The race to deliver faster payments in the United States intensified as major payment networks and service providers expanded their real-time money movement capabilities. By leveraging existing debit card infrastructure, companies such as Visa, Mastercard, clearXchange, PayPal, and Popmoney sought to provide consumers with near-instant access to funds while advancing broader industry efforts toward real-time payments. As competition increased, payment providers focused not only on transaction speed but also on expanding network reach, enhancing person-to-person payments, and developing new value-added services that could differentiate their offerings in an evolving payments landscape.
On August 2nd, MasterCard released a press release announcing that clearXchange had adopted MasterCard Send to “to enable U.S. debit card holders to send and receive money through the clearXchange network.” Not to be outdone the Visa press release today (August 4th) announces that several companies, including clearXchange, Popmoney, and PayPal, have selected Visa Direct for Real Time Payments:
“Leading players are already using Visa Direct to offer a range of innovative real-time payment services – from mobile P2P payments between friends to business disbursements for sharing-economy services such as ride-sharing companies. For example, Early Warning, a company made up of leading financial institutions offering real-time payments, authentication and risk mitigation, will enable real-time P2P payments on its clearXchange network using U.S.-issued debit cards through the Visa Direct platform. Fiserv, the first company to leverage Visa Direct for P2P payments, is already offering Visa Direct as part of its Popmoney personal payments service. Additionally, last week PayPal and Visa announced that consumers will soon be able to instantly withdraw and move money from their PayPal and Venmo accounts to their bank account via their Visa debit cards leveraging Visa Direct – providing an experience that offers speed, security and convenience.
Early Warning, Fiserv and PayPal join a growing list of innovative companies or partnerships using Visa Direct which also includes Ingo Money and Square. Together, these partnerships represent significant progress in advancing the Federal Reserve’s stated goal to bring faster payments to consumers in the US.”
Since both MasterCard and Visa can perform a deposit into each other’s card accounts via a gateway, it is hard to understand why clearXchange needs both; although one possible explanation is that it’s to spur pricing competition.
In the larger scheme of Faster Payments however, the branded networks have a leg up on all other solutions related to both the number of accounts that can be accessed today and the speed to settle, which they established through new rules that required banks implement the Original Credit Transaction. Where the branded networks lag is in providing B2B tools that can be used to add value to the transaction as a communications tool between business partners. Both NACHA and SWIFT have supported multiple different business oriented protocols for some time, but the branded network solutions appear to be limited to the ISO 8583 format. For example, the ACH Corporate Trade Exchange (CTX) format incorporates an Electronic Data Interchange (EDI) solution. . It is possible that the MasterCard acquisition of VocaLink will help them expand capabilities in this area.
To displace existing payment platforms across a broad range of payment types, and to better compete against each other, the branded networks will need to expand the feature functions that they offer and be able to explain that differentiation to interested parties.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
