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Looking Forward: Further Payment Trends
Smart Money

Looking Forward: Further Payment Trends

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Moving on from our last post on the future of credit cards, we’re going to check out more payment trends and new tech being developed within the industry. From traditional payment giants Visa and Mastercard embracing cryptocurrency, to new developments in digital currency, biometric payments and credit assessment, this is where credit cards are heading to next.

Traditional Payment Giants Go Crypto

Whether you know much about cryptocurrency or not, you’ll have likely heard of bitcoin. And no wonder. Both its reputation and its price are soaring right now. Just ten years ago, you would have been able to pick up one bitcoin for around $1. While it’s safe to say its price has seen some fluctuations over the years, it’s at a record high right now, sitting at around $66,500 per bitcoin.

Perhaps it’s no surprise then that big players within the payment industry are now dipping their toes into the cryptocurrency pool. Let’s take a look.

Visa

Having partnered with some 35 bitcoin and cryptocurrency platforms over the past few years, Visa now seems to be embracing the enemy it once found within crypto. In fact, in a recent announcement, the credit card giant revealed a new crypto software program, designed to help its client banks roll out bitcoin and cryptocurrency buying and trading services, set to launch later this year.

With bitcoin and crypto custodian Anchorage holding the cryptocurrencies on behalf of Visa’s clients at the back end, banks that choose to integrate Visa’s new software will soon have the facilities to allow their customers to withdraw and hold their bitcoin and cryptocurrencies within a traditional bank setting.

According to Visa CEO, Alfred Kelly, the company is preparing its payments network to handle a full range of cryptocurrency assets in the future. As such, it plans to treat the crypto market as two distinct segments, separating traditional cryptocurrencies, such as bitcoin and Ether, from fiat-backed digital currencies, including stablecoins and central bank digital currencies.

“In this space, we see ways that we can add differentiated value to the ecosystem,” Mr Kelly advised during the company’s fiscal first-quarter 2021 earnings call. “We believe that we are uniquely positioned to help make cryptocurrencies more safe, useful, and applicable for payments through our global presence, our partnership approach, and our trusted brand.”

With regards to the first segment mentioned, Mr Kelly stated Visa will work with “wallets and exchanges to enable users to purchase these currencies using their Visa credentials, or to cash out onto a Visa credential to make a fiat purchase at any of the 70 million merchants where Visa’s accepted globally”.

In saying this, Mr Kelly pointed to digital currency platforms and wallets Crypto.com, BlockFi, Fold and BitPanda that have already issued Visa cards.

Moving forward, Visa will aim its focus on upcoming stablecoins that can be handled as a traditional and globally accepted means of exchange, such as bank-issued coins and central bank digital currencies.

Mastercard

Not long after Visa’s announcement, rival Mastercard declared its plans to move into crypto, saying it would give merchants the option to receive payments in cryptocurrency later this year. While the details are yet to be revealed – including which digital currencies it intends to support – the change should allow Mastercard customers’ digital currency payments to be settled in crypto at participating merchants.

This is a distinct step forward from Mastercard’s previous support of crypto transactions, which, through crypto card partners Wirex and Uphold limited users to payment in crypto, not settlement, meaning the cryptocurrency was converted to fiat currency before reaching the merchant. With this new development, however, merchants who opt in can essentially move beyond the fiat network, to deal solely with crypto.

With that being said, there have been some who’ve been quick to point out potential sticking points in Mastercard’s plan. For starters, many of those who currently hold an interest in cryptocurrency are in it for the investment. This ‘buy-and-hold’ mentality could result in limited interest in using crypto as a form of payment.

This sentiment was echoed by Visa’s head of crypto, Cuy Sheffield, who said, “We see crypto assets as more like digital gold. There’s less demand to spend bitcoin.” Visa’s Alfred Kelly also described bitcoin as “digital gold”, admitting cryptocurrencies were “not used as a form of payment in a significant way at this point”.

A further obstacle may be found in the strict criteria cryptocurrencies must adhere to in order to be included within Mastercard’s network. According to the card company, cryptocurrencies must:

    • Provide strong consumer protection, including privacy and security of consumer information and transaction data.
    • Allow all stakeholders, including financial institutions, merchants, and mobile network operators, to contribute to and benefit from their blockchain networks.
    • Operate in compliance with applicable laws and regulations, including anti-money laundering laws.

It’s unclear whether any existing cryptocurrencies meet all three of these requirements.

In a blog post, Mastercard Executive Vice President for Blockchain and Digital Asset Products, Raj Dhamodharan, indicated stablecoins would be the primary beneficiary of Mastercard’s coming integration.

“Our philosophy on cryptocurrencies is straightforward: It’s about choice. Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value,” he said.

PayPal

As an online payments system not much more than two decades old, PayPal is perhaps not what you’d call a ‘traditional’ payments player. However, given the fact that the company is now worth billions of dollars and has a presence the world over, it could easily be described as a payments giant. As such, it also recently announced a foray into the world of cryptocurrency.

