Mobile Carriers Will No Longer Earn Money on Payment Transactions

by Tim Sloane 0

This article in Silicon Angel indicates that:

“Google will have to explore other avenues to earn money from its recently announced mobile payments service, Android Pay. Unlike rival Apple Pay, Android Pay will not earn Google a percentage of each transaction processed via the payments service.
According to a report from The Wall Street Journal, this is ‘because Visa Inc. and MasterCard Inc., which operate the dominant payment networks, recently standardized their ‘tokenization’ card-security service and made it free, preventing payments services from charging fees to issuers.’ ”

Specifically, this was announced by Visa as the Visa Digital Enablement Program, or VDEF with Google as the first participant. It is widely assumed however that VDEF is the “Honor All Cards” rule updated to reflect the reality of mobile payments and tokenization. Based on this, it is assumed that no mobile wallet app provider will be able to download tokens from Visa unless that provider accepts tokens from all issuers of that network. This means a single contract with Visa that all issuers can then utilize to enable mobile payments free of charge. While MasterCard has not confirmed a similar solution, it is expected.

Not mentioned in this article is Apple Pay, but it is assumed that Apple will fall under these same rules as existing contracts expire, if not sooner.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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