Mastercard enlists Worldpay to push Vocalink's Pay by Bank app

This is great example why payments innovation in the UK is slower and less innovative than it could be. 

"Pay by Bank enables customers of UK businesses to make online payments for goods and services via their banking app, and directly from their bank account"

Why would any shopper in their right mind do this and potentially loose the protection that comes by paying by card?  But more importantly give direct access to their main bank account.

This is being touted as a benefit to the shopper but what is the benefit?

I can see the attraction to the merchant as it might lower their costs.

The point I am making is, that for adoption to take off there has to be real benefits to the consumer, so unless some of the Merchant savings are passed on to the consumer e.g. as loyalty rewards, why would they use Pay by Bank.

very good point. if a business whats CSR benefit they could register the card with www,impactapp.org.uk and push donations out . If they chose this method no cost at all and impact will double the donataions

Exactly the same argument will apply to PISP roles under PSD2 (which is basically what Pay by Bank" is - what motivation does the consumer have to give up valuable rights in the purchase?  I can only see myself linking my bank to regular merchants such as amazon or tesco groceries if, as you suggest, they reward me with more points or "split the difference" on thier card scheme savings.

I suspect this will be very attractive to the food and fuel retailers who's customers (bizarrely) pay for most of their transactions by debit card. I doubt there are many examples of customers 'disputing' their food or fuel purchases, meaning the guarantee offered by the card would be limited.

It would however enable those retailers to become for competitive as the margins they currently pay to the major card schemes could (in part or in full) be passed on to their customers. Retail is a cut throat business and for most price is everything. If you don't think consumers will benefit in the end, I think you'd be delusional.

Agree, unless the customer sees some tangible benefits, I don't see this scaling up. Thay said,  I can see why MasterCard would want to do this.  They are after some of the debit card transactions that are urrentlyy almost completely Visa in the UK.That is a play not jus for processing revenues but also customer behaviour data that they will use to generate insights they can sell. After all, 'data is the new petroleum'.

" If you don't think consumers will benefit in the end, I think you'd be delusional."

The point is if the customers don't see the benefit, they will not believe it.  How often do we see that a cost saving for a retailer or utlity is not passed on to the customer? All the time.  They only pass it on, when they get found out.

Will it affect long term pricing because the market is competitive - sure. But will the customers see the direct link - I doubt it.

In some situations I agree that it is important that customers can see a direct link, fuel for example, but in retailing in general? Do they not think there is enough competition in retail out there? Do you think the main supermarkets have learned nothing from the likes of Lidl and Aldi entering their domain?

At the end of the day, card fees are for most retailers just another (expensive) utility. It's not reflected seperately on their P&L and just forms part of their overall operating costs. Given that the average cost to a merchant of accepting a debit card is c.0.21%, on an typical basket value of £25, this equates to just over £0.05p. In itself it doesn't amount to much, but multiply that by millions of transactions and it becomes an issue. Apart from price at PoS, what other unit of measure can retailers offer their customers to demonstrate how competitive they are?

What's the compelling reason for consumers to bypass the card schemes? Without one I don't get this. In my experience the only way you have a chance of success is to bring something innovative to the proposition for the consumer based on convenience, choice, cost, quality or security. Don't see any of those boxes ticked. Sorry!

Given the latest issues .......Reliability?

Some good points on the PISP interface discussion, but don’t overlook the other end of the transaction. Remember that payments is a two-sided market and it may be that merchants will rewardconsumers (and commercial payers) out of the transaction cost savings. With good fraud prevention, which we expect PSD2 & CMA9 Open Banking to deliver, fraud provision will be small, but other disputes must be handled well-enough if not using card/credit protection. Don’t assume that consumer benefits aren’t there because they’re not being provided by their PSP, and don’t forget that merchants need benefits too.

"It would however enable those retailers to become for competitive as the margins they currently pay to the major card schemes could (in part or in full) be passed on to their customers." This is highly delusional. Retailers already incur less cost on debit card than credit card payments. How many retailers pass on the benefit by charing a lower price to customers paying by debit card? Replace debit card in the above statement with cash and the question still remains. OTOH, when the V/MC removed the No-Surcharge rule, several merchants slapped 7.5% surcharge even though they incurred only 2% MDR. End of the day, virtually every industry is greedy. Banks act out their greed with sophistication and remain the most profitable industry. Retailers act out their greed crudely and remain one of the least profitable industries.

