About Brian Riley

Brian is Director of Mercator Advisory Group's Credit Advisory Service. Brian's spent a quarter of a century with top tier national credit card issuers at Chase, Citi, HFC and Wachovia (First Union National Bank) in senior management credit policy, operations and system design functions with an emphasis on applying scoring and technology solutions to acquisition, credit, collection and fraud.

Durbin 1.0 Did Not Work Well for Debit, Do Not Expect Durbin Amendment 2.0 to Work for Credit

If you ask the Federal Reserve, particularly one a hundred miles away from the nation’s capital in Richmond, Virginia, the Durbin Amendment failed to reduce merchant card processing costs. While the timing played well for the U.S. Senator, who ran for re-election in 2008 and 2014, the price controls did not meet the mission of reducing merchant costs. In a 2015 study, the Richmond Fed found, “New survey results suggest that the regulation has had limited and unequal effects on merchants.”  The report, which you will find here, suggests the opposite.  Main Street merchants did not benefit. In an [...]

By Brian Riley|2022-08-02T14:44:41-04:00August 2nd, 2022|Tags: , , , |

Circumventing Russian Credit Card Sanctions: Three Options for Muscovites

It is hard to beat the breadth of the Mastercard and Visa networks. Both payment networks remain at the forefront of the payments industry, engineered decades ago for security and universal acceptance. Today, you can transact globally, though things get tricky in Cuba, Iran, North Korea, and Venezuela.Recently, credit cards became more accessible in Sudan, but that took the “overthrow of its long-time dictator” to get the country off the U.S. sanctions list. When a country appears on the U.S. Department of Treasury Office of Foreign Assets Control (OFAC) sanctions list, citizens need to find payment card alternatives. The [...]

By Brian Riley|2022-04-05T17:51:40-04:00April 5th, 2022|

BNPL: Was It All a Dream? Wake Up and Smell the Coffee

It seemed like a good idea at the time, but if you look at valuations for Aussie Buy Now, Pay Later (BNPL) stocks, you will find that you can buy one share of each remaining company for about the price of coffee at Starbucks. While the coffee might get your blood flowing with 180 milligrams of caffeine, the stocks may be worth even less tomorrow. Back in 2019, we wrote about the emergence of Buy Now, Pay Later in Australia. It seemed like a good idea, but we questioned the model's sustainability, and the unlikeliness BNPL could displace more [...]

By Brian Riley|2022-03-28T09:43:12-04:00March 3rd, 2022|Tags: , , , |

Zero Interest Credit Cards: The Next Big Thing in Consumer Credit?

There is no shortage of innovation in credit cards. Mastercard and Visa are no longer bank associations; they are payment innovation and technology companies. Cards are everyday products that continue to displace cash. Financial institutions focus more on credit card lending than they do on installment loans. Magnetic stripes are out, and digital authentication is in. Most of all, as a result of credit, debit, and card products, 5% of the United States is unbanked, 13% is underbanked, and 81% is fully banked, according to the Federal Reserve. What has not changed much is the structure of the credit card [...]

By Brian Riley|2021-11-03T17:35:18-04:00November 3rd, 2021|

BNPL: The Empire Strikes Back

As Buy Now, Pay Later continues to gain adoption, borrowers are aligning with prominent lenders, not just shiny new fintechs. Traditional financial service firms do not intend to forget their core banking skills and are ready to revitalize installment lending. From a technical standpoint, BNPL involves light coding; from an operational perspective, it means more but smaller loans than an established, revolving credit line. Top private label credit card (PLCC) issuers, typically non-banks that offer closed-loop credit, are also defending their market, as evidenced by Synchrony's recently announced "Pay-in 4" offering. Alliance Data Systems (ADS), another player in the PLCC [...]

By Brian Riley|2021-11-03T17:39:19-04:00September 22nd, 2021|

BNPL Gets Bigger and Better with Afterpay and Square

As retailers begin preparing for the winter holidays and Buy Now, Pay Later (BNPL) players such as Mastercard, PayPal, and Visa roll out their point of sale solutions, Square entered the market with a splash. Square, founded by Twitter’s microblogging entrepreneur, Jack Dorsey, provides a range of integrated merchant payment services. The firm recently acquired BNPL giant Afterpay. Square, founded in 2009, helps small merchants compete in e-commerce. The firm began as a solution to help Jack Dorsey’s friend, Jim McKelvey, sell his crafted blown glass at a business called Third Degree Glass Factory. The story goes like this. McKelvey, [...]

By Brian Riley|2021-08-05T17:49:24-04:00August 5th, 2021|Tags: , , , |

BNPL Aussie Stocks: Truing Up the Market or Waiting for a Dead Cat Bounce?

Twelve BNPL lenders listed on the Australian Stock Exchange fell from $147.7 to $111.1 per share between April 28, 2021, and May 24, 2021. BNPL lenders lost $8.8 billion in market capitalization during the same period, falling from $37.6 billion to $28.8 billion. Mercator suspects this fall is due to rising BNPL uncollected debt and missed payments by consumers. Mercator's recent Buy Now Pay Later (BNPL) report illustrates some of the market weaknesses for BNPL, the new darling of financial services. Loose credit policies surrounding loan approvals, which seem to lack good judgment, create business losses beyond what regulated financial [...]

By Brian Riley|2022-03-01T15:47:40-05:00June 1st, 2021|Tags: |

The BNPL Value Proposition: Consumers, Don’t Throw Away Your Credit Card

Interest-free buy now, pay later loans- they sound enticing, but consumers (and regulators) should do the math.  In today's blog, we provide the calculus of lending and compare the difference between BNPL lending to credit and debit cards. Spoiler Alert: the argument for the promise of interest-free loans fizzles for consumers when you look at the numbers. In the example that follows, a debit card transaction would carry the exact cost as a BNPL loan, and the difference for credit cards would be between $0.35 and $0.74, depending on the type of credit card. For this example, we consider a $100.00 [...]

By Brian Riley|2021-07-16T18:31:32-04:00May 7th, 2021|

The Buy Now Pay Later Merchant Proposition: Credit Card Interchange Is Cheaper

This blog focuses on the merchant side of the BNPL transaction. Our next blog will cover the consumer side of the equation. Credit card interchange, the price merchants pay for accessing the payment networks, is a constant cause of friction. Even when payment networks back off on increasing the merchant expense component, the regulators and merchants still complain. Interchange varies by product, brand, card type, and merchant vertical. It ranges globally from zero to 4 percent, according to the Federal Reserve. The fact is that Mastercard and Visa do not earn revenue from the interchange proper. Instead, Mastercard and Visa generate revenue from their member [...]

By Brian Riley|2021-07-19T20:21:42-04:00March 26th, 2021|

BNPL Loans: Use the Strength of Financial Institutions to Capture the Market

From a lender's point of view, Buy Now Pay Later (BNPL) loans are a bit of a nuisance. Lending standards are lax, as evident in Australia, where delinquencies run 20%. Cost of acquisition is high: loans for $100 financing can cost as much as it does to book a $5,000 credit card when you consider the ability to pay, KYC, and necessary credit underwriting costs. With no regulatory requirements, consumers have little clarity regarding lending costs, as you find with the Schumer Box, named after Sen. Chuck. The BNPL lending model prescribes "payment in 4," meaning the debt will be billed four [...]

By Brian Riley|2021-07-16T18:34:22-04:00December 10th, 2020|

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