Payments Watch

Earlier this month, the Federal Reserve made available a summary of the 2007 Federal Reserve Payments Study. I have used these results, as well as previous payments studies to update the Payments Watch payments model. Preliminary results from this model are predicting that (for the United States) debit card use may surpass checks paid as early as this year, and that ACH and credit card use may both surpass checks paid by 2009.  Longer term, at current trends, the model is predicting that checks as we know it may cease to exist before 2020.

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What I want is a financial services mash-up. I want a single online application that combines all of my financial services products, whether from the same or different providers. Consider an on-line banking website where you view transactions and seamlessly transfer money between your savings account, line of credit, your mortgage and credit cards, with access to a consolidated summary of all of your finances - even though all of these products are all provided by different banks and vendors.
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Rob Carrick at the Globe and Mail writes about how Air Canada’s Aeroplan and Air Miles will encourage you to do redeem points for non-travel items. Why this trend towards offering non-travel rewards by airline loyalty programs? Because it makes good business sense.
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Here is a neat story: the City of Vaughn (just north of Toronto) has introduced the MuniCard Mastercard, a municipal credit card that allows residents to apply rewards to their municipal tax. I believe this is a first for North America, and when you think about it, is a logical next step in the evolving story of reward and affinity cards.
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The Charlotte Observer writes about kiosks that allow shoppers to receive custom coupons by scanning their loyalty card as they enter the store. The coupons could be tailored to the purchasing patterns of the card holder. Why are these services not being offered by the credit card networks to merchants?
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Payments News reported on a piece in the Detroit Free Press regarding thoughtful use of one’s debit card. The gist is that one may over draft their account by using a debit card for purchases, resulting in one incurring overdraft fees. Here’s a thought: why can’t debit cards become credit cards when there is no more money in the account?
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In September, Interac, Mastercard and Visa Canada are planning a trial of chip cards (I understand using the EMV standard) in the Kitchener-Waterloo area just outside of Toronto according to ComputerWorld. Merchants in the region will be set up with EMV enabled POS devices that will accept chip based credit and debit cards.
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No one is going to use your new payments platform until a significant number of businesses or people accept the new method, yet no one is going to invest in the infrastructure to accept and handle the new payment method until lots of customers are using the new method. This chicken & egg problem needs to be addressed in any strategy, and the answer is often having a backward compatibility option that dissolves the problem.
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Currently residents of Second Life, a virtual world created by Linden Labs buy from and sell to one another directly using the Linden (a virtual currency which is exchangeable for US dollars and other currencies on market-based currency exchanges). How about offering other payment channels in Second Life like credit cards?
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Bruce Schneier comments on an article about how rising gas prices and the caps on card transactions authorized at the pump can cause pumps to shut off mid-fill.
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