A few minutes in the lab can sometimes change the world.
Transactions are going to change. Settlement and interchange will too.
I can see how high interchange fees are more likely to encourage competitors in a market dominated by well established brands, and that lower interchange fees could theoretically discourage new entrants considering the infrastructure required may prove expensive.
This is about to change.
I don't see how US banks could use the Australian example where fees were not reduced for consumers, merely allowed to be added as a surcharge by merchants, depending on the payment instrument. Australia is not the US, in Australia there is an artificial
'4 pillars' monopoly of 4 major banks, at least in the US they have the potential for a competitive marketplace.
Everything is going to change.
Why? Because it can be done - more efficiently.
We have been experimenting with a new integrated mobile transaction + settlement system.
Bank to bank settlement time is just seconds and that's assuming the lowest common denominator in global infrastructure.
During the system modeling process we concluded that the transaction processor could also be the settlement processor. The connections are already there in our model.
Transactions could operate over the internet or even run as a service on an existing network, or a combination of both and that fits our multi-factor multi-vector security model. Banks don't even require a connection to the merchants.
What is possible?
International credit or debit transactions to merchants and P2P payments could be performed with zero risk of personal or financial data loss, very low risk of fraud and at low cost, cleared and settled, bank to bank in just seconds.
What began as an e-commerce and authentication project has evolved into a better way to do transactions, interchange and settlement.
Everyone wins -
- Consumers win with lower costs, faster money and no ID theft or fraud. It's multi-lingual and multi-national suitable for in-store, Internet, B2B and P2P.
- Merchants win with lower transaction costs and reduced risk of fraud and data loss using the web or mobile for transaction processing or existing EFTPOS.
- Banks win with reductions in counter-party risk, fraud risk, data loss, infrastructure costs, operating expenses and call centre costs. Customers can be enrolled in their millions via a TV broadcast, website or mail-out.
The new, easier and safer mobile transaction model is compelling and it is as different to current methods as snail mail is to email, and it's complete with privacy and security and lower costs for business. Mobile transactions do not need to carry legacy
card infrastructure forward, it would be grossly inefficient, and legacy card transactions could be supported by the mobilisation infrastructure anyway.
It's about moving payments forward, not dragging the mobile back to 1950.
Consider the option of a new financial debit or credit instrument - manifested in the mobile and outsourced complete with all customer and merchant infrastructure, including interchange and settlement, within the integrated transaction process.
Mobiles should really appeal to institutions which aren't burdened by legacy EFTPOS infrastructure.
What started as a solution for e-commerce has evolved into a complete transaction and settlement architecture, reducing customer risk, merchant risk, IT risk, and counter-party risk, and we didn't have to add any infrastructure.
Considering the many forward thinkers led by
Chris Skinner who expound the undeniable logic and desirability of a centralised payment and clearing system, we really think we have something here.
For you card carrying types, that's OK we can still do card transactions safer than the old way without the EFTPOS, so we can still let you use your card for a while yet(if you insist), but it will cost you more than using a mobile. Won't new merchants love
it, no infrastructure and they can do card or mobile transactions (unless the credit card companies don't want to play, but I'm sure your bank can help you out instead).
If any of the banks think that a single bank is going to be able to claim naming rights to the mobile transaction space - think again. Customers will be able to do transactions with their cards from your bank - just as if they were a Visa or Mastercard -
debit or credit without all that credit/card infrastructure and interchange fees and with instant settlement - only they won't need to actually use or carry the card (and neither will the bank). Every transaction will reinforce your bank's brand in the minds
of your customers.
We might just end up with a version of the CLS Bank for the retail transaction market, equally accessible to every bank, merchant and customer right across the globe.
Any suggestions on fees for such a service? Remember no infrastructure is required for your bank or customers or merchants.
Per transaction - Per settlement - or all in one? How much would it be worth to have your bank's branded (non visa/mcard) debit and credit accounts accepted by 4 billion other humans and the world's merchants, and you won't have to issue a single card?
Somehow I don't think it's going to take a decade to get this revolution underway.
The Dr (on the phone to his broker to dump those Visa shares) has pronounced the card dead, it just doesn't know it's dead yet. RIP 'the credit card' 1950-2009.