Consumer Data Bureau?

The US, Middle East and a few other corners of the world remain the data wild west. Europe’s GDPR brought a global model for privacy that is being replicated in most other geographies. But where is the clearinghouse of permissions? The “one time” access to consumer information based upon online banking credentials has mophed into an “always on” inquiry for unspecified uses. 

Short blog today as opposed to the 9 page monster in identity and attribution Friday.  Today I’m providing my thoughts on what a consumer data bureau would look like.  Summary: Banks have a unique opportunity to create a consumer data bureau and be the key “switch” for regulated and permissioned data. Will they seize it?

Per blog yesterday, everyone has a partial view of you based upon their observations and what you trust them to hold (see Payments and Observer Effect). The more often you interact with a single entity, the more they learn about you. Today Google and Amazon know you much better than your bank. Any unique insights that a bank may have is limited by their ability to take part in that transaction. Thus entities, with the ability to initiate transactions, have the most control (summary of Identity will Define Future of Trust Blog).

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Interchange is going toward 0.. So what?

The impact of interchange going toward 0 should be negligible for V/MA, perhaps even a positive as it provides opportunity for networks to expand their services

There are only 3 major markets where credit card interchange is not regulated: US, Japan and Russia. In these markets, Issuers use interchange (US 130bps-270bps) to power consumer reward programs (see Tilting Networks Toward Merchants – 2015) and card marketing.  The ROW has credit interchange regulated to ~30bps and debit 20-30bps, and the reward programs are much different (Barclays UK below). But regulating payment interchange HAS NOT resulted in volume loss for V/MA, to the GREAT frustration regulators.. this is a key point (more later).

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A2A, Fed Now and Real Time – Threat to V/MA? Nope.

Sorry for typos

My good friend Dave Birch wrote a piece in Forbes today on Account to Account transfer threat to V/MA. I wanted to provide an alternate view. This will likely be a multi part blog.. today I’m starting with the consumer and the merchant (from a US perspective). 

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ACH, A2A and Marketing Incentives

(sorry for typos). I’m up at 5am this Saturday and have all kinds of things I’d like to write about: DeFi, PayFacs, Opportunities in B2B payments, Platform strategies of Shopify/Stripe/Adyen.. I’ve settled on a short blog surrounding ACH, A2A and Marketing incentives. The key question I will be answering today: will an ACH based A2A or ACH checkout option develop threatening V/MA?

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New Decoupled Debit – Affirm/Plaid/Marqeta

Riding on my blog Plaid and Decoupled Debit.. It looks like Plaid and Marqeta just created a new product with Affirm as the first customer. 

Affirm Debit Card – https://www.affirm.com/debit

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Plaid and Pay By Bank

There are 2 big options: 1) Plaid is expanding its API set and back-end to create a new organic service 2) Plaid is a partner in a new bank service

As I sit down with my coffee this morning I’m asking myself what are the key questions to answer:

  1. What is the Plaid service? What innovation have they created?
  2. Is it a threat to V/MA?
  3. What merchants/Consumers will use it?
  4. What do banks think of this? Can they stop 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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