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The Payments Year in Review: March 2006 - March 2007
David Evans
Founder

April 9, 2007

At this year’s Lydian Roundtable, MPD Founder David Evans kicked off the discussions with a look back at the last 12 months in the industry. Below is a summary of his opening talk. For a copy of his powerpoint presentation, email us.

Looking back, the activities of the industry in the last year reinforce what all of us in this room already know: that the payment industry is passing through an inflection point. The last 12 months have seen more than 100 announcements of new moves, new money, and new