Ever since I started going to card association conferences I’ve been hearing about ‘the war on cash’. The MasterCard Debit Conference in Monte Carlo this week was no exception. It’s hardly surprising – cash costs banks and retailers money to handle and the card associations can’t take a cut. This week MasterCard announced its latest weapon in the struggle – their as yet unbranded low value payments mechanism.

Anyone who has been following what they’ve been doing with
contactless payments will realise that this is pre-authorised debit
with a few bells and whistles, EMV-based, using a contactless interface
and appearing as an add-on application on a Maestro branded debit card.
The trouble with the war on cash though is that in the past, in the
face of initiatives like Mondex and other electronic purse systems,
cash has put up quite an impressive fight. Purses were inconvenient for
all concerned – they needed additional infrastructure and cardholders
had to remember to keep them charged up. Neither of those factors apply
with MasterCard low value payments, although bizarrely there is an
option to force cardholders to do explicit value loads at ATMs
(apparently this is required by banking law in some countries), rather
than allowing each payment to be charged as a regular debit payment.

Of course one thing that will make a huge difference to the take-up
of this system is what banks charge retailers for transactions using
the system. That of course depends on what MasterCard plans to charge
banks. Although MasterCard hinted coyly at a new uniform SEPA pricing
framework, the explicit details of low value payments charges and other
transaction charges remained firmly covered up at the conference, which
is more than you could say for the frankly off-colour entertainment
after the gala dinner at the event. Let’s just say that I’m glad that
they let us eat first before unleashing the dancers because the number
of buttocks on show would have caused me to look rather differently at
the medallions of baby lamb we were served.

Anyhow, I shall stop hyperventilating in indignation, and conclude
by reporting that the first European pilot of this system will be in
the UK this summer, courtesy of the Royal Bank of Scotland. Here’s the MasterCard press release.

1 comment

  1. Hi Jane,
    Nice post. Also note that people rarely talk about seniorage revenue when they address the cash cost issue (with exception of a handful of geeks at the FED or the ECB).
    Now about the failure of e-purses I’d like to tell you a little secret that did not remained unknown in the world of closed schemes :
    Successful payment schemes DO give more than cash or any payment cards : they give customer incentives to use it.
    We’ve been doing this for 20 years in parking : you’re a student ? It’s written on the card, you’ll get a discount. Same for seniors, disabled, unemployed, whoever : they can all have specific rights.
    Do you park more frequently in a given area ? Get a discount, your area is written on the card and the parcmeter knows its location.
    Call it idiosyncratic fit … We have plenty of others like that.
    Strangely I don’t know one single big player that derived this idea in his own business (with the noticeable exception of public transport now that they have contactless cards).
    Kind regards,

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