https://www.finextra.com/newsarticle/35772/banked-moves-out-of-beta-to-take-on-visa-and-mastercard#comment

Dwolla, PayM, PingIt, PopMoney, Pay By Bank, CurrentC, Boku Zong, … I’ve lost count of and forgotten the names of all the startups that have attempted to disrupt Visa and MasterCard credit card payments in the last 10-15 years. Funnily enough, all of them have the same value proposition for merchants and the same lack of value proposition for consumers. Hope this time is different.

https://www.finextra.com/newsarticle/33069/mastercard-bids-to-bypass-own-rails-with-pay-by-bank-app-promotion

Re. compelling value for consumer, we’ve gone thru’ a decade of alternative rails from Retailers (CurrentC), MNOs (ISIS, M-PESA), Fintechs (Boku, Zong). Some of them have shut down and others have “pivoted” to card rails. I don’t know a single one that has succeeded globally – at least not without itself becoming costlier than card networks charging 2-4% transaction fees.

Maybe it’s still early days but I suspect that MasterCard’s latest attempt to disrupt itself via Pay By Bank will also fail to gather steam unless MC uses its deep pockets to grant rewards to PBB users and massively reduce interchange fees for PBB merchants.

I preempted mention of the success of Alipay, WeChat & PayTM in my previous comment: “A2A mobile payment methods like Pay By Bank tend to do well in markets with low credit card penetration.”

In addition, PayTM makes whopping losses year after year, so its success is driven by the strategy I’d preeemptively suggested for MC in my previous comment:

“MC uses its deep pockets to grant rewards to PBB users and massively reduce interchange fees for PBB merchants.”

Nice to know that mine is not the only voice in the wilderness on this issue!

Why 5 years – India already implemented fingerprint-bank account-based payment system called Aadhaar Enabled Payment System (AePS) two years ago. BUT, it hasn’t taken off – despite my aforementioned point about low credit card penetration in India and despite getting massive amounts of free publicity from the government’s drive for #CashlessIndia. And, now with the recent Supreme Court diktat banning the use of Aadhaar Biometric ID by banks, fintechs, et al, the fate of AePS suddenly hangs in balance.

You’re also probably aware of a fingerprint-bank account based payment system in the US called PayByTouch. It was one of the most high profile casualties of the dot com crash of the late 1990s, since it raised over $100 mn, which was one of the highest VC fund raises in that era.

In short, fingerprint-bank account-based POS payment has been threatening to kill V / MC next year for the last 20 years. Not saying the threat won’t succeed in 2019, though:) As I said before, if a new method of payment offers 2X the rewards and charges 0.5X the interchange fees as credit / debit card, it can kill card networks overnight.

Before #WC2018, I’d have crudely paraphrased Gary Lineker’s famous saying to this context: “Payments is a simple business where interesting players and initiatives happen every year but, in the end, Visa and MasterCard always win”. But, seeing as what happened
to Germany in the latest world cup, I’ll content myself with the hope that waiting for interesting players and initiatives in payments won’t be like Waiting for Godot in the eponymous play by Samuel Beckett!

According to Bloomberg, US retailers are having another go at saving credit card MDR aka swipe fees by launching their own bank account-linked payment apps and incentivizing consumers to switch to them from their credit cards by offering discounts, easier returns, line jumping and other benefits. We know what happened to their first round payment apps like CurrentC. Only time will tell how their second attempt will pan out. On a side note, according to this article, the Starbucks mobile payment app “now represents 14 percent of the coffee chain’s transactions.” That’s a far cry from the grandiose predictions made by the digerati a few years ago.

True dat but, to be fair, the second round of retailer apps seem to be better thought out. Instead of trying to provide purely monetary incentives by way of discounts, which is not a sustainable strategy in a low margin sector like retail, the second round of retailer apps seem to trying to drive adoption by throwing in non-monetary incentives like easier returns and line jumping, which are (arguably) more sustainable. Of course, these apps will qualify even less to be called payment apps than the first round of apps but, as long as they help retailers save on the MDR they pay to banks, what’s in a name?

WSJ doesn’t buy my argument about #WC2018. In a recent article, it echoes my aforementioned paraphrasing of Gary Lineker’s famous saying thusly:

“Despite a bewildering proliferation of digital payments over the past 10 years, the old payment champions Visa & MasterCard continue to be the new payment champions because most new ways to pay for things still lead back to Visa and Mastercard.”

I was asked to answer the following question on Quora today: “Are there any online payment programs that don’t take a percentage of sales?” I answered that there was none in my knowledge. Obviously you (probably) can’t run a payment business profitably in that manner. But this got me thinking about my earlier comment that a new payment rail with 2X Rewards & 0.5X MDR can kill Card Networks overnight. Wonder why there isn’t one like that. If startups can attract VC funding despite making whopping losses in so many other industries (e.g. ride share like Uber), why not in payments?

Saw this tweet on how Visa has announced an increase in CNP interchange rates. It’s US-centric but I was surprised to find some tweeples saying that even PayPal and SQUARE have failed to make a dent on Visa / MasterCard when it comes to online / CNP payments.