making ever more threatening noises about MIFs and this has dragged MasterCard and Visa to the table. The former agreed fees of 30 and 20 basis points for SCTs and SDDs respectively, with Visa also then falling into line. These will be legally binding. ‘So there have been tangible results but we are continuing our investigations,’ said DG Comp director, Irmfried Schwimann, in late 2010. She echoed Trumpel-Gugerell’s hopes that a third player would break through. ‘More competition would be very welcome.’ Ideally, she said, fees would be held down by competition, with DG Comp a ‘reluctant regulator’. Payfair’s stance is not to scrap MIFs but to ‘set the right price for the right service’ by consensus. The EC’s aim is ‘merchant indifference’ whereby the MIF is the same or less than the cost of cash. One element of the US’s Dodd-Frank Act is for the Federal Reserve Bank to set what it considers to be reasonable fees. And Australia, at the forefront in a number of areas, has done away with them all together. Aside from regulatory pressure, competition can have a large bearing. MasterCard and Visa MIFs tend to be lowest where local MIFs are low. As such, the already discussed end of local schemes could have a negative impact here as well, resulting in an increase in MIFs in some countries. It could be argued that for retailers to complain about MIFs (as they have, consistently) is to fail to see the bigger payments picture: banks have their own ‘loss leaders’ and it seems the majority do not make money from payments. Estimates suggest that payments account for 30-35 per cent of bank revenues but around 40 per cent of the costs. ‘Cost recovery is not possible on the least efficient instruments,’ said Birch. He pointed out that when banks in Belgium tried to introduce charges for ATM withdrawals, there was uproar and the banks had to swiftly give up. And revenue from debit and credit cards is only likely to fall.


Some have sounded the death-knell for Visa and MasterCard. Rabobank’s


business development director, Nico Ten Wolde, felt everything would end up on the mobile phone and that Visa and MasterCard’s role would be minimal by 2020. Google has made similar predictions. The globe has been peppered with NFC pilots while Rabobank has more than 100,000 users of its iPhone app. The bank had come together with ING, ABN Amro and the three largest mobile operators in the Dutch market, KPN, Vodafone and T-Mobile, within the aforementioned effort to define standards. What was really needed, he felt, was a ‘Trusted Service Manager’ in the middle but it was not clear who would play this role, although he felt it was not suitable for a bank, for reasons of trust and competition. The latest global player to plan moves into payments have been facebook and twitter but it is still Apple, with 800 million iTunes accounts (and the associated credit card details) by early 2014, and the security facilities of the iPhone, that many industry watchers believe will be the most powerful entrant.


Faster payments


The UK has been among the small number of pioneer countries laying down the infrastructure for real-time payments, particularly borne out of the needs of e-commerce, within its Faster Payments initiative. Launched on 27th May 2008, all the clearing banks were live within a year. The origins were a UK government initiative to remove float, the three day period


where a payment sits neither within the payer’s or payee’s account. The initial scope for the requirements of the service was to reduce the clearing time for internet and telephone-initiated payments. However, there was a bigger picture, to make the economy more competitive, be more in tune with today’s requirements, and give the UK a payments system to compete in Europe and beyond.


Payment Systems & Suppliers Report | www.ibsintelligence.com 7


market overview


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