This is scalable in the extreme (not sure who is writing this anonymously). Given that the BRC / BIRA and others claim that their processing costs are in the £billions; the benefit is there to be realised and shared through commercial redistribution of the savings. And becaus ethe infrastructure is now all broadly in place, innovation providers will have the capability now to use, evolve and develop the new infrastructure(s).

The main thing that the article got wrong is the assumption that Mastercard was going to displace its OWN trandactions, which it corrected later by explaining how it would actually be displacing the transactions of Visa. Note that Mastercard is registered with the FCA as a PISP TWICE, and Visa not at all!

Google “push vs. pull payments” pand you will find all the good arguments why push will win over time. Yes, it will take a while, but push is just more efficient and secure. ‘Pay by Bank’ app looks better than Open Banking (at least for now) and you don’t need a PSD2 PISP license to offer it.

Personally, I have a big problem with PUSH payments: Lack of receipt by default. PSA: Insist On Receipt When You Pay By NEFT And FPS. Unless this problem is addressed and redressed, I'll find PUSH insecure and will prefer card payments (PULL). Either way, it's Pay By Bank:)

I've always been intrigued by Push payments and disappointed that the UK banking industry has taken so long to exploit the superb Faster Payments infrastructure.  I first blogged about this in 2011.  MasterCard's branding and marketing expertise may be the missing ingredient for massive adoption.  I think displacement of card payments for e-commerce will only be a small part of the potential market in the longer term.  More important will be cash, cheques, person-to-person payments, bill payments, and all the other things we currently use Direct Credits for at the moment.  If you look at this development as the first steps towards a more user-friendly, less clunky online bank payment service then the long term potential is huge.

@Ketharamen Swaminathan - Is it not all well handled now within the new ISO 20022 - giving the banks the ability to formally 'receipt' the payments for us all as consumers (assume that you are talking about this as a consumer): and this is then (ISO 20022), I believe more advanced in its implementation in your part of the world?

@Bill Trueman:

One day, it'll all come down to limitations of ISO 8587 v. ISO 20022 and differences in implementation in different parts of the world but I think we're not there yet. As of now, the problem seems to lie with incompleteness / vagueness of specs and that's applicable virtually all over the world. We're seeing this in Open Banking, with specs on access method, consent type still undecided. We're also seeing this in FPS. Like I quoted from FPS website in PSA: Insist On Receipt When You Pay By NEFT And FPS, "Once the payment has been made, ... Each sending bank will decide how this confirmation will be made available to its own customer." With total ambiguity around such a crucial element of the transaction, it's not surprising that different customers have different levels of comfort w.r.t. security of FPS, NEFT and other A2A PUSH MOPs.

On a side note, any idea what's the status of the Enhanced Remittance initiative in your part of the world?

Full disclosure – I work at Mastercard and am responsible for Pay by Bank app (PbBa). I’m truly grateful for each and every comment on the Worldpay PbBa announcement. It’s great to see so many people interested in this news. I do want to clarify some realities versus some assumptions here though…I hope it’s helpful to everyone.

Does PbBa enable consumers to pay for goods and services online using their trusted mobile banking app?...Yes. Mobile banking apps have become our most used financial services app and millions of us use them every day. Bringing retail payment capability to the mobile banking app is a natural next step.

Is PbBa allowing direct access to a customer’s bank account? No. The customer logs into their mobile banking app in the usual (bank grade security) way, views a Request To Pay from a retailer, views their balance in real time (making a more informed decision as to whether to pay)…and immediately pushes a payment from their chosen account. No notion of pending transactions with PbBa. No-one else has access to their bank account. No valuable account credentials are shared, with anyone. It brings a new level of security and speed to buying things online.

Yes, PbBa is good for retailers and will absolutely help them sell more, at lower cost. But consumers do not lose protection. PbBa has protection / charge back rights which match debit cards. Fans of credit cards for rewards and points, or enjoy extended protection are less likely to use PbBa. That’s not a bad thing, they would already be using their debit card if these things were not important. But, for those consumers who love using their debit cards, PbBa is the next generation for them.

Not having to share any highly sensitive payment credentials with anyone, ever…that’s good for consumers

Viewing balances live to make more informed spending decisions…that’s good for consumers

No pending transactions so always knowing how much you have spent…that’s good for consumers

Ultimately, consumers will decide if PbBa becomes their preferred way to pay. Let's keep the conversations going. I’d love to hear what you think when your bank switches it on.

Thanks for the full explanation Jonathan. I was very interested in Zapp when it was first muted, but I and a number of other retailers at the time were put off when we were told that the fees would be on a par with existing debit card rates at which point the business case went out the window. 

Hopefully things have moved in since then....