Once, there was cash, and then there were cheques, and then there were charge cards and credit cards. Cash has always provided the ability to transfer value in real-time, cheques provide a means of transferring value in near real-time whilst avoiding the need to carry cash. In both cases, the value is transferred from the buyer to the seller directly. Charge cards and credit cards introduced the notion of authorisation and settlement to retail transactions, adding an intermediary and disassociating purchase from payment.
Now that we are living at the dawning of the age of the real-time account-to-account value transfer, do we think that we have come full circle? Is the global real-time payment grail, holy? Or is this just another example of doing stuff simply because stuff can be done?
The financial advantage to merchants of receiving payments in real-time rather than a day or so later in the settlement is essentially a one-time benefit. Large organisations with high turnovers may be able to maximise the impact, but even this is questionable since many acquirers already provide large merchants with early settlement. Ironically, the merchants most likely to benefit from real-time payments are those who are currently considered to be of a higher risk, where acquirers tend to hold on to settlements for an extended period in order to reduce their exposure. If these high-risk merchants were to benefit from real-time payments, would that benefit not be derived from the transaction risk being passed from the acquiring bank to the consumer?
The global expansion of cards and card payments brought with it a global acceptance of card payment principles that ultimately served to protect the cardholder. The reality is that consumers making payments by card are generally protected.
How much consumer protection exists in the world of account to account transfers? Card fraud may be the criminals first choice but the industry picks up the tab, which is usually passed to the merchant, or to the acquirer or the issuing bank. Again, the reality is that card transactions were never designed for the internet. [There is, I believe, a solution but that is the subject of another discussion.]
So, whilst the fraud is easy, the cardholder is rarely at risk. We should be asking the question: will consumer rights be maintained in an Open Banking environment where the money has already moved, and where there are no mechanisms for moving it back?
The future consumer value for real-time payments lies in the ability to move it back.