PIX Brazil – Short Blog

Brazil’s Central Bank is now recognized as the leading innovator. Both in PIX and CDBC launch this year.

Identifying new networks is a must for any investor. The growth rate of network businesses dwarf most other models as each node invests something in joining. Mobile has transformed the time for network effects to reach critical mass – moving from 20 yrs (think debit card and mobile phones) to months. When network effects take hold, Investors see opportunity in both the network core (owner) and the periphery. We also look at how new services will impact existing established players

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Quick Take – Google Pay – Relaunch

Google just completed a massive “relaunch” of Google Pay this week.

Google just completed a massive “relaunch” of Google Pay this week. 

Recommend you read either of these 2 articles to get the details. There are 4 key elements in the launch

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Quick Blog on Apple, P2P and Clusters

12 Nov 2015


  • Most of you have seen today’s WSJ today on Apple P2P. 
  • Apple has 4 options here: FIS/Vocalink/Paynet, Mastercard, Visa, ClearxChange/Early Warning. News here is that Apple asked the BANKS for help. Banks responded that they would like for Apple to be first non-bank customer for ClearXChange (the 4 yr old bank owned P2P utility formed initially between BAC and WFC with ownership now spanning all top 6 banks). ClearX has a new owner as of Money2020: Early Warning Services, the #1 bank risk and fraud utility in the world. It is not often I compliment everyone.. but this makes sense.. for Apple, For Banks, for Consumers. The same service I use at Bank of America online to pay anyone (ex email or phone number) would be within the Apple platform. The challenge of P2P is risk management. As one of the first customers of Cashedge pop money (2005), the advantage POP had in operating the service was ACH risk management. Now the banks have that in EWS… times 100!
  • P2P in general.. what an awful space… littered with the corpses of failures. It never makes sense as a standalone service. P2P can increase the value and stickiness of existing networks (ex Facebook/Whats App, Google, Apple, …) but it is a loss leader. Google has been doing free P2P for over a year.. my guess is less than $500M in volume (at a 25bps loss).  The ULTIMATE GOAL (of free P2P) is the data associated with connecting social networks, commerce and payment networks. Early days see spot successes for specific needs. For example Venmo is almost a “banking lite” for college campuses.. it has a critical mass there, but doesn’t do well in the ROW (rest of world).  Consumer behavior is VERY VERY sensitive to pricing on P2P.. even $0.10 will make consumers jump to something else. So why would the banks want this service? The ClearXchange model is probably the best answer. The big owning banks are at either the initiating (ODFI) or the receiving (RDFI) of 70%+ of all transactions. They created an “on we” utility where payments to each other would be free, and payments outside of this group would cost for either RDFI or ODFI.    So the small banks incur the costs of ClearX.. and the large owning banks make the money..
  • Apple is apparently quite upset with Visa/MA eliminating their 15bps (through VDEP/MDES) and may be hoping to eventually enable a new V/MA competitor. They have indeed said this. However P2P will not be the place to start here. Remember Banks make money in the V/MA networks. It is one of the few models where thousands of businesses invest billions of dollars to make work. Yes there are 100 other ways to do payments, but there is no other model that has proven effective in getting an industry to INVEST IN. For example, Bitcoin is better at P2P everything (anonymity, risk, authentication, validation/acceptance), but no one has developed a scale-able way to make money from managing bitcoin… or creating the acceptance infrastructure to support it. Given Apple’s market position and global presence wouldn’t that be cool..!? Governments would go absolutely nuts.. global bitcoin platform with no way to track interaction. I see this in 5 yrs…

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Google in Payments: Why Yesterday was BIG News

For eCommerce/mCommerce merchants this may be the biggest “no brainer” since Cybersource offered to offload card processing/fraud risk management. This is a V.me killer… from both cost, and advertising perspective.

16 May

—- Correction — MA rate for non-regulated debit is 160 bps (not 105). My old Google card in the NFC wallet was card present.. I forgot to make the change to card not present…  Rate table below —-

Yesterday Google rolled out InstantPay, and a new planned P2P service integrated with Gmail, wallet, … etc. Although this is a step back from the physical card revealed by Android Police in November.  This is a VERY BIG DEAL for payments. Why?

