Mercator Blog

Debit and Alternative Products Advisory Service Update - February 2018
Date: February 2, 2018
Sarah Grotta
Director, Debit and Alternative Products Advisory Service

Welcome to 2018!

I trust your new year is off to a good and productive start. Mercator Advisory Group has a full schedule of reports in the Debit and Alternative Products Advisory Service based on topics clients are telling us are important to them and with an emphasis on data, including projections regarding accounts, dollars transacted, and transactions.

The annual debit outlook for the new year, which considers how market forces may impact debit and alternative products is available through this link. Also, my colleagues and I conducted a webinar in which we each discussed our respective areas of expertise, providing a full view of where the payments industry is headed in the near term. Subscribers to Mercator’s advisory services can listen to a recording of that webinar here.


The report agenda:

 

Faster Payments

I will kick off the year with a report on the state of faster payments in the U.S. that includes projections on the growth of faster payments in person-to-person, consumer-to business, business-to-consumer, and business-to-business (P2P, C2B, B2C, and B2B) segments to help readers size up the opportunity. A portion of the report looks at the growth in same day ACH. Same day is not a real-time payment, but it is a faster payment and it is important to consider alongside payments that do in fact message, post, and settle in a matter of seconds. Same day ACH (SDA) may take some opportunities away from real time payments in situations where ACH is fast enough, the features of ACH fit the need, and where the price for same day ACH is attractive.

Financial institutions that aren’t already offering SDA origination services are gearing up to launch services in 2018, which necessitates a critical look at sign-up criteria and security. We are also seeing evidence of rising interest among businesses in certain niche markets looking at push payments like Mastercard Send and Visa Direct in products such as B2C disbursements. For those businesses with significant B2C distributions, the ability to reach anyone who has a Mastercard or Visa branded card, eliminate the need to capture and maintain checking account details, and reduce the manual aspects of processing paper checks is a measurable benefit.

Also in 2018, we will get a better perspective on how the Fed’s continued role in real time payments. They have stated their intention to build a real time settlement capability, but they have also left the door open to build a real time payments service themselves should they not see the market moving quickly enough towards a ubiquitous offering. A Fed offering may be a welcomed addition to smaller financial institutions wondering how they can support the implementation of a new payment type to their current environment.

 

P2P

Following the faster payments report, I will turn to looking at the person-to-person, or P2P, payments market. P2P has components of faster payments that I will discuss in detail as well as discussing the role of P2P in influencing mobile payments at the point of sale. P2P is enjoying rapid adoption that are the envy of the “universal” payment applications like Apple Pay. P2P may be the steppingstone to greater payment app adoption and greater mobile banking use, and provide a foundation of users more likely to adopt cardless ATM transactions.

 

Debit Survey Data

If you are also a subscriber to Mercator’s CustomerMonitor Survey Series (CMSS), the annual debit survey has been published. There is where we ask over 3,000 adult U.S. consumers about how they acquired and use their debit card, their experience with fraud on their cards, use of debit within mobile apps and a host of other questions regarding debit and the ‘ pay now’ market. An important finding from this survey is that debit is losing favor with young adults and high income earners.

Around the Industry

In this section I like to highlight interesting articles or reports that have been published in the industry.

The Boston Federal Reserve Bank recently released a report of a survey it conducted with over 700 financial institutions regarding mobile banking capabilities. Some of the data are broken out by banks and credit unions and also by asset size, providing some benchmark comparisons:
http://go.mercatoradvisorygroup.com/e/38232/7a27f0b85-2e53c46582-258744865/7z48zt/645164554

The success of same day ACH has led the National Automated Clearing House Association (NACHA) to consider increasing the limit for a single transaction from $25,000 to $100,000, to add an additional same day ACH window, and to expedite funds availability. NACHA is also testing the waters to see what its membership thinks about extending operations to include weekends and holidays. NACHA is currently going through its rules evaluation process, so this is not guaranteed to happen, these new rules, should they be implemented, would have impacts not just on ACH but on real-time payments and push payments as well. More on this at NACHA’s website: http://go.mercatoradvisorygroup.com/e/38232/comment-expanding-same-day-ach/7z48zw/645164554

As always, if you have any comments regarding these debit trends or wish to discuss anything in the realm of pay now alternative products, I would enjoy hearing from you. Please feel to email or call:

Sarah Grotta
Director, Debit and Alternative Products Advisory Service
sgrotta@mercatoradvisorygroup.com
1-781- 419-1704