Two HUGE payment events this week
Per Bloomberg, consumers that don’t want to go for the 5% back Amazon store card (SYF) can now link their DDA and earn 2% back. This may be the biggest payment innovation of the year!
As I’ve written previously, Amazon, Apple and Paypal have proven the ability to manage fraud to under 3bps. To tokenize cards on file (COF) they want risk based pricing… not VBV 2.0. Amazon going direct to ACH by-passes all cards .. and delivers Amazon 0bps.
There are only 2 entities that can put this together: Amazon and Paypal. The ACH connection is easy… managing fraud requires both technical assets and history of users over time. Mobile authentication can solve some of the problems.. but not online and not in a seamless 1-click experience. Amazon has executed on my prediction of payments within a new commerce bundle. (See Changing Economics of Payments)
In April, TechCrunch reported the Google/Paypal deal with Discover as the primary “proxy card”. I have to say I was a little underwhelmed … UNTIL TODAY. My twitter stream with Frank Young below.
WOW.. this is major. This means that there are 0 economics for V/MA or the issuing banks. Paypal is presented as a virtual discover card to Home Depot and then routes visa ACH funding. A decoupled debit extraordinaire!!.
You have to be a payment history buff to see how funny this really is. Just 2 years ago Google offered to PAY BANKS to get transaction data (digital receipt) and TAKE A LOSS on the payment.. In this model the banks get 0 data and 0 interchange…. wow talk about FLIPPING THE TABLE.
Paypal’s deal with the banks may soften the blow long term…. but only for banks that jump on board with the PAYPAL PLAN.