Merchant Value Proposition

  • Reduce payments cost. No matter what card customer uses, everything will be priced as a non Durbin Debit (160 bps). This marks the First Time Ever a provider will take a LOSS on every payment, to get the data.
  • Customer uses whatever card they want, credit, debit, Amex.. or even ACH.
  • Merchant keeps current processor. The payment metaphor is a 16 digit PAN.. a Google MA that wraps everything else (see don’t wrap me).
  • Increased Conversion (particularly mobile). One button (pay with Google) and everything is filled out.
  • New performance measurement tools in google analytics
  • New offers and ad types possible (dependent on redemption, and/or number of purchases)
  • Possible loyalty programs
  • New physical merchant use cases (buy on mobile pick up in store).instant buy

Consumer Value

  • Centralized payment instrument/fraud protection. I’m not giving my card number out to all merchants
  • Ease of use.. no more form filling
  • Centralized e-reciepts
  • Use any payment instrument I want
  • Store coupons/incentives in wallet
  • Wallet on Android no longer NFC dependent

Consumer “downside”

  • Google gets to see more of your data.. but who do you trust with it? Google vs. Banks vs. none of the above.ma rates non-regulated


  • Expanding the google master account (GAIA) to manage verified identities and making new services available (to these consumers it has verified)
  • Ad delivery: Leveraging customer insight and “touches” to influence consumer
  • Ad quality: closing the loop with payment.. what ads contributed to what ACTUAL behavior
  • PAY FOR PERFORMANCE Advertising!??  No more CPC? one obvious future is if Google can see transaction then the could bill merchant for advertising based upon the purchase (not on the click). This is the Holy Grail of advertising and if there are indeed plans here.. it is beyond a moon shot. As an advertiser I would only pay for marketing that led to customers buying from me. This would spawn an entire new industry of campaign managers. More on this in future blog.
  • Phone as tool for Authorization of a given identity.
  • Business model… big win for merchant (cost, conversion, experience and reach) and consumer (protection, convenience)…

For eCommerce/mCommerce merchants this may be the biggest “no brainer” since Cybersource offered to offload card processing/fraud risk management.  This is a V.me killer…  from both cost, and advertising perspective. The primary challenge Google faces is that 70% of eCommerce sales are controlled by Amazon, eBay/PayPal/GSI, and Visa/CYBS… They can make it difficult for smaller brands to turn this on.. but it will happen… Amazon may even want to let Google eat 1% interchange on all their sales.

Osama and the Google team have done great work getting this out to market. Congrats.


On the P2P side.. not quite sure. Sending money in gmail is certainly better than a stand alone service.. but EVERY SINGLE P2P effort money with gmailhas failed: Obopay, Visa Money Transfer, ClearXchange, POPMoney, Zashpay, paybox, ..  Consumers just don’t pay other people (like babysitters or golf bets) electronically, nor do they PAY FOR PAYMENTS. There is a strong social element in giving and receiving something of physical value (ie cash). Remember when your Grandmother sent you a birthday card with $20 in it? It just wouldn’t be the same if Granny sent me an email with an electronic notice..

With respect to Google’s new service, I will certainly say that Google has done a great job with integration, and there is no more highly used service in the world than Gmail.. so if anything had potential.. this is it. Google is not exactly a culture that seeks operational folks.. more of CREATORS.. not regulatory, payment ops, KYC, dispute, … experts. This will be one GIANT headache of a service to manage (globally).  If they can make this work, and extend to android.. it could be the LINCHPIN to ubiquity and payment success in emerging markets. Payments for “free”!!?? If cross border were enabled, what would this do to Xoom? PayPal? WU? See my blog on Growing the world’s economy and poverty alleviation.

 NFC Thoughts

Is Google walking away from NFC? Don’t think so.. there are probably markets where it makes sense. US doesn’t seem to be one of them.  Remember the NXP chips only just recently allowed more than one card emulation application.. so for last 5 years everything had to be Visa, or MA, or Amex.. ISIS is facing delays because of lack of Gemalto SWP SIMs and the handsets to support them… and consumer “demand”.  The NFC ecosystem is dead in the US… the only people that win are banks and telecos.. Merchants are not enabling contactless.. for a reason. As I told Google 2 yrs ago, to establish consumer behavior, you must use it 5+ times per week. There are 3 critical payment areas for this: Grocery, Gas and Transit.  Without participation here.. no payment change will occur.   See my note on Apple and NFC, and Google Wallet.

