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Revolt Over Interchange: Home Depot, Wal-Mart Lead Way

March 8th, 2012

People can differ sharply as to what constitutes need, especially when one of those people is being asked to write a seven-figure check. Also, the economy and the individual profit situation for each chain will almost certainly have a major impact on how much of the money is ultimately invested.

That raises the question: Invested how? Beyond the usual costs of creating a major group such as this—research, spec creations, legal work, coordination, negotiations, etc.—the dollars are earmarked to find and/or create a firm that will deliver a mobile-payment system that comes close to the goals described.

The initial hope is to find an existing entity and to use the money to help that firm, presumably in exchange for an equity stake if not outright ownership. “There are systems out there. People have already figured out how to do a lot of this,” said another participant.

Another possibility—admittedly more remote—is for the group’s efforts to force major changes from existing players. For example, if the group’s financial and organizational efforts are succeeding, will we suddenly see Google Wallet, ISIS and PayPal change their security and other features, to try and become what this group is looking for?

Even more unlikely, would Visa and MasterCard change their tune on interchange and security, hoping that some major compromises would enable them to continue their existence? That scenario is admittedly the most far-fetched. First, the emotional reality would likely thwart acceptance of a Visa proposal. More practically, it’s highly unlikely that Visa’s business plan would permit concessions nearly deep enough to appease the retail group. Not that it might not try anyway.

Another possibility is that a major player that hasn’t yet made its entrance into mobile payment—such as Apple—might be wooed to enter it in a retail-friendly manner.

Beyond the large chains, the group’s initial members include major bank issuers, networks and technology providers, but not—as of yet—the card brands. Given the desire by some to undermine the card brands, that’s not surprising.

One participant said that he would like to see transactions moved to a new infrastructure, one where account credentials are never transmitted in the clear. As the NRF has argued for years, if given a choice between banks and retailers, who is better positioned to handle and control payment systems?

To make that radical a change to the system, though, will require retailers to take over and make dramatic, wholesale changes. Ironically, said that participant, “to get out of the payments business, [retailers] have to get in the payments business.”


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Why Did Gonzales Hackers Like European Cards So Much Better?

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