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Another BRIC in the wall

By Dave Birch posted Aug 31 2010 at 4:39 PM

[Dave Birch] So far as the commonly-discussed "next billion" consumers are concerned, the idea of some kind of universal payment card is vanishing. We've spent the last 50 years trying to make Visa, MasterCard, Amex and others into globally-accepted brands and I, like many other consumers, get off the plane anywhere on Earth and expect my UK-issued Visa debit, MasterCard credit and Amex credit cards to work without let or hinderance (except in the US, of course). But will this be true for the rest of the world? Isn't there a "balkanization" of payments underway?

The examples to study are, it goes without saying, Brazil, Russia, China and India. China, with China Unionpay, already has its own payment card (if you live in China, you cannot get a MasterCard, a Visa card or an Amex card), but that does at least share technical interfaces with the rest of the world. However, China's newest venture in payments does not.

China Mobile has confirmed that it plans to continue to "vigorously promote" its 2.4GHz RF SIM technology both in Shanghai and in other Chinese cities.

[From China Mobile will continue to ‘vigorously promote’ RF SIM • NFC World]

The 2.4GHz technology referred to here is a longer-range RFID standard (I think it's the same as in the Hitachi Mu-chip) that is entirely unrelated to the short-range NFC standard being adopted everywhere else for payments, including in China by rival China Unicom.

The new service will enable China Unicom subscribers to store a prepaid card account on their mobile phones. They will then be able to top up the prepaid account by transferring funds over-the-air from their Bank of Communications bank account.

[From China Unicom and Bank of Communications announce commercial NFC payments launch • NFC World]

Bit of a niche, really. They've only got a few hundred million subscribers. Anyway, the Chinese model of having a national payment scheme is admired elsewhere.

To promote the use of plastic money, the Reserve Bank of India is set to launch an IndiaPay card modelled on the China UnionPay card.

[From The Telegraph - Calcutta (Kolkata) | Business | China model to promote plastic]

Given India's desire to develop more financial services for the its population, financial services that will have to be configured to meet the specific needs of their population, you can see the desire to integrate a national payment scheme more closely with a number of other specifically Indian initiatives, such as the Universal ID (UID) scheme.

The Bank of Maharashtra (BoM) on Thursday announced its plans to launch a number of new biometric ATMs, which will enable elderly citizens to use the facility without having to commit their PINs to memory.

[From Forget the PIN: banking now at tip of senior citizens’ fingers]

These aren't the only examples. As I understand it, Russia is considering a law to insist on domestic transaction processing and perhaps a government-subsidised "RussiaPay" and there are plenty of other countries where the international card schemes have been caught up in an anti-globalisation backlash.

Bradesco and Banco do Brasil have announced signing a Memorandum of Understanding "regarding the launch of a Brazilian brand and integration of part of their credit cards operations." Specifically, they have entered into a non-binding memorandum of understanding for the preparation of a business model, involving:

* The integration of part of their card operations;
* The launch of a Brazilian brand ("Elo") of credit, debit and pre-paid cards for account-holders and non-account-holders;

[From Bradesco, Banco do Brasil Agree to Launch New Brazilian Card Brand]

Some banks in Brazil already have their own EMV debit schemes that are not linked to international brands, so you can see why it would make sense to bring them together into a national scheme. They might then, perhaps, issue a Visa/MC/Amex application on to the same cards for international travellers: the ability to load multiple payment applications to the same card is an under-utilised capability of EMV, although there are a few banks around the world already issuing such cards (POSB in Singapore being the latest).

Does this mean we are moving away from universal schemes? It seems to me that we are already losing them. When I was in SF last week, I did my usual round of experiments so that I could see for myself what the situation is. I found a very mixed bag. For example: none of my UK-issued contactless cards worked in the contactless terminals in SF although my UK-issued contactless sticker did (it's obvious why: although the sticker is issued in the UK it implements MSD as do the US terminals, and the US terminals don't implement EMV). As an aside, there were several places where my UK cards were refused in unattended environments: BART machines, CalTrain machines (once with an interesting "bank not on file" error message), SFO cart machines. I wonder if the UK issuers are declining unattended transactions when tney are not chip and PIN? If so, it's an odd decision, because in many retailers I was never asked for a signature for transactions under $25 and for transactions over $25 when I was asked for a signature I signed as "Carlos Tevez". In a couple of retailers I was asked to provide picture ID, so I produced my English driving licence, which none of the retailers could possibly have verified, and everyone was happy. In one retailer, my son was using the prepaid card I had given him for his holiday and the retailer asked him for picture ID (which he didn't have with him) so I just told the clerk "this is a prepaid card so he doesn't need picture ID" and the clerk said OK and ran the card anyway. In a restaurant one UK prepaid card was declined but the other was accepted: I've no idea why. A decade ago, I knew I could go pretty much anywhere in the world with my Barclaycard and it would work. A decade from now...

It's one thing to see national payment systems emerge in opposition to, or perhaps in parallel to, the international payment systems that we are familiar with. There might be a whole other future coming along though, where regional payment systems are used to pay with regional currencies.

Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

[From The demise of the dollar - Business News, Business - The Independent]

We're not going to have universal anything: accounts, cards or even currency! What we're going to have is globally-interconnected local systems. So one might imagine someone from Dubai coming to London and using their GulfPay card (which is in gold) at Harrods to buy a $1,000 necklace. Harrod's acquirer obtains a gram of gold from the GulfPay issuer and then immediately trades it away for $995, which it credits to Harrods' account. Or alternatively, depending on its trading strategy, it might decide to keep the gold and send money from its own Sterling account to Harrods. Payments are going to be much more fun in the future than they were in the past.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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