I’m sure by now you’ve all read about MasterCard’s acquisition of VocaLink. If not, you can listen to me talking to David Yates, the CEO of VocaLink, about it on the latest podcast in our Tomorrow’s Transactions series, either via iTunes or directly via our web site. It’s very interesting, in my opinion, to hear David’s rationale for the deal and his very positive view of the future that has VocaLink experience in instant payments married to MasterCard’s global presence. And for more on this deal, Karen Webster over at Pymnts spoke to MasterCard’s Chief Product Officer to look into the “why VocaLink and why now” behind the acquisition and wrote a nice piece about it.
With VocaLink’s Zapp proposition, Miebach explained, a consumer can go to a merchant’s checkout, use their mobile device to access their trusted bank’s mobile app, and see a variety of payment options including Zapp’s pay-by-bank offering.
Personally, I think this initial analysis didn’t touch on a couple of issues that are relevant to understanding the deal. First of all, the reason why VocaLink was worth so much to MasterCard rather than anyone else (and thanks to the collapsing Pound was a bargain for them) is that Visa dominates the UK debit market and the push future for “instant payments” at retail presents a debit-like proposition to consumers. Zil Bareisis made this point over at the Celent blog.
Visa controls 97% of the debit card market in the UK. I would imagine that a Zapp-like solution would have more of an immediate impact on debit card transactions rather than credit card spend.
From The Future of Zapp and Other Musings on MasterCard and VocaLink
Secondly, if a push payment debit-like in-app and in-browser alternative to the traditional debit card which did not run through the card network but through the Faster Payment Service (FPS) is attractive enough for consumers to want to use then merchants will have to accept it and potentially pay more than they do for existing debit cards (which they will do, because the push product will have more attractive rules and rights) and that will give scope for MasterCard to offer rewards of one kind and another.
Somehow this takeover didn’t make the news headlines, but mark my words it was one of the most significant events in the evolution of the UK payments industry since Reg Varney got a tenner out of that first ATM in Enfield half a century ago. It’s a significant milestone on the road to #cardmaggedon, and it’s not only me who thinks this. Using mobile phones to make instant payments is going to impact the use of traditional plastic cards and plastic card products. Not just because the card will vanish into the phones but because the products themselves will be reinvented for the new age.
As ANZ rolls out Android Pay to its customers, the Australian bank’s chief executive Shayne Elliott has predicted that mobile payments could displace plastic cards in well under a decade.
From ANZ chief predicts mobile will kill off cards in less than a decade – BayPay Members Blogs
This is exactly what Anthony Jenkins said (when he was head of Barclaycard, before he was the CEO of Barclays) when he said, as memory serves, that mobile phones would get rid of cards long before they get rid of cash. But I think the change is more profound than he was thinking about back in the day.
The mobile phone isn’t just going to get rid of the 1940s embossing and 1950s card and the 1960s network and the 1970s magnetic stripe and the 1980s chip and the 1990s online card-not-present use and the 2000s 3D secure and keep only the 2010s network tokenisation in devices but it is going get rid of the whole bundling of PAN-based payment with credit and fraud management and merchant guarantee. The push for push, as they say (or, at least, I say) is inexorable.
Brilliant synopsis Dave. I agree, the ‘push payment’ architecture is going to set the stage for a roster of new offerings.
Dave is of course fully right; in the EU the powerful combination of instant payments and the new payment initiation services under PSD2 will speed up card replacement …. but cash will still be around. See also the Visa Direct announcement.
Maybe, maybe not. But the fact that another core component of UK infrastructure is no longer in British hands is a tragedy.