My top recommendation is to integrate this tightly with KYC/Authentication initiatives..  See blog on reputation.


BAC, JPM and WFC launch Clearxchange .. a mobile pay anyone service. This is a very solid idea by the 3 top US retail banks… after all why should PayPal route funds between banks? Banks have always had the capacity to make this work, but have lacked the structure (and business case) to pull this together. Their real risk was banks loosing the “directory battle” (referred to in my previous blog on Chase QuickPay).

25 May (updated)

WSJ: Bank launch Clearxchange

Banks take back mobile momentum!! Everyone else.. stay away from P2P because this team will own it.

BAC, JPM and WFC launch Clearxchange .. a mobile pay anyone service.  This is a very solid idea by the 3 top US retail banks… after all why should PayPal route funds between banks? Banks have always had the capacity to make this work, but have lacked the structure (and business case) to pull this together. Their real risk was banks loosing the “directory battle” (referred to in my previous blog on Chase QuickPay). The last Bank driven initiative of this scale was Spectrum in 1999 where banks decided that acting together in electronic bill payment was the right thing to do..

A short history on this initiative. WFC and BAC got together and created Pariter Solutions a few years ago for “on we” clearing of ACH and images. Pariter initially received the charter to also move toward developing “on we” clearing for mobile/online P2P transactions, but this was pulled late last year as Pariter was having challenges executing against its core mission. Subsequently BAC and WFC got together and created Clearxchange to develop a common “directory” and online/mobile application infrastructure for P2P routing (ACH processing is TBD, but likely to be handled by host organization with clearxchange as a 3rd party sender).

Chase was an early leader here.. QuickPay delivers all of the functionality of Clearxchange… plus some. At one level, I view clearxchange as building what Chase (and Cashedge) already have.  Chase has agreed to participate in directory sharing, so that Chase customers can send/receive to Clearxchange customers.

I’m a very big supporter of ClearxChange’s bank led P2P model, banks must own this for this service to take off. Remember, retail payments are a money looser for banks, the WSJ article did an excellent job describing the dynamics.  By taking the lead, I would hope other banks also participate directly with ClearXchange or through Cashedge’s PoPMoney service (described here in blog).

Moving money via ACH is technically simple, the real challenge is in risk/fraud management. On this level, there are only 2 organizations with substantial fraud management skills in cross bank P2P: Cashedge and PayPal. Both have 10+ years of ACH history.  In the last few years banks have collaborated in developing shared fraud models (can’t really discuss specifics for obvious reasons) that now allow them to substantially reduce risk without prior transaction history. The long term objectives of CX are rather vague (bank control of ACH rails, and balance retention in DDA). Their short term plan is to move consumers to a  “push” model, where funds are sent from a bank authenticated log in. Banks want to be the starting point of a transfer. This positions them as the trusted intermediary, with benefits in fraud and cementing consumer behavior. This is a significant announcement with over 3 years of planning behind it.. but scope is narrow.

The push (ACH Credit) P2P model, where customer initiates transfer from their bank, has a poor history (search on “Paybox success”). The historical issues here have nothing to do with technology, but rather business model: simple and free funds transfer is not a great business. I’m very curious to see what CX’s revenue model looks like.. At one level I do laugh.. just 5 years ago, the only top 5 Bank to allow online transfers out of the bank was BAC. I ran online and payment services at Wachovia (now part of WFC) which included all the online payment operations. The other bank retail heads were very reluctant to launch online transfers because of the risk of deposit run off.. or rate hopping. … wow have things changed.

Every year the banks delayed this service was another year that PayPal could develop a directory of mobile phone numbers, e-mail addresses and ACH information…  this is the real battle… retail payments are a terrible business when viewed as a stand alone product.. but are essential to retail banking.  (See Banks will win in Payments).

The only “cons” I have for ClearXchange are:

  • It involves a technology build.. and clearly Chase and Cashedge have already built these functions. The banks should have gotten together and bought Cashedge.. particularly since BAC is Cashedge’s biggest customer.. they could have been running with this for 2 years
  • The structure. Why not put this in The Clearing House?  or Early Warning Services?  another bank owned consortium does not make sense given their charter unless they plan on involving non-banks
  • BAC, JPM, WFC.. will you please walk away from Visa Money Transfer.. they are attempting to walk all over what you are building here. My guess is that your Visa relationship managers are not talking to your P2P teams..

