Would banks invest in new payment rails if it allowed them to dominate digital payments like they dominate card networks?
Payments
Asked by Question Bot01/Mar/20131 answer
1 Answer
F
Faisal Khan
Answered 01/Mar/2013
From an outside the US perspective, the answer is Yes.
Many banks & start-ups in emerging and developing countries are indeed working on alternate or hybrid payment systems that would typically bypass the traditional card associations.
The issue is not so much as the payment system itself, which is relatively easy to design, but rather issues likes how to fit the whole solution under a regulatory framework.
Competing systems also dilute the traction any one system can get, so another problem faced by banks is which system to have and take ownership of. In a few countries where we are working, a consortium has been made where a payment system was selected and all the banks partake equity stakes in it. This ensure that one of the most importact factors: traction, is gained.
In countries like India, the Governor of the central bank (Reserve Bank of India) has indeed highlighted the need of an alternative payment network that would cut India's domestic payments from the umbilical cords attached to the giants such as Visa &/or Mastercard.
Domesticated payment networks and payment systems are slowly gaining traction, however a multitude of issues exist, such as: legal, compliance, regulatory framework, signups, tractions, interoperability, agent network, load/unloading of funds, processes, etc. are all factors that take time to iron out before a payment system can be successful.
Many banks & start-ups in emerging and developing countries are indeed working on alternate or hybrid payment systems that would typically bypass the traditional card associations.
The issue is not so much as the payment system itself, which is relatively easy to design, but rather issues likes how to fit the whole solution under a regulatory framework.
Competing systems also dilute the traction any one system can get, so another problem faced by banks is which system to have and take ownership of. In a few countries where we are working, a consortium has been made where a payment system was selected and all the banks partake equity stakes in it. This ensure that one of the most importact factors: traction, is gained.
In countries like India, the Governor of the central bank (Reserve Bank of India) has indeed highlighted the need of an alternative payment network that would cut India's domestic payments from the umbilical cords attached to the giants such as Visa &/or Mastercard.
Domesticated payment networks and payment systems are slowly gaining traction, however a multitude of issues exist, such as: legal, compliance, regulatory framework, signups, tractions, interoperability, agent network, load/unloading of funds, processes, etc. are all factors that take time to iron out before a payment system can be successful.