Back in October, PayPal revealed to its 346 million users that they would be able to buy and spend bitcoin and a number of other major cryptocurrencies using the PayPal platform. But, while this notion of bringing bitcoin to the masses was celebrated by some, others pointed to the small print, which revealed some fundamental limitations to the deal.

Using the platform, users would not be able to transfer their cryptocurrency in or out of PayPal. In addition, they would not have control of the private keys for their cryptocurrency. These keys are made up of a long string of numbers and letters that allow crypto-holders to move and use their digital assets as they please.

Invoking the cryptographic mantra, ‘Not your keys; not your coins’, Satoshi Labs, the creators of cryptocurrency hardware wallet Trezor, warned people to avoid PayPal in a blog post. “Do not use PayPal for bitcoin; there are many other places to buy crypto which will let you keep ownership of your coins,” the company wrote bluntly in the post.

Meanwhile, Danny Scott, chief executive of bitcoin exchange CoinCorner, said, “From outside the industry, this is a positive for the credibility of bitcoin, but from within the industry, this is just another company offering exposure rather than allowing for sends and withdrawals,” he said.

“Of course, this goes against the general bitcoin ethos of ‘being your own bank’, but it is a potential step in the right direction, as long as their long term strategy is to open sends and receives to allow you to move bitcoin outside their system.”

Whether that will indeed be the case remains to be seen. On its website, PayPal advises only PayPal users in the US can currently can buy, sell and hold cryptocurrencies (Bitcoin, Ethereum, Litecoin, and Bitcoin Cash). However, the company states, “We plan to expand this service to select global markets in the first half of 2021”.

On the subject of transferring crypto in and out of PayPal, the company says, “Currently, you can only hold the cryptocurrency that you buy on PayPal in your account. Additionally, the cryptocurrency in your account cannot be transferred to other accounts on or off PayPal”.

It’s also noted that users cannot use crypto to buy stuff from merchants, or to make peer-to-peer transactions. To use it to carry out those types of transactions, it must be sold and turned into USD.

crypto

Spending in Crypto: Crypto Cards

While there may be limits to the Mastercard and PayPal crypto offering for now, Visa is putting its best foot forward in the crypto game, issuing a number of crypto debit cards in markets around the world.

Having partnered with Visa, digital investment platform Bitpanda launched its Visa debit card in Europe, allowing users to switch between multiple assets such as cryptocurrencies, fiat currencies and precious metals to fund payments.

On its release, Bitpanda co-founder and CEO, Eric Demuth, said, “We wanted to build a product that is missing in the market by asking ourselves why it wasn’t possible to spend your investments at any time you want”.

How does the card work exactly? In what the company is calling a world first, the card can be linked to any asset in the cardholder’s portfolio on the platform, selected via the company’s app. The cardholder can then use the card to shop online and in person, anywhere Visa is accepted, with transactions processed instantly in real time.

Crypto Cards in Australia

While the Bitpanda Card may be only available for use in Europe, Crypto.com revealed in December its cryptocurrency-based debit cards would soon be launched in Australia.

After receiving its Australian Financial Service License from the Australian Investment Review Board, the Hong Kong-based firm is now set to bring its range of crypto debit cards to Australia, while continuing to roll out its full suite of services to Australian users.

Crypto.com’s CEO and Co-founder, Kris Marszalek, said its debit cards are designed to appeal to “new-to-crypto” users. “We have created products that are designed to support those currently not using cryptocurrency, given how familiar our credit/debit card is for traditional financial users, along with our user-friendly app, Exchange, and more,” he said in an interview with Business Insider Australia.

Pointing to a 2020 RBA report regarding consumer payment behaviour, Mr Marszalek highlighted the fact that 80% of Australians know about cryptocurrencies, but only 1% use them. “The fact that so many are already aware of cryptocurrency, means that it is only a matter of time until their appetite for digital currencies is both realised and will need to be solved,” he said

Used alongside the company’s Exchange, the card and its other financial services products serve in Crypto.com’s efforts to create a “crypto ecosystem” that is accessible to a much broader audience.

“Essentially, our goal is to complete the full suite of product offerings to our Australian customers, so that users can buy/sell/earn/pay and spend with crypto without the need to leave the platform, and maximise their benefits with lower fees and higher cashback rewards,” Mr Marszalek said.

And the card? Using Crypto.com cards – which are tiered in their offering – cardholders can use their current cryptocurrency funds within normal card payment systems, and to make ATM withdrawals. Charging no fees, the cards also reward cardholders with up to 8% cashback in crypto, and extras such as free Netflix.

Looking forward, Mr Marszalek said, “In the near future, digital assets will serve as a collateral for all your spending – we will assign credit limits to our users based on their wallet balance. In this scenario, you can use the card to pay your bills, while keeping your digital asset portfolio (and its potential upside) intact”.

Aussies wanting to get their hands on a crypto debit card now can also check out options from CoinJar and SpectroCoin.

And In Other News…

Moving on from crypto, let’s take a look at what’s going on elsewhere in the world of card payments.

Enhanced Transaction Transparency from Mastercard

Back to Mastercard. According to a recent release, the card issuer has debuted a new service designed to make it easier for users to track their transactions. Delivered via Ethoca, this new service aims to boost transparency by providing cardholders with more details on their purchases, allowing them to see info such as the merchant’s name, logo and location of the purchase.

