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| Date post: | 31-Mar-2015 |
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e-Payment and e-Purse : a Reasoned Approach
André-Jacques SelezneffAndré-Jacques Selezneff
Vice-President Low Value & Proximity Payment
Solutions
MasterCard Europe
Summary
Review of electronic payment means for individual card holders
An approach of costs
Evolution Perspectives for payment techniques and consequences on costs
Review of electronic payment means for individual card holders
Existing electronic payment means
MasterCard Credit Card : does not allow transactions anonymity
“Classical” Maestro Debit Card : problem if no banking account
Maestro “Pre-Paid” : communication cost might be too high for low value transactions
Market situation for e-Payment Means
Market pulls card transactions towards low value amounts
e-Purse World Market unclear: multiple incompatible national solutions no cross-border inter-operability
e-Purse Choice too often technical
Security is important when business exists
MasterCard's Low Value Payments offer
Pre-Authorised Debit on M/Chip4: standard EMV debit transactions, no on-line authorisation
Clip e-Purse: derived from existing transactions processing tools dedicated infrastructure
Mondex: THE MasterCard solution for "electronic cash"
dedicated infrastructure
Future for Electronic Payment
EMV (M/Chip 4 in MasterCard) offers members multiple features for debit / credit and for low value payments
M/Chip 4 incorporates known needs for face-to-face payments, as well as new needs like : distant payments (on Internet, through GSM, …) low value payments (e-purse type) payment means for new customers (youth, newly
employed, partners' clients…)
An approach of Costs
Principle of cost structure per scheme type
Deb/Cr or Virtual e-Purse Current e-Purses e-Cash
Total Cost
Volumes
The Dream !
Actual Cost Structure with successive scheme types
Deb/Cr or Virtual e-Purse Current e-Purses e-Cash
Total Cost
1
12
2
The hard facts The hard facts of lifeof life
Learning TimeLearning Time
Learning CostLearning Cost
Actual Cost Structure with successive scheme types
Deb/Cr or Virtual e-Purse Current e-Purses e-Cash
Total Cost
Learning TimeLearning Time
Learning CostLearning Cost
Transaction Cost : hard facts
debit/credit needs telecommunication cost = telecomm and authorisation + processing commissions just allow Bank to cover costs on LVP
e-Purse needs neither telecommunication nor on-line authorisation allows Bank to make money estimated minimum transaction value 0,10 €
Evolution Perspectives for payment techniques and consequences on costs
e-Payment: infrastructure issue
Comparable to Fortresses of XVIth century Railways of XIXth century Tap water of the 50's Electricity of the 60's Highways and Nuclear Plants of the 70's Telephone and Prestel/Minitel/BST of the 80's Pay-TV and Payment Cards of the 90's Internet and ADSL in this early XXIth century
e-Payment e-Authentication Needs a new technical infrastructure
Long Return on Investment: Characteristic of infrastructure Amortisation increases cost to charge
Bank complex job, difficult communication Tariff per transaction well accepted for credit / debit
e-Payment and Transaction Costs
Issue : Users have for centuries considered cash as « free » difficult to charge e-purse « service » to card holder necessary to reduce costs
Answer : Shared Infrastructure decreases per-application costs opportunity to offer new applications Marketing issue, not technical one
e-Payment and Transaction Costs
Other issues to address
e-Purse « limited » to low amounts Undefined Risks? Yet undefined Market? Deployment complexity? Lack of trust in technology? Time required by users to get to grips with a new
product?
??
!!!!
??
!!
!!!!
Suggestions
Shared Infrastructure Rely on EMV deployment
Debit / Credit EMV allows DDA Same security than for e-Purse
AA brandbrand is NOT necessary for Low Value Payment products, IF solution is independent from the underlying technology
The EMV obligation (1)
EMV-based LVP solution is
an absolute necessity
to compensate for reduced revenue due to new interchange rates regulation
The EMV obligation (2)
EMV-based LVP solution is
an absolute necessity
to allow exploring new "low value payment" market, while limiting required initial investment, accessing an immediately available acceptance
infrastructure, guaranteeing cross-border interoperability.
The EMV obligation (3)
EMV-based LVP solution is
an absolute necessity to help Members amortise EMV investment whilst fully leveragin efforts spent at the occasion of
EMV deployment
Proposed Approach
Pre-Authorised Debit on M/Chip4 allow quick access to interoperable pre-paid market
Acceptance rules based on existing programmes
Adaptation of e-Purse solution on EMV once business is existing
Results in solution available today
consistent Card products offer with guaranteed future.
