Monday, March 29, 2010

PayPal Changing the Payment Processing Game

According to, PayPal changes the credit card payment model in significant ways. If one compares the impact of interchange regulation in Australia on Visa/MasterCard issuers vs. American Express, it is clear that closed/semi-closed loop payment systems may have an inherent advantage. In partnering with Banks, and not sharing in the topline opportunities, PayPal could seriously affect the balance of the payments eco-system. In that light, rethinking the services offered to banks to assist them with new payment and commerce channels is a critical imperative for the rest of the industry.

Ultimately, innovation is a matter of culture: PayPal is grounded in the advent of eCommerce and Push Payments, both encouraing changes. This not only explains best why PayPal would try where other would shy away, it also exemplifies the challenge for leading providers. It would be reckless for a Visa or MasterCard to try become an Internet-style company. However, they would be well advised to aggressively partner with other new comers such as Obopay, or Bling Nation to capitalize on their "let's do it" outlook on business.

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