Friday, July 30, 2010

Benefits of closed-loop payment networks

I was surprised to note the continual downward trend of fraud figures reported by PayPal (see graph [includes some interpolation]), including their recent figures of 0.18%, which is about 1/3rd less than comparable figures with Visa/MC.  This is one of the obvious value-adds of closed-loop payment schemes.  PayPal is an example of a [dominantly] closed-loop scheme, in which the merchant and the consumer use PayPal for payment, thereby making it easier for the scheme provider to detect fraud.

Saturday, July 24, 2010

Setting up a new scheme: Learning from CUP

Traversing down the roadmap of bringing a payments scheme to life is interesting.  Once a scheme is launched, most of us think that all the features of the scheme come to life in relatively short order.  As an entire industry is affected by a new scheme coming to life, getting a good feel for timeline is critical to success of many products/ventures that are dependent on the scheme of the land.

Features of a typical scheme include:
  • Domestic
    • ATM
    • Retail (Debit, Credit)
    • Online
    • Other payment networks (Postal system, Rural, Cooperatives...)
  • Connectivity / bilateral agreements with other schemes (primarily 'international'), primarily around card acceptance
  • Connectivity / bilateral agreements with international banks (primarily 'international') primarily around card acceptance