Payment market. Change of models as a development path?

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13.02.2018 15:11:07 Page views 590 views

Payment market. Change of models as a development path?

Payment market. Change of models as a development path?

Will a tripartite payment model let the market do without acquirers?
Strengthening of the tripartite model of non-cash payments can become one of the key trends in 2018, say experts interviewed by The PLUS Journal. 

The classical four-party payment model comprising merchants, cardholders, card issuers and acquirers, is gradually giving way to an alternative tripartite model. Some experts find it more efficient and at the same time more fair in the context of fees charged for non-cash payments. Its difference from the classical model is the actual absence of an acquirer as such: there are only the payee (a store) and the payer (a buyer). Having come to the store, the latter authenticates his/her card directly with the card issuer and instruct the issuer to transfer funds from the card to the payee's (merchant) account, using a mobile application most often. And it is wide adoption of mobile payments that has resulted in gaining momentum by this trend.

It should be noted that it has been a long time since the market participants started discussing such a tripartite model. For example, MCX, an American Association of major retailers, has been one of its advocates for the last five years. However, it is exactly today, with the wide spread of mobile payments, that the dynamic implementation of this initiative has begun. For example, those same old Alipay and WeChat are nothing more than successful examples of the implementation of such a tripartite payment model.

What advantages does such a model offer to merchants? First of all, merchants don't need   to conclude any acquiring services agreements with a specific acquiring bank. However, in this case some problems with the return of payments may arise, but as regards micropayments (and it is in this segment where above mentioned Alipay and WeChat operate), the advantages of the new scheme outweigh its shortcomings. Merchants no longer need to install a POS-terminal or even an inexpensive mPOS, neither need they get connected to a bank to be served, etc. The only thing they need is a bank account. As a result, the retailer's costs associated with the payment acceptance are minimized. In addition, the store does not have to pay a merchant fee for card transactions.
That's why Alipay and WeChat began their victorious march across Europe, quickly moving beyond the Asia-Pacific region. Moreover, according to some estimates, the widespread use of QR-code mobile payments in the tripartite model both in the Asia-Pacific region and in other regions will increase the global fleet of devices used as POS-terminals from today's 60-80 mln to 120 mln! 

A logical question arises: who actually pays for the payment in a tripartite model in the absence of interchange and acquiring fees? The answer is quite simple: the payer, that is, the cardholder. However, given that it is about micropayments and fees in Alipay and WeChat tend to zero in this case, consumers usually have objections regarding such an approach. 

As for the Russian market, Sberbank with its own service of mobile transfers between the card accounts opened with the bank can seriously compete with Alipay. As is known, the attractiveness of the service is one of the bank’s most effective tools to lure mass client today. 

To learn more about other global trends in the payment industry, read the Editor-in-Chief’s Column in the latest issue of The PLUS Journal.

Journal:  PLUS Journal 1 (248) 2018

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