Could electronic checking cause credit cards to lose market share?
Banking
Asked by Question Bot12/Jun/20131 answer
1 Answer
F
Faisal Khan
Answered 12/Jun/2013
I don't think so.
The credit card / debit card industry is huge. Its impact on the market with respect to its core products and ancillary products is evolving and becoming more and more mainstream.
Payment Card companies likes VISA, Mastercard, AMEX, China UnionPay, etc. are evolving their product lines to enable businesses, banks and individuals to take advantage of their gigantic network and their brand-power to allow for alternative payment products to ride on their payment networks. VCT (Virtual Card Technology) is one such product that immediately comes to mind.
There is a lot of pressure no doubt on payment card companies to revise their percentage based revenue model, but I do not think this will be changing anytime soon. Consumers, especially frugal consumers will seek alternative payment methods to find more economical payment methods.
On the US side, ACH has its fair share of problems (settlement, fraud potential, the fact that it is a 40+ year old technology, etc.) So if one is expecting the ACH system to drastically dent in any manner the revenue that card companies get in form of payments online, I do not think that is a realistic expectation.
VISA, Mastercard, AMEX are huge entities with a lot of brand value, security, outreach, Dollars to accquire companies, etc. They will not be dethroned any time soon.
As an example, if Dwolla becomes a serious competition to VISA / Mastercard, it is not unrealistic to see an acquisition of Dwolla and then the Dwolla product being reshaped to that of say VISA or Mastercard's liking. This is very much probable.
At present, there is no network other than the traditional payment card companies that can rival them. Most end up befriending and using them (think PayPal etc.) From a financial regulatory point of view there is no regulation and/or concerted effort by the Regulator in the US to make card transactions more cheaper and to see a push for alternative payment networks, etc. (the same cannot be said in Europe, where the regulators are pushing for just this).
So, to summarise, no. Don't expect to see any dent. Businesses do this, just to save themselves money, (settlement times, no acquiring fees, etc. when compared on an ACH based payment or electronic check).
The credit card / debit card industry is huge. Its impact on the market with respect to its core products and ancillary products is evolving and becoming more and more mainstream.
Payment Card companies likes VISA, Mastercard, AMEX, China UnionPay, etc. are evolving their product lines to enable businesses, banks and individuals to take advantage of their gigantic network and their brand-power to allow for alternative payment products to ride on their payment networks. VCT (Virtual Card Technology) is one such product that immediately comes to mind.
There is a lot of pressure no doubt on payment card companies to revise their percentage based revenue model, but I do not think this will be changing anytime soon. Consumers, especially frugal consumers will seek alternative payment methods to find more economical payment methods.
On the US side, ACH has its fair share of problems (settlement, fraud potential, the fact that it is a 40+ year old technology, etc.) So if one is expecting the ACH system to drastically dent in any manner the revenue that card companies get in form of payments online, I do not think that is a realistic expectation.
VISA, Mastercard, AMEX are huge entities with a lot of brand value, security, outreach, Dollars to accquire companies, etc. They will not be dethroned any time soon.
As an example, if Dwolla becomes a serious competition to VISA / Mastercard, it is not unrealistic to see an acquisition of Dwolla and then the Dwolla product being reshaped to that of say VISA or Mastercard's liking. This is very much probable.
At present, there is no network other than the traditional payment card companies that can rival them. Most end up befriending and using them (think PayPal etc.) From a financial regulatory point of view there is no regulation and/or concerted effort by the Regulator in the US to make card transactions more cheaper and to see a push for alternative payment networks, etc. (the same cannot be said in Europe, where the regulators are pushing for just this).
So, to summarise, no. Don't expect to see any dent. Businesses do this, just to save themselves money, (settlement times, no acquiring fees, etc. when compared on an ACH based payment or electronic check).