Remember when MasterCard changed their name to Mastercard, de-emphasizing the card part? Mastercard is now doing more than just changing its name. In a recently announced partnership with Worldpay, they are promoting a consumer payments product that doesn’t process through their network. This is made possible through the purchase last year of UK based technology company, Vocalink. Vocalink has played a part in the development of faster payments platforms around the world, including providing technology for The Clearinghouse RTP platform in the U.S. In addition to Vocalink’s platform technology capabilities, it also offers a product called ‘Pay by Bank’, a direct debit payment solution that bypasses the card network. Finextra reported on the recent partnership with Worldpay to promote the wider adoption of Pay by Bank in the UK:
Pay by Bank enables customers of UK businesses to make online payments for goods and services via their banking app, and directly from their bank account.
The app was developed by Zapp, a unit set up by VocaLink in 2013 with the aim of bringing real-time mobile payments – in store, online and through apps – to millions of Brits by integrating its system into bank apps and tapping into the Faster Payments rails.
The initiative signed up a host of big name retailers and banks ahead of a planned 2015 launch, vowing to win 20 million users by 2017, rivaling traditional payments giants such as Visa and MasterCard – which now owns Vocalink.
With the continued pressure by regulators in the UK to reduce interchange fees, it’s a good time to look at an alternate business model. More on recent interchange battles in the UK can be found here.
Of course, these are early days and it is unknown how a direct debit solution will play out in a card centric market. Will consumers want to give up the protections they receive with card transactions, or will regulators require the same protections on all payment types?
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group