New payments technology and rising demand for services are expanding the scope and reach of most of the world’s leading domestic payment schemes. But challenges from Visa and Mastercard loom large.
The top threats to domestic payment schemes surround incentives large international card networks are paying to issuers, the challenges of cross-border acceptance for domestic payments and the need to develop new products and services to remain competitive, the Payments Jury said in a Tuesday press release announcing its annual report.
The Payments Jury, a nonprofit initiative formed in 2013, pulled research and data from 36 domestic payment organizations across 35 countries over a six-week period from July to September 2018 for a report authored by independent payments adviser John Chaplin.
Domestic payment networks generally account for 35 percent to 55 percent of point of sale spending, the report noted.
Large international card payment networks have substantially increased the incentives they pay card issuers over the last two years. “In markets where there is no regulatory protection, domestic schemes may themselves have to find ways to incentivize issuance,” the report said.
The fees domestic payment schemes and switches charge tend to be about 25 percent to 50 percent less than those of the international card payment networks, but that may not be sustainable, the report indicated. “There is some evidence that at this level, the fees may be too low and inhibit the necessary product development to remain competitive,” the report noted.
Most schemes recognize their systems must provide support for e-commerce, contactless and mobile payments to remain competitive.
Senior executives at participating domestic and regional payment organizations have concluded that to restrict their focus to their legacy focus on debit card payments is strategically dangerous in today’s market, according to the report.
Regulators and market participants see rising support for lower-cost payment options via domestic payment schemes and switches. But in some cases the report said regulatory action has had the opposite effect, and it is inadvertently assisting international competitors.
Another key theme of this year’s survey is the fact that domestic payment schemes are collaborating with each other to share knowledge and resources, particularly in technology but increasingly on acceptance issues, the report said.
The majority, or 61 percent of domestic payment scheme executives surveyed, see the evolution of mobile-first payments as an opportunity, not a threat.
Participation by individual global domestic payment schemes in the annual survey has nearly doubled since its launch, according to the report.