How will this work? Let’s say you’re checking out your transactions online and you find one you don’t remember making. The only info that’s included on the transaction is a trading name you don’t recognise, plus the amount and the date it was made. Unsure of the transaction, you call your card provider, which may result in you getting a chargeback.

Mastercard aims to change all that. Instead of seeing a list of anonymous-looking transactions on your card statement, you will find much more information, making it easier to track transactions and identify the ones that are truly fraudulent. While this will rely on merchants uploading their details onto the Ethoca system, Mastercard hopes to create a new industry standard in which users enjoy better visibility within the next year.

Mastercard Launches World’s First Central Bank Digital Currency-Linked Card

On to more Mastercard news, in the Bahamas this time. In a world first, Mastercard and Island Pay have released a new program that provides people in the Bahamas with the option of loading the country’s central bank digital currency (CBDC) onto a prepaid Mastercard to use anywhere in the world.

How does it work? After being piloted back in 2019, the Sand Dollar was introduced as the world’s first CBDC in October 2020, when it became the first fully-deployed digital version of a country’s fiat currency. While at first it was accessed exclusively through a digital app at select merchants, Mastercard has now released the Bahamas Sand Dollar card, which allows users to convert Sand Dollars to traditional Bahamian dollars, which can then be used to pay for goods and services wherever Mastercard is accepted.

Why choose to trial the project in the Bahamas? There are 700 small islands in the Bahamas, set within 13,000 square kilometres of water. As you might imagine, moving cash within that setting is both clunky and costly. By creating a useable CBDC, the country has removed the problems associated with dealing with cash, to provide a more forward-thinking solution to Bahamians paying for stuff day-to-day.

Richard Douglas, co-founder of Island Pay, said, “By working closely with the Central Bank of The Bahamas and Mastercard, we are able to issue a prepaid card unlike any other in the world. We are now able to bring immediate, critical benefits to our customers at a time when they are looking to find new, innovative ways to pay.

“The Bahamas is leading innovation in CBDCs, and we’re thrilled to be able to play an important role in helping to democratise access to currency, especially in areas that are currently underserved.”

Mr Dhamodharan of Mastercard added, “This partnership is an example of how the private and public sector can rethink what’s possible, while delivering the strongest levels of consumer protection and regulatory compliance. We’re creating a lot more possibilities for governments, shoppers and merchants, allowing them to transact in an entirely new form of payment”.

Biometrics Credit Card Released in France

Over in France, BNP Paribas is set to launch biometric authentication on its cards, having trialled the technology on a smaller scale towards the end of 2020. Signalling the first major, country-wide, mainstream rollout of biometric payment cards, the program will be offered through select branches through the first half of 2021, extending to branches across the country later in the year.

Initially, the technology will be offered exclusively through the bank’s Visa Premier card offering, giving cardholders the option to pay an extra €24 ($37) on top of their card’s standard annual fee of €134 ($208), instead of a €12 ($18) surcharge for a version of the card featuring an extra digital code-based security mechanism.

Many within the biometrics and payments sectors believe biometric payment cards will become widespread throughout 2021, after years of behind-the-scenes development. The development has no doubt been spurred on by COVID and consumers’ resulting dislike of touching shared surfaces. Using a biometric card could provide them with further security, above and beyond what’s on offer when paying via contactless payments.

What will be interesting to see is whether cardholders will pay more for this type of technology on their card, when they can essentially utilise it for free when paying with their smartphone.

A New Way To Assess Creditworthiness

Lastly, our news round-up brings us back to Australia, where a leading data aggregation and data analytics platform for digital financial services, Envestnet | Yodlee, has announced the launch of its Australia and New Zealand-specific responsible lending product, the Envestnet | Yodlee Credit Accelerator.

What exactly does it do, we hear you say? In a nutshell, it is designed to allow credit providers to access quick and accurate consumer information, letting them make more educated lending decisions. Moving on from what the company thinks of as outdated credit evaluation, this ‘Credit Accelerator’ works to provide a more complete and accurate – and real-time – financial picture of each borrower.

Using the new technology, credit providers can generate a comprehensive report, which includes income and expense summaries, while also helping to identify key credit risk and lifestyle factors, such as whether applicants have children, regularly eat out, pay their bills on time or pay large amounts of interest on their credit card.

For you as a borrower, it obviously leaves you nowhere to hide. But, it should mean you only get approved for credit you can actually afford. On top of that, there is the benefit that you would need to provide less documentation on application, speeding up the approvals process. Instead of taking hours, or even days or weeks to get a decision, your report would be available to the provider in less than ten minutes.

Founder - Roland B Bleyer

Roland Bleyer

Founder of Creditcard.com.au. Roland has extensive knowledge about credit cards in Australia. Known as a credit card expert, he has been featured on tv and in various publications. Some popular offers on our site right now include the ANZ Low Rate. This special offer has no annual fee first year, a low purchase rate and long 0% balance transfer. Have a look also at the huge 0% for 30 months balance transfer from Citi with no balance transfer fees.

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