How does the development of Account-to-Account transactions affect the networks? Do banks still need to be "connected" via a Network? Does PSD2 make this easier for them?
Hey Miguel, those are really good questions. My understanding is that a simple transfer doesn’t affect the networks because credit isn’t involved. But PSD2 (the revised payment services directive) does make it easier. Now banks are forced to share some of their data through APIs. This has led to the success of Plaid (coincidence it was acquired by Visa? I think not) and others. The networks have taken stakes in a lot of these companies and they are trying to stay ahead of the curve. So far, it’s working.
Insightful and thorough breakdown, Ryan! Incredible to consider that companies like Stripe, Brex, Divvy, and Galileo Financial Technologies all rely on MasterCard or Visa. I'd love to hear your thoughts on PayPal!
Hey Jigesh, thanks for the question. Surprisingly, it's fairly straight forward. My understanding is that Apple charges the issuing bank 0.15% for every transaction, NFC or mobile. So if the interchange was 1.15% of the overall price, the issuing bank would be left with 1%. The value prop for the issuing bank is that a customer might be more willing to use Apple Pay due to its ease of use.
Hey Ryan, amazing report on Visa. This is the first one i read. Could you explain why scalability increases in the bitcoin network will compromise its security? Thank you.
"Sure, the scalability will improve but that compromises one of the main benefits of Bitcoin, which is security."
Hey Ryan. Great report on Visa. I guess there’s two main questions about V/MA: 1.with such high market share where does the next leg of growth come from? 2)because of how reliable their biz is the valuations are sky high so what should someone reasonably be willing to pay for the growth they will experience and 3)the concept of a wallet and credit cards seems so archaic these days with we chat and Alipay would they get disrupted if the need for cards went straight down or do margins go up without the cost of printing millions of cards in a switch to RF codes or facial recognition? Perhaps even the new way to buy stuff still requires visas network but clearly Baba has already bypassed the necessary use of a physical card
1) Overall, there is still a surprising amount of transactions done with cash. Riding that natural tailwind and small price increases should sustain growth.
2) Agreed, valuation is high. Might be a situation where everyone knows it’s a great business and reflected in the price.
3) It’s yet to be seen what will happen in the US but I suspect it will be different from China. China slipped straight to mobile instead of desktop so there was almost a clean slate for online payments. In the US similar wallets like Google’s have kind of flopped. This is obviously a big risk but V/MA have shown they are trying to innovate here. They now offer Visa checkout, etc.
Hi Ryan,
Thanks for this, very ueful.
How does the development of Account-to-Account transactions affect the networks? Do banks still need to be "connected" via a Network? Does PSD2 make this easier for them?
Hey Miguel, those are really good questions. My understanding is that a simple transfer doesn’t affect the networks because credit isn’t involved. But PSD2 (the revised payment services directive) does make it easier. Now banks are forced to share some of their data through APIs. This has led to the success of Plaid (coincidence it was acquired by Visa? I think not) and others. The networks have taken stakes in a lot of these companies and they are trying to stay ahead of the curve. So far, it’s working.
Insightful and thorough breakdown, Ryan! Incredible to consider that companies like Stripe, Brex, Divvy, and Galileo Financial Technologies all rely on MasterCard or Visa. I'd love to hear your thoughts on PayPal!
Will add PayPal to the list :)
Hey Ryan, super insightful read. Could you describe how Apple Pay fits into the picture (both NFC and mobile purchases) and the fees they get?
Hey Jigesh, thanks for the question. Surprisingly, it's fairly straight forward. My understanding is that Apple charges the issuing bank 0.15% for every transaction, NFC or mobile. So if the interchange was 1.15% of the overall price, the issuing bank would be left with 1%. The value prop for the issuing bank is that a customer might be more willing to use Apple Pay due to its ease of use.
Hey Ryan, amazing report on Visa. This is the first one i read. Could you explain why scalability increases in the bitcoin network will compromise its security? Thank you.
"Sure, the scalability will improve but that compromises one of the main benefits of Bitcoin, which is security."
Hey Ryan. Great report on Visa. I guess there’s two main questions about V/MA: 1.with such high market share where does the next leg of growth come from? 2)because of how reliable their biz is the valuations are sky high so what should someone reasonably be willing to pay for the growth they will experience and 3)the concept of a wallet and credit cards seems so archaic these days with we chat and Alipay would they get disrupted if the need for cards went straight down or do margins go up without the cost of printing millions of cards in a switch to RF codes or facial recognition? Perhaps even the new way to buy stuff still requires visas network but clearly Baba has already bypassed the necessary use of a physical card
Great points Eric.
1) Overall, there is still a surprising amount of transactions done with cash. Riding that natural tailwind and small price increases should sustain growth.
2) Agreed, valuation is high. Might be a situation where everyone knows it’s a great business and reflected in the price.
3) It’s yet to be seen what will happen in the US but I suspect it will be different from China. China slipped straight to mobile instead of desktop so there was almost a clean slate for online payments. In the US similar wallets like Google’s have kind of flopped. This is obviously a big risk but V/MA have shown they are trying to innovate here. They now offer Visa checkout, etc.
Thanks for reading!