Merchants may get real-time access to funds at lower rates

Typically, if a merchants wants to pay low fees, they get access to their funds later (e.g., ACH payments received after 3 days). If the merchant wants to get access to their fund immediately, they would have to pay a higher rate (e.g., credit/debit cards payments are received overnight).

This seemed to be an immutable reality that merchants had come to expect. Lower rates/fees and 'immediate' access to funds seemed to be a contradiction.

There is light at the end of the tunnel. Digital Transactions reports that PayPal is piloting a payment method where the merchants can have access to fund immediately (overnight). The rails are different from ACH and payment card rails. The disruptions keep on coming.

It will be interesting to see how this innovation plays out. All the best to PayPal for continuing to move the ball forward. Innovations that reduce online merchant's cost of accepting payments cannot come fast enough, especially in the current economic conditions.

Obama effect on payments innovations?!

At a personal level, Obama's victory provides hope and optimism of a new tomorrow. Given the prevailing mood, hope and optimism are the engines that will get the US back on its feet again and restore its place as the leader of the free world. However, the expectations on President-elect Obama and his administration might be a little too much for any mortal to bear, even though that mortal might be Barack Obama

I was keeping this post for the new year. As all of us are being carried away by the developments of this week, I figured it is appropriate to gaze into the crystal ball (and again in the New Year).

Positive Trends

• More use of debit cards, resulting in a cheaper tender for merchants (PIN Debit).
  
• Alternative payment systems to reduce cost of accepting payment cards
• Consolidation among players in the P2P and alternative payments space
• Government use of payment cards to distribute social security and other benefits to citizens
  
• Initial usage models of Android phones-based applications to bridge online and retail
  

Negative

• Commercial deployments of NFC will be delayed
• Delay in deployment of contactless readers at retailers
• Mass transit, the beneficiary of high gasoline prices, might be collateral damage as cities struggle to invest over the next couple of years. The reason this aspect shows up here is because Mass Transit payments have led the deployment of contactless acceptance infrastructure
  

Initial indicators suggest that markets, such as, India have not been affected very badly. It will be interesting to watch for any innovations in the payments space from emerging markets.