One question from me regarding fraud being someone else’s problem, and somewhat related to Matt’s original article and follow-up question.

“I couldn’t care less about card fraud as it’s not my problem. If some rapscallion books a weekend away with my card, it’s the airline’s problem (without 3D Secure) or the bank’s (with 3D Secure).”

That’s a very credit card centric view in my opinion. As you reference later on, the wallet/payment could be funded by another method, say push payments via the ACH (e.g. FasterPayments in the UK).

So my question: isn’t there a good chance that we’ll see a liability shift back to the consumer?

Even in the case where an intermediary wallet is funded by a credit card (e.g. PayPal), some card companies drag their feet to honour consumer protection guarantees (e.g. Section 75 in the UK). For me, this is related to your previous post and my comment here: http://www.chyp.com/media/blog-entry/shades-of-grey#comments

Back to the networks. From my perspective, at the simplest level, the card networks solve a many to many problem: they set an international standard that connects billions of consumers to millions of merchants via thousands of banks. Their future lies in their ability to continue in this role, by managing down the risk, cost and time in electronic payments vs any feasible alternatives. (Note that the networks help others manage risk, but don’t take a balance sheet position themselves.) It might be interesting to note that when EMEA banks were polled on this last year, networks were believed to be one of the top 3 beneficiaries of alternative payments.
[Source: http://www.oliverwyman.com/advanced-and-mobile-payments-whats-stopping-you.htm ]

I still think that there is a real threat to the networks, as the barriers to entry are falling
– new technologies can build scale extremely quickly
– real time payments via ACH are becoming a reality in national markets (UK FPS, Singapore G3, Australia RTP, …)
– POS integration is easier as systems move from being standalone to being online/mobile
– issuing banks have some capabilities in managing credit/fraud on current/checking accounts (over and above acquirers and networks) given debit cards: the challenge will be moving these capabilities off the card rails.
– interchange (an incentive for issuers to use card networks) is under pressure (cf. anticipated EU regulation, recent JPM announcement)

Interested in your views.

James
@26left

thanks,

matt