In reality, additional card fees for wallet schemes will probably just reduce the cost advantages of wallet schemes over card acquiring. For some this fee looks like a punishment or a fight against new innovations at the POS. However, it may only balance the equation with traditional acquiring banks. Whats the different between wallet and card payment calculations?Wallets have been designed for global usage because they are Internet and mobile services. This fact has influence on pricing calculations because wallet schemes can apply low international and interregional card interchange fees for funding with card payments. A low interchange fee helps wallets to keep their service fee to merchants down which actually is an advantage over traditional card acquiring.In addition to that, wallets have a global reach whilst an acquiring bank needs to pay substantial license fees to MasterCard and Visa for each region or country where they want to signup merchants. A wallet is just global but an acquirer pays for each license in Europe, USA as well as per country in Asia.With those advantages in mind and backed with fast growing home markets like e-commerce and mobile there is no need to doubt the business model of wallet schemes. Last, but not least, MasterCard and Visa have exposed market positions that limits their freedom of choice regarding extra fees because anti trust agencies are watching them closely. For instance MasterCard was punished for excessive fees in Europe.At Computop we see wallets winning more and more market share, especially with large global brands. We recently analysed the significance of different payment methods for the online fashion industry in Europe: 48% of 5.7mn orders were paid by credit card and these order values were 25% above the average. Although order values paid with PayPal are 24% below average PayPal covers 33% of the online fashion sales volume. If wallets are that successful at the POS, card schemes will lose a lot of business at the POS because cards are only one of many funding sources for wallet users.The rise of wallets wont be stopped with a simple fee. However, MasterCard is taking a risk here: By raising fees and increasing pricing for funding wallets with cards, MasterCard takes the risk that wallet schemes will promote other funding methods. On the one hand an extra fee is extra income for MasterCard balancing the equation of wallets and acquiring banks, but on the other hand wallets will probably influence their users to use other payment options to fund their wallet. That wont help MasterCard to keep their market share.
Finally, I sense that merchants and wallet users won’t like what MasterCard proposes which could end up damaging their reputation in the retail industry.
COMPANY PROFILE
Computop is a leading international Payment Service Provider with a focus on mid-range to larger sized merchants. The Paygate payment platform is a global payment solution with all relevant local payment methods and fraud prevention capabilities that merchants need on an international scale. In Europe, nearly 2,000 respectable mid-size and large online retailers process an annual volume of 44 million payment transactions with a turnover of EUR 2.5 billion through the Computop Paygate. In 2010 Computop Germany grew by 30% in turnover and by 50% in transactions.
For more information about Computop, please check out a detailed profile of this company in our dedicated, industry-specific online companies database.
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