Money 2020

10 Oct

Great Conference! In fact I would vote it the best networking conference I have ever attended. Kudos to Anil, Jonathan and the rest of the Money2020 team.. !

I’m backlogged and jet lagged but had to get a few thoughts out.

MCX IS REAL

I was fortunate to have lunch with Dekkers, though I can’t comment on anything relating to product, I will certainly comment on what I think is most surprising. Dekkers related that the degree professionalism and warmth of welcome has surpassed anything he has ever experienced in his career. It is NOT a herd of cats.. ! It is also not just a bunch of  interchange focused treasury guys.

Retailers are sick and tired of being handed rules by people that have no understanding of their business. They are competitors.. just as different as the Yankees and Red Sox… but they do agree on common rules .. and are determined to set them within their own “MCX” league.

Tokens

My panelist were great.. the content and answers were predictable.. hence the session was a little dry.  What is clear?

Banks want us all to believe that they support V/MA/Amex token efforts.. and this is all about security. I can assure you this story is complete BUNK!  At least from a business strategy perspective.    Card CEOs are furious at the thought of ANY ENTITY delivering value on top of their cards (see don’t wrap me):  Cardspring, Visa, MA, Retailers, Google, PAYPAL. There is an all out war to stop them.. the war is about DATA AND CONTROL and ESTABLISHING CREDIT as the primary mobile payment product.TCH Scheme

Consumers prefer debit for most POS transaction 8:1 (in Grocery).. but credit usage dominates eCommerce due to the better protections available to consumer (Reg Z) and reluctance to share debit card information online. Logically TOKENS should first extend to DEBIT in order to address these issues and ensure debit account security. Whether from action or inaction, most banks WANT to extend consumer UNCERTAINTY over eCommerce debit use into mobile.. CAN YOU BELIEVE THAT? Of course they would recast this statement “we want to deliver value to consumers [on credit] and ensure consumers are protected on mobile [using credit].. and we are making investments [in credit] to make this happen”.

Banks are investing over $1.5B (collectively) in data, offers and new ways to add value to CREDIT CARDS. However Banks don’t give a hoot about Debit (except BAC and CUs), the rest want to establish credit as the PRIMARY payment mechanism (in mobile POS payments). Their token moves are focused on protecting WHO CAN ADD VALUE TO CARDS ..  Make no mistake, token efforts are focused on protecting CARD BRANDS and the VALUE they deliver, with safety/security a distant second. Supporting Data:

  • Credit only in ISIS
  • No EMV
  • Bank investment in Data/CLOs
  • Bank investment in Tokens
  • Lack of investment/strategy in Debit
  • …etc

These credit focused banks know they can’t move as fast as Google, Square, PayPal.. hence they must stop them from adding value to cards. THIS IS THE PURPOSE OF TOKENS TODAY. Banks are seeking to create a new DATA Network that bypasses Visa/MA to deliver this value… Tokens are just part of it.

We all know this to be the case.. Bank preference for CREDIT the elephant in the room.. it’s the reason ISIS switched from Discover/Barclay card.. it’s the driver behind tokenization by an entity (TCH) that has never touched a credit card in their life. Along these lines, Jim McCarty did a great job of articulating Visa’s Value: [it’s not just about transactions, but a BUSINESS MODEL to drive revenue among network participants].  Credit drives MUCH MORE value to Banks:$0.03-0.12 /tran vs 2%+ of the SALE!

I told the bank head of the TCH initiative  “start with debit and everyone will jump on board … DEBIT FIRST is the only thing you can do to rebuild trust with retailers.. and you can do it without support of V/MA”  his answer  “what if we do both”?

My message to merchants, wallets, acquirers, mobile operators, … do nothing on tokens unless debit IS FIRST. It is how consumers pay at the POS today..  Banks are NOT doing the heavy lifting on mobile payments.. they are NOT the center of Commerce but a supporting actor.  We will never move this ball forward unless we create value to consumer and merchant.. we CANNOT operate in a model where only banks benefit and control the rules.

My view of MCX’s objective is clear and simple.. enable retailers to deliver value in a debit like model. Banks are not making investment here.. so we must find a way around them.

V/MA/AMEX Tokens

They have ALL the Carrots and ALL the control of existing rules on existing cards.. I see no way around their leadership.  The banks are very upset …

The network opportunity is to involve all commerce parties in rules construction.. a retailer said it best “Visa and Mastercard DO things to me.. they never talk to me.. they direct me.. the never listen.. they mandate… “  (see Network Tokens). Also see my blog outlining the different token strategies.

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2 thoughts on “Money 2020

  1. Abso-fking-lutely & wish I’d been able to attend.

    As soon as I read about V/MC/Amex token scheme I thought control… but no-one else seems to have caught that other than you. Doesn’t the owner of the token– whoever owns the lookup table– control information about the cardholder & spend? Imagine if V/MC simply were passing tokens back and forth rather than PANs? It would relegate them to your oft-mentioned dumb pipes.

    And debit insight a very good one.

    Finally I’m glad to hear that you see MCX guys as more than just interchange ogres. That was my fear– they’d be only after cheaper transactions and not engage with their marketing colleagues.

    Great post, and makes me more sorry you won’t be at our NYC Unconference.

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