Monday, March 7, 2011

Apple, Google and the future of the payments market

A post I wrote about domination of the payments market and the largest players in it is live on TechCrunch (here).

Happy reading!

1 comment:

bill said...

Ohad, your article is very thoughtful and insightful. I was especially impressed that you acknowledge that misinformation creates serious issues during discussions of payment systems and several of the commenters bore this out.

I’d like to shed a little light on the role of banks and all others in the payment space. First, banks in the US are the only entities that can actually move spendable money (checks, coin, currency and its electronic equivalent) from one entity (human or otherwise) to another. All others – non-banks – do not move any actual money. VISA and MasterCard are network providers (data transporters just like package transporter UPS); PayPal is registered in most states as a check cashing service; Amazon, Google and Apple are all merchants. VISA, MasterCard and PayPal are all intermediaries who sit between the payer (buyer) and the payee (merchant or a second party) in a financial transaction. All of them perform data processing to prepare transactional data and deliver it to banks/credit card issuers who in turn move the actual money between parties.

VeriFone, Intuit and Square are all offer POS-capture services and then deliver the raw data to the networks who in turn deliver it to the Banks and card issuers for payment action. On-line games and other content providers perform account maintenance functions to keep track of script-like currencies and they, too, rely on banks and card issuers when reverting to spendable money. Prepaid card issuers rely on banks and card issuers to fill the pre-paid cards and then provide micro accounting for usage.

Some common carriers perform micro account for transaction that can be charged to a customer’s phone bill for monthly collection. Some common carries act as networks to deliver transactions to a card issuer such as Discover Cards.

So, where does this leave us when reading about the trials and tribulations of big on-line players who trying to figure out a way to make extra money from us as they show us ads or sell us stuff? It means that Google, Apple, Amazon, PayPal, et al are like a room full of blind elephants dancing each to the own beat.

Until and unless banks decide that the internet merchant and the internet buyer are unique and require a new form of transaction processing there can be no innovation in the payments space.

And you can take that to the bank!

Bill Anderson