It’s been a quiet couple of months in the world of mobile payments, but only because few seem to have paid close attention to what should be considered an enormous development: A series of agreements between PayPal and the card schemes that the pioneering online payment firm has long been at odds with.
As part of the new arrangement with MasterCard, PayPal will become the first non-bank card company to use the network, with customer accounts tokenized like a standard card before NFC transactions. Meanwhile, PayPal will stop discouraging its users from employing bank cards as payment instruments, and treat such cards equal to bank accounts when users populate their wallets. The new deals will also allow Venmo – the PayPal-owned peer-to-peer money transfer service that is a huge hit with millennials – to introduce in-store payments.
It is tempting to focus on whether the deals with MasterCard and Visa represent a “truce” or a “capitulation” by one or the other sides, or to get bogged down in the details of the agreements. But it is more useful to look at what the new arrangements actually mean for the payments space as a whole.
And the overall message sent by the deals seems crystal clear: That no matter how large, well-branded or technically adept, no one payments firm is capable of going it alone. Or, to use a metaphor popular in the telecoms area, it means that everyone is starting to see the benefits of sharing access to their own and everyone else’s pipes.
This trend is also being encouraged by regulators. Take, for example, the European Union’s revised Payment Services Directive (PSD2). The new legislation, to be implemented by individual member states by 2018, foresees among other developments a banking system in which banks must provide APIs that fintech companies can use to build value-added services.
While this cooperative approach may seem odd given the high stakes and hard-fought struggles in what many have called the “payments wars,” it underscores what Cellum has told its global clients for years. If you have an ambitious, long-term strategy in payments you should expect to share the route to success with many collaborators, including some that may often seem more like rivals than partners.