This article in Seeking Alpha uses the Justice Department’s lawsuit against Visa as proof that payments is undergoing rapid change, and they expand on this using AliPay and faster payment networks as further examples. But payment networks don’t operate in a vacuum, and the technologies that support payments are also changing rapidly and operate in a larger ecosystems.
Authentication technologies, such as biometrics and the standards (FIDO), that make identity accessible, and the networks that are springing up to support self-sovereign identification are examples of adjacent markets that will impact payments, while crypto and Central Bank Digital Currencies are direct competitors that shouldn’t be overlooked:
“The most important thing for investors to understand is that money is just information. Therefore, one can say that money is nothing more than zeros and ones. A dollar bill that is nothing more than a piece of paper that can be exchanged for another dollar bill is also nothing more than an account on a computer system that can be exchanged for another dollar within the computer system.
This is the foundation upon which the whole financial system is based upon.
Furthermore, this “information” can be transferred throughout the financial system in many different ways. Bank checks are one way. Bank credit cards are another way. And, the whole process is now evolving further and further to an electronic base.
Mr. Demos writes about how the banks in 2017 moved to a real-time payment network via The Clearing House “to speed up and fully digitize bank-to-bank transfers.” And, Mastercard (NYSE:MA) has acquired a firm called Vocalink, which provides an infrastructure for real-time payments networks.
The Federal Reserve is putting together a real-time payment network, although its development seems to be lagging and it is not exactly known what this system will look like or when it will be available.
Then there are digital wallets that can be used to collect and manage cash. These can also be used to pay without the use of cards. Venmo and Square’s (NYSE:SQ) Cash App can be used in this way.
So, the field is evolving and the Justice Department and the courts must come to some understanding about how the world is evolving. The one thing that can be said in defense of the Justice Department, however, is that these advancements are taking place so rapidly in this area because of the spread of the coronavirus pandemic. No one expected to see the movements taking place at the pace they are now moving.
But, the tipping point seems to have been reached and now people…courts…and investors…must move to adapt.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group