The credit-card duopoly is crashing the faster-payments party
Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Mastercard and Visa seek to get the most out of the digital-payments boom
The Economist | Oct 3, 2020
The credit-card duopoly is crashing the faster-payments party
THE GREATEST accolade a payment system can aspire to is to be forgotten about. “People don’t want to make payments,” says Diana Layfield, an executive on Google’s payments team. “They want to do what a payment facilitates.” The industry’s biggest battles therefore often happen in the shadows. The latest struggle, which sees card networks, tech firms and governments vie to control the virtual pipes along which digital money flows, is no exception. Recent manoeuvres by governments, card networks and even SWIFT, the main interbank messaging service for cross-border payments, show how the battle lines are shifting.
“People don’t want to make payments,” says Diana Layfield, an executive on Google’s payments team. “They want to do what a payment facilitates.”
An electronic-payment system used to resemble a postal service for money. Many countries have a low-cost, national payment network, mandated by the government, that transfers funds between banks. Like post, the money could take days to arrive; tracking it was tricky. So automated clearing-houses (ACH), as the national systems are known, were mostly used to disburse recurring payments, such as payrolls or benefits, which do not need immediate authorisation.
For one-off transactions, like shopping, people used private card networks, which allow for instant checks via technology embedded in terminals.
As the digital economy has boomed, however, many governments have upgraded the pipes so they can clear and settle online transactions in seconds. Today 55 countries, from Canada to Singapore, have “real-time” bank-to-bank payment systems.
Credit-card firms, though, sense a threat. So Mastercard and Visa, which together handle 90% of global card payments outside China, have found a clever response: to get in on the action. On September 29th Mastercard said it would collaborate with ACI Worldwide, which makes software for real-time payments systems, to provide such services globally.
See:
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UK government open banking tender puts focus on payments
Google and Gates Foundation to help spread digital payments in developing countries
Visa’s digital dollar concept opens a door to central bank currencies
Mastercard to Acquire Finicity to Advance Open Banking Strategy
FFCON20 Video: The Future of Paytech
On September 17th Swift unveiled a strategy to “facilitate instant, seamless, secure payments” using cloud technology. That would be like leaping from the costly and cumbersome process of sending a parcel abroad to the convenience of email. SWIFT’s plans could fast gain traction; the co-operative has more than 11,000 members, most of which are banks.
But the card networks see an opening here too. Last year both Mastercard and Visa acquired firms that process bank-to-bank transfers by connecting directly into local clearing systems.
Plastic is becoming less of a mainstay: this week Mastercard called itself a “global multi-rail payments technology company”.
Paul Stoddart, who is in charge of new payment platforms at the firm, describes its forays as a way of offering customers choice.
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