Forget Interchange Relief—Even Those Developing Mobile Payments Say Banks Will Still Be In Charge
Written by Nick HollandNick Holland has spent the last decade covering the intersection of the mobile and payments industries. He currently covers all things mobile-transaction related at Yankee Group.
From all the buzz about mobile payments, you’d think they represent a major shift in how consumers will pay for goods and who will get a piece of that payment. But increasingly, it looks like that’s not the case. And it also appears that the people most involved in mobile payments—the companies developing mobile-payment systems—understand that not much is going to change with interchange.
With all the signal and noise pertaining to mobile payments (98 percent noise, 2 percent signal), it is extremely hard to define what exactly is going on. Who will own what? What is there to own? What is a Secure Element anyway? Most of all, what will it all mean for the interchange fees that merchants pay to card companies?
A recent survey by Yankee Group offers a clue. Twenty key representatives from companies involved in developing mobile payments in the U.S. were interviewed. One question asked was: What level of importance do the following stakeholders have in ensuring security for mobile payments—banks, mobile operators, retailers and consumers?
According to those surveyed, retailers have a 28 percent level of importance now, which will rise to 50 percent in two years. Mobile operators are at 44 percent today and will be at 61 percent two years from now. Consumers are at 56 percent now, climbing to 61 percent in two years. And banks are currently at 78 percent, rising to 89 percent in two years’ time.
Predictably, all responses indicated that an increase in importance relating to security was expected to occur over the next two years. But more interesting was that the interviewees perceived banks as the most important in ensuring mobile payment security—in fact, the overwhelming majority considered banks to be important or extremely important today, and they’ll become even more important as time goes on.
Bear in mind that these interviewees are considered to be domain matter experts—people intimately involved in developing mobile-payment services in North America. What this telegraphs quite clearly is that these people still believe traditional banks will have the greatest responsibility for mobile payments and, by association, are not expected to be disintermediated by new payment mechanisms.
If the people who are creating the new mobile-payment systems don’t think banks will fall out of the chain, there’s no chance that will happen.
Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code.
-Marc
