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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