Banks Launch “Wallet” (again)

Short Blog

Per the WSJ Article this AM, US banks have launched a new wallet (again). For frequent readers of my blog, very little new news. Also, I’m just wrapping up a 15-page part 4 “Innovation in Networks” that will be out very soon. 

Quick Summary

  • TCH Banks have been contemplating a mobile wallet and a new network for 13 yrs (I have over 20 blogs on topic, see overview here). 
  • Today we gain clarity that Banks gave up on their latest Authentify Wallet launch and jumped on board a “white label” SRC wallet led by Visa (See 23Jan2023 WSJ). I outlined this in my SRC blog (Sept 2022) and TCH RTP Update.  
  • Inital pitch for this wallet was not well received by big retailers at Money 2020. It entailed a liability shift if wallet was offered and all COF were tokenized (see blog)
  • The wallet is not owned by EWS, but a new payment network led by James Anderson. The ownership of this new network is the same at EWS (see blog ). Lets call this wallet EWS SRC to shorten the name. 
  • Competitor is Apple.. the banks want to own the mobile payment experience. Google is working with the TCH banks and is also working with FedNow (long blog coming on this one). It is likely that Apple is not involved in any of these activities, yet Google is working to pilot both FedNow and TCH RTP to leverage their India UPI success.
  • Now that the largest TCH banks have jumped on board SRC, the TCH RTP effort focus has shifted to commercial flows and bill payment.
  • i provided a detailed strategic discussion on the reasoning behind this move in Part 2 – The Power of Bank Networks.

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Part 2 – The Power of Bank Networks

The Bull Case for V/MA (24 pages). 

© Starpoint LLP, 2022. No part of this site, blog.starpointllp.com, may be reproduced in whole or in part in any manner without the permission of the copyright owner.

Part 1 – US Payments Environment covered the complexity of the US payment environment and the challenges faced by top banks in modernizing their systems (where all systems live forever). There are many types of payments: bill payments, A2A, P2P, wires.. Today the focus is on how banks intermediate commerce. Banks MUST have networks as every bank can’t connect to every consumer/merchant. Effective Bank networks (aka rails) are NOT a commodity service, but one that allows the banks to leverage their unique ability to assume risk.

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Merchants Tokenize – eCom Wallet Challenges

UPDATE – Nov 29 2022 – Note that I have conflated the relationship between SRC and 3DS 2.0. 3DS 2.0 is the authentication protocol used by SRC. 3DS 2.0 has been widely adopted as a mandatory replacement to 3DS 1.0. Part of the driver for adoption was the EU SCA mandate. SRC has NOT been widely adopted as it is a fairly broken consumer experience at the moment. 

I’m at M2020 today and it has been a “back to normal” fantastic event. Let me put my “merchant hat” on for a story from their perspective.

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TCH Phase 1 – eCom Wallet

Short blog – 80% confidence

© Starpoint LLP, 2022. No part of this site, blog.starpointllp.com, may be reproduced in whole or in part in any manner without the permission of the copyright owner.

Phase 1 of TCH’s token efforts will be in SRC model. A bank branded “wallet” acting in the DCF role for TCH PIs . Just as VAC has enabled the elimination of physical hardware for acceptance, issuers see a plastic-less future for cards. They want to own the issuance of cards and want much more than a token, they want the entire “wallet”.

Go to market is either as:

  1. TCH as SRC System, or
  2. Visa as the SRC System for all TCH banks (V and MA) with TCH is a “unique role” managing all consumer data, registration, payment tokenization, …
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Apple – #1 Payment Innovator

As Apple is set to launch the iPhone 14 today, I was thinking about the significance of ApplePay’s innovations to V/MA and how these innovations benefit the entire network of merchants and consumers. Making payments easy is hard… Apple is the lead “innovator” within the V/MA networks at the consumer touchpoint (with Google, Samsung, PayPal and others in the mix). Their “wallet” and branded integration into both POS AND mCom is unrivaled and represents 93% of all mobile wallet payments in the US (2021).

This 2021 Pulse Network Debit Whitepaper provides the best public view on performance (US Only), with TPV CAGR over 50%. Quite frankly, when it comes to mobile payments, it’s silly to talk about anything else by ApplePay in the US

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Secure Remote Commerce – May 2022

Short Blog. I wanted to follow up on the last point I made in Bank ID Service – What Is It?

Some US Banks are refusing to jump on board SRC. As managers of risk, Banks are reluctant to accept network services which level the playing field in both managing risk and “diluting” their brand.… In some respects Authentify is a response to SRC.

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