clouin.com

Payment Revolution Will Have to Wait

Steve Case is putting the brand and financial weight of its Revolution investment arm behind
a consumer Internet payment offering. The highlights are a PIN-based payment
card for consumer, a lower interchange fee for Internet merchants, and a
proprietary Internet-based network to authorize and carry transactions.

Merchants will undoubtedly find the lower interchange fees attractive. Hopefully, this
will spur merchant adoption to rapidly take off. The Internet-based payment
network seems to enable Revolution to leverage some slightly more advanced
security features than the current credit card standard. However, the low fees
will also leave less room for error on risk management.

User adoption will be the key challenge. Will security features and peer-to-peer
payment be enough to overcome traditional behaviors? Consumers traditionally don’t
react strongly to security pitches, because chargeback is perceived as easy for
card non-present transactions and because consumers are concerned about
security only after disaster strikes. A case in point is the fade into
insignificance of the Amex Blue Card v1, which came with a chip and smart card
reader.

As for peer-to-peer payment, PayPal succeeded because it piggybacked on eBay’s auctions (and tapped
into eBay’s coffins to fine-tune its risk management). Rather than going for
generic P2P payments, some focus on one of the underserved P2P payment would
more surely bootstrap Revolution’s viral adoption, such as mobile payment,
international transfers, advanced consumer payments or P2P lending.