Abstract
New Research Examines the Impact Alternative Debit Payments Are Having on the Market
Alternative debit products have gained ground in online payments, but have yet
to gain any real traction at brick and mortar locations. Decoupled debit may
be finding a home in certain retail markets, but has not proved to be the
success once feared by traditional debit card issuers. It' s obvious that
financial institutions are exploring how they can leverage some of these new
payment types to regain online purchases and consumer connections lost to
these new payment forms, but they may be better served by paying closer
attention to the mobile financial market. This growing market is the
realization of card-less payments that presents the long-term threat to
traditional debit card-based strategies. Simultaneously, the ACH is working
hard to react to their new-found popularity.
Pay Now, Pay How? Natural Selection and the Alternative Debit Payment is a
report by the Mercator Advisory Group that attempts to define the alternative
debit payment schemes, such as decoupled debit, currently operating in the
United States in the context of their market sustainability. In this report,
we review the primary alternative debit payment models from the point of view
of each of the major stakeholders in the transaction stream, including issuer,
merchant, network, and consumer. Included in the study is a discussion of the
market dynamics that are driving adoption, the impact to traditional debit
issuers and the challenges in building an entirely new form of payment scheme.
This report is designed to more closely examine the impact that alternative
debit payments may be having on the market by the manner in which they are
offered, selected, and adopted.
"This bifurcation between the physical buying world and the virtual buying
world is just one of the challenges alternative payment types are facing as
they consider their market opportunity from a consumer' s point of view," says
Patricia Hewitt, Director of Debit Advisory Services, and author of the
report. "Those payment methods that are quickly becoming a standard part of
the Internet buying experience don' t translate easily or perhaps at all into
the physical world."
Highlights of this report include:
- Alternative debit payment schemes are proliferating and finding real
traction in the e-commerce market as "payments as a service", but the physical
retail market is still waiting for a proven success.
- Decoupled debit cards have not delivered on the anticipated market
disruption, but did pave the way for new thinking and new payment product
development.
- Financial institutions are cautiously beginning to enter the market with
alternative debit products through direct sales or marketing alliances.
- Regulatory and economic conditions should motivate even higher adoption
rates, which may provide the economic stimulus needed for further
infrastructure investments.
- No one scheme of this type has all the stakeholder attributes of a
successful new payment type, but subsequent developmental cycles should help
separate products in their competitive markets.
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