens in Google Wallet will be a few more months away.
  2. TCH’s primary focus this year is an eCom wallet focused on the Secure Remote Commerce Model (see blog)
  3. Neither Apple nor Google are involved in any of these activities, yet Google is working to pilot both FedNow and TCH RTP to leverage their India UPI success.

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Something is launching next week (rumor 8/23 pilot) with Google, TCH and at least 4 banks. The banks have just hired a new CEO to run it with a “network background”. This is likely a new consortium, and we will see changes in where the assets of TCH, Akoya and Early Warning line up. This CEO will be tasked with creating a new network to “compete with ApplePay” as the premier mobile payment platform.

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Durbin 2 – Short Update

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What are the new Durbin’s legislative prospects? A: Not at all likely (<10% probability)

Top retailers spent this week meeting with Bank CEOs trying to convince them to support the new Durbin legislation. Their pitch was to enable bi-lateral deals, “new products” and avoid network rules (see blog). Banks did not seem to bite, as they remembered the lessons of Durbin 1:

  • Only largest merchants benefited from dual routing
  • Consumers lost in debit rewards (ie keep the change), increased bank account fees, and no merchant pass-through of savings
  • Acquirers/processors did not pass through fee reductions to most merchants
  • Networks recovered lost revenue through merchant fees
  • Large banks lost competitive advantage as smaller “exempt” banks under $10B operated under different rules
  • See WSJ article

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TCH Tokens in eCom SRC Model

TCH tokens will be in Apple/Google in next 6 months with Request for Payment as the primary scheme

Part 1 – Current US Routing Rules

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IMPORTANT – Update September 7 BEFORE YOU READ. This blog is dated. 3 key updates:

Why should you read this? The top ~25 banks have been working on this for over 10 yrs and now Google and Apple are involved.

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Driving Vision of Durbin? Bi-Lateral Connections?

My latest G2 from people involved in shaping Durbin is that retailers see an opportunity to end-run networks in bilateral deals AND direct (alternate) routing. To be clear, issuers have always been able to strike bilateral deals directly with a merchant. What they have not been able to do is route these transactions off-network. 

I now have 70% confidence in the forces shaping Durbin (still no threat to V/MA). 

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Durbin 2 – Impact on “Wrapping” Rules?

A highly technical “what if” scenario involving a long-sought after change by top US card issuers. What if Durbin credit routing bill were designed to eliminate network wrapping rules?

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A highly technical “what if” scenario involving a long-sought after change by top US card issuers. I’m fortunate to have the exec teams of just about every payment network, processor and FinTech read this blog. I have 3 main drivers for writing today:

  1. Start a community discussion
  2. Assess the potential for a much more strategic driver behind the proposed Durbin bill
  3. Most “change” in US payments is driven by 7-10 players: networks, top issuers, Google, Apple, … etc. These changes have an enormous impact on the FinTechs building around them. I’m hoping to help these small companies plan around these changes as the only advantage of a start is speed.

Note I DO NOT think this scenario is likely, but rather possible (30% probability). Historical context is key and the only reason I’m spending time on this today is that 27 bank CEOs have been discussing this for over 10 yrs.

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New MA Rate Tier for Installments (ApplePay Later)?

Rumor is that Mastercard plans for a new rate tier to support installments and ApplePay Later. 

Quick 18 Aug update to Aug 1 blog below. This new rate tier was confirmed by Bloomberg this week. According to Bloomberg, Settlment product acceptance is optional for merchants (does not operate in Accept All Cards rule). Optional acceptance is quite surprising. I surveyed 3 top 10 merchants (non-grocers) and couldn’t find one that plans to sign up for the product (other than Apple).

Note that card based BNPL (consumer BNPL) has no proven market data showing increased conversions. My inclination is to believe Card based BNPL conversion will closely mirror a normal credit card. See the rationale in my blog Three Flavors of BNPL.


As I outlined in June, Apple Pay Later will be (est Oct)  is the first major launch customer of Mastercard Installments. A large retailer just related that Mastercard plans for a new rate tier to support this product. 

“Somewhere around 300 bps” – Top 5 US Merchant

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BNPL Travel Example – Short Blog

Short blog today on an example BNPL opportunity and the differences between a consumer BNPL solution like Apple Pay Later and Merchant integrated solutions from providers such as Affirm (or SQ/Afterpay see Three Flavors of BNPL).  Today Air Travel and Vacation packages are the focus.

Short blog today on an example BNPL opportunity and the differences between a consumer BNPL solution like Apple Pay Later and Merchant integrated solutions from providers such as Affirm (or SQ/Afterpay see Three Flavors of BNPL).  Today Air Travel and Vacation packages are the focus.

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Apple Finance – ?Tipping Point?

A tipping point for consumer finance? Apple is doing much more than creating a consumer finance arm (ie in the model of GM/Ford) they expanding consumer access to credit beyond their products, based upon the unique “instant” distribution they have and their knowledge of the consumer.  This platform will support the distribution of their own unique products (Apple Pay Later) as well as partner products (Apple Card with GS) and instruments core to how consumers pay (V/MA/Amex and domestic schemes). 

Bloomberg beat me to the punch with their great article last night on Apple Pay Later and Apple Finance LLC (must read). Well, I was certainly wrong about one big thing in my Project Breakout blog “Apple doesn’t want to be a bank”. Quite frankly I believe even Goldman Sachs was surprised by the scale of what Apple is building. Last night I outlined the key points:

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