Apple’s P2P: Visa Money Transfer

The big banks that have taken the plunge are JPM and BAC. Not sure if both have committed on debit AND credit.. or just credit. The business case for credit is pretty solid and I don’t have any issues here, but allowing Visa to control transfers on debit is not in the best interest of banks. Why would banks want to allow Visa to develop a consumer directory and a new service that directly competes with ACH?

Update 13 March 2011

It would seem that there is some amount of disconnect between the bank eCommerce, debit and inter bank teams. The banks are working on a new interbank P2P service. This service will be based on ACH and follows on to what was pulled from the BAC/WFC Pariter scope last year. My guess is that JPM is also a “partner” and is committing to directory integration just as it is with CashEdge (Citi, 5th 3rd and 200 odd banks).

The Visa Money Transfer commitment may be an “accident”, and the banks may not know that Visa is working with Apple. This Visa service would clearly compete with the new bank owned service.  

11 March 2011

In previous blog I spoke about Apple and NFC, although I still don’t know if Apple’s wallet will be ready for the iPhone 5.. it does seem that they plan to launch with a P2P transfer system powered by Visa (See previous blog on Visa Money Transfer). Apple’s iTunes wallet does not “store” funds like PayPal nor Apple does have money transfer licenses. It was therefore searching for a way to allow consumers to pay each other. News I have is that they have selected Visa Money Transfers for this. Is it the only way? perhaps not… but I give it 90% confidence of being in scope for wallet launch.  (Sorry for the confidence thing.. it was Gartner Group’s way of making shit up)

I just can’t believe that bank payment heads are allowing this. I was on the phone with the head of debit for 2 of the top 5 banks..  their eCommerce teams love the idea of partnering with Apple.. but the debit cards head have said “no way”.  It is just a terrible idea for banks to give Visa a way to circumvent ACH.. and it will be very, very hard to shut down once it gets moving. Reasons:

  • – Visa runs it.. Continues to build Visa brand on your ACH
  • – You own the risk, Visa develops new services
  • – Circumvents all of the industry controls on ACH (ex. TCH, Early Warning)
  • – Unfunded Reg E research burden and consumer support reqs.

The big banks that have taken the plunge are JPM and BAC. Not sure if both have committed on debit AND credit.. or just credit. The business case for credit is pretty solid and I don’t have any issues here, but allowing Visa to control transfers on debit is not in the best interest of banks. Why would banks want to allow Visa to develop a consumer directory and a new service that directly competes with ACH (see blog)?

Bankers, my recommendation is to buy Interlink or Star and put it in TCH… then run the this debit service there.

Start ups.. I would not focus on payments in Apple’s platform. Think there would be new opportunities in intgrating POS to Apple’s payment mechanism, or even a “billtomobile” kind of function where you can pay online with your apple ID.  My head is spinning at the chaos this will cause within ISIS AND each carriers own billtomobile efforts. Apple is near a tipping point with the carriers. I would expect them to start aggressively pushing a much more friendly Android model.

P2P on Mobile – CashEdge POP Money

Just announced at Finovate today


I know the folks at CE very well. Fantastic organization.. they excel at both the Sexy front end as well as the messy back end (risk/fraud) of payments. Their new POP Money service is rock solid and could give FSIs a strong contender in competing w/ PayPal in Sending money to any phone number or e-mail address.

CashEdge is a “Bank Friendly” service provider in that all of their services are white labled for banks. Few people know that if you use Wachovia, Citi, or Bank of America today, to transfer money outside of the bank, you are using a CashEdge Service. In 2004 I selected CE (Wachovia) because they provided a higher quality service at a lower price point then what I could build  internally (fully loaded). Many eCommerce teams only focus on the User Interface and top level design when assessing the cost of delivering P2P payments.  However it is risk and fraud management where you will find the true costs of “payments” to the organization. 

This new POP service will allow banks to create a revenue generating service, and take back consumer mindshare from PayPal.  Existing CE customer have a tremendous advantage in enabling this service, particularly given the current resource constraints within bank IT.

Many large banks are just beginning to offer A2A transfers (accounts that I own across FSIs). Wells just made this service available on a pilot in June.. Chase has it, but it is buried deep within the online functionality. There will be a big first mover advantage here, and my informed opinion is that Bank of America will be the the leader… or should I say stay the leader in payments.

Move over PayPal.