The card giants may be immersed in battle with disruptors, merchants and regulators, but the cyber-police have their backs.
The card networks could be forgiven for feeling that everyone has it in for them. It’s not just that BNPL giants like Klarna are eating their breakfast and that the European Payments Initiative wants to do the same; that Amazon is putting the squeeze on Visa or that the UK’s Payment Systems Regulator has concerns about their fees (as well as the card acquiror set up). They also have the likes of JPMorgan planning to “eat the world” with their payment ambitions and open banking enthusiasts now hoping to do far more in payments than they ever dreamt of doing with data.
With its pan-EU instant credit transfer initiative, the EU Commission aims not only to offer an alternative to (fast disappearing) cash, but also to cards, while the PSR’s proposed strategy aims to “unlock the potential of account to account payments” to “offer a viable alternative to card payments” (except presumably EPI ones). In China the two card giants have hardly got a look-in and in India things aren’t much better. There the Reserve Bank of India banned Mastercard from issuing cards in July, whilst the government’s "informal and formal" promotion of domestic payments rival RuPay has upset Visa – at least according to Reuters. Merchants routinely complain about card charges and consumer protection folk about their interest rates.
If all that weren’t bad enough – or perhaps because it is – prominent payment watchers reckon the future isn’t one for cards. Stripe’s employee Patrick McKenzie writes that “we’ll see bank transfers as a more prominent part of the payment mix in much of the world” in his blog Bits about Money. David Birch meanwhile asks whether “cardmaggedon [is] on the horizon”, citing affirmative evidence from Worldline and CapGemini, McKinsey and PwC to conclude that it is.
But not everyone has it in for the card giants. In a pre-Black Friday warning, the UK’s National Cyber Security Centre put out a warning about online shopping. The NCSC urged consumers to “use a credit card when shopping online, if you have one”. Getting down into the nitty gritty, its warning explained not only how most major credit card providers protect online purchases and are obliged to refund you in certain circumstances, but also helpfully pointed out how using a credit card (rather than a debit card) also means that “if your payment details are stolen, your main bank account won’t be directly affected”. Indeed.
It may make economic and general public policy sense to promote competition in payments, as well as good financial sense to embed (free, or at least lower cost) account-to-account payments as a payment option if you are a merchant. But account fraud rates are high, especially in those markets (like the UK) where instant payment systems enable these immediate account-to-account transfers. It will be interesting to see what consumers, the likes of the NCSC – and lest we forget, the fraudsters – make of seamless, frictionless transfers as an alternative to cards. (If taking the money and running is your sort of thing, we have a hunch that sending on good old money at par will be a much more compelling proposition than, say, having to fence illegally bought handbags and laptops at a discount.)
The card crew have decades worth of experience fighting fraud behind them and yet card fraud is still a problem today. Can account-to-account transfers really be a safer alternative? Are they ready to be?
Stay tuned, because if the cheerleaders are right, we are soon about to find out.