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Google has been offering free payment processing to Internet merchants since they launched Google Checkout almost two years ago. Merchants get free credit and debit card processing when they also use Google Adwords, a direct marketing service that displays
paying advertiser’s names alongside search results. Could a marketing subsidized payment processing model work for physical face-to-face transactions as well? Could an acquirer offer free payment processing? Not just cheap and very low margin services (where
they’re headed to already, due to pressure on acquirer fees and interchange litigation around the world) but free, gratis, without charge.
For the full blog post see here.
Free transaction processing is an interesting question and why not free transactions as well?
As for google transaction processing, it's not exactly free. If you spend $1 advertising to get $10 of 'free' processing doesn't that translate to a 10% advertising/processing fee? Sounds a bit like ebay or amazon.
Google, microhoo and the like will eventually only get paid for actual sales generated by search, because they can be measured with the internet, and search competition will evolve to that model sooner rather than later. If any of them get too 'pushy'with
their advertising their names could turn to mud overnight. Googlebay is a strange situation, where google advertisers compete with ebay second hand goods listings in almost every search. I'm not sure I get the long term benefit for google, why not set up a
free auction site themselves and ditch ebay from search results? Are they afraid of ebayahoo?
Ebay is effectively a bloated search facility with the seller/advertisers doing the work and users pushed towards Paypal payments. They will also move to pay-if-you-sell eventually. They will need to force users to use Paypal to remain viable in the future:-
[March 24th - eBay UK is requiring that all sellers on eBay.co.uk offer PayPal on their listings. Sellers will continue to be able to offer other payment methods that are allowed in its accepted Payments policy, which bans Google Checkout...and certain
other rival services....only Motors Vehicles are exempt from the policy.]
Perhaps it might be enough to give consumers safe free transactions and merchants the lowest transaction costs with no losses due to fraud and maybe even faster payment.
As a fall back position - safer and no fees for either merchants or consumers.
Perhaps this should be the prime position and take advantage of the viral 'free' thing.
There just might be a practical business model for no fees for either the merchant or the consumer. Would merchants be willing to bank with a provider of free and safe transactions? Certainly some consumers would.
Somewhat disturbing for banks to think about free anything in the current climate but inevitably it will arrive.
There are no free lunches, but paying a little interest in addition to no fees and might still make a profit, depending on your actual transaction costs, without neccesarily being involved in the advertising/search business. The right approach to infrastructure
might enable serious competition with the google/paypals for internet payments as well. I expect Paypal would find it difficult to offer real world merchants anything other than higher transaction fees. Visa will fight back as Paypal eats away at their transactions
online and in the real world, could we eventually see everyone being both a Visa merchant and cardholder?
There remain other untapped transaction markets in the real world which are potentally vastly larger than the internet and may well remain so for some time. A competitive transaction system which is easier, safer and suitable for more purposes might dominate
- especially if it were free. Of course I have a few ideas as to how.
Ubiquitous and free might go a long way in the 21st century.
19 Mar 2009
This post is from a series of posts in the group:
The Single Euro Payments Area, the Payments Services Directive, the Eurosystem, TARGET2, STEP2, the Euro and related matters.