Can instant payments break the duopoly of Visa and Mastercard in the area of payment transactions? The two card issuers currently hold the market firmly in their hands and together account for more than 80 percent of all EU card transactions. Yves Mersch, Member of the Executive Board of the ECB, gave a resounding 'yes' to this question during a speech in Brussels.
Mersch sees instant payments solutions emerging throughout Europe. A good sign, according to him, because the set-up of a rival third scheme will stimulate competition.
Mersch: “It is important that new instant payment solutions have pan-European reach so that end users can make and receive payments without restriction across national borders.”
An interesting thought, according to the organization of Money20/20 that held a panel session on the first day around the question: will the rise of instant payments render card schemes obsolete?
In the end, the battle between instant payments and card schemes did not end in a bloody fight. In fact, at the end of the session there was a truce: an audience poll on who is winning ended in a 50-50 draw between instant payments and cards. So, no winner takes all. Indeed, it was generally agreed that although instant payment will become a norm, it will not be the norm, as there will be space for the cards, even if not in the form we currently know and use (at least some of us).
It was clear to the public from the start that instant payments have a place alongside card schemes. Instead of replacing cards, this new payment method improves the existing account-to-account flows (A2A) and also replaces other methods such as cheques. Specific use cases are particularly suitable for immediate payments. Think of insurance companies that can quickly settle a claim via instant payments.
Instant access to funds to aid access to cash is a clear benefit, whether for micro merchants, P2P payments or larger corporations. But we are at the very start and whilst there are many local and very successful schemes, we still need to address the issue of global utility and such issues as revocability. The implementation of instant payment has to be value-driven.
On the other hand, card issuing is still growing and the revenue pool is estimated to reach 45 trillion dollars by 2019. This does not look like a dying industry, but it is indeed changing. Look at Marqeta, a fintech start-up with an API-driven approach to card issuing processing. Marqeta is certainly laying all its bets on a strong future for cards and the investors seem to agree, as it was recently valued at nearly 2 billion dollars during its latest round of investment. This fintech company says that if we examine the main fintech development and innovation in 2019, the card is central to most of them and this is because of its utility.
After the interesting sessions, most of the audience agreed that there is room for both schemes and that it is about offering choice and value.