If you are reading this, you are probably a payment geek of some degree. Here’s an excellent read from the Economist that starts with a punch:
- 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 most significant battles, therefore, often happen in the shadows.
Well said. For the common person, you want payments to work. The bigger deal is what you are purchasing, rather than the coolness of the payments technology. But, payment networks worry because everyone wants into the game.
- The latest struggle, which sees card networks, tech firms, and governments vie to control the virtual pipes, and digital money flows, is no exception. Recent maneuvers by governments, card networks, and even swift, the main interbank messaging service for cross-border payments, show how the battle lines are shifting.
The article continues with an excellent analogy:
- 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.
- Central banks think they are reliable and more resilient. Tech firms, like Google, have built their own payments apps on top of such “rails.” And users enjoy moving and tracking money seamlessly.
But, Mastercard and Visa will not easily cede the space. Why should they? They invented the business more than 50 years ago.
- 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.
The article explains how networks respond, and in this forum, they cite ACI Worldwide’s recent announcement.
- On September 29th Mastercard said it would collaborate with ACI Worldwide, which makes software for real-time payment systems, to provide such services globally.
- That continues an attempt to shift away from plastic that Mastercard embarked upon in 2016 when it bought Vocalink, a software firm that built and now runs Britain’s fast ACH and also powers those in other countries.
- For its part, Visa has set up its alternative to fast ACH, called Visa Direct, and offers services, such as security tools, to help strengthen countries’ payment networks.
ACI Worldwide is a foundational company in payments. Its first global product was BASE24, which evolved with technology. I have followed ACI for decades (as a bank-client and an industry analyst) and can tell you where the “24” came from: it signifies that the system was available 24 hours a day, back when bankers worked 9 AM to 4 PM!
The Economist concludes:
- With both card and fast ACH payments growing at double-digit rates in recent years, the boom in digital payments should mean there are plenty of gains to go around. Just in case, though, the card networks are betting on every horse.
The takeaway is this: payments continually evolve. New entrants will make their mark, but the foundation laid in acceptance and clearance logic lives on. Be there, or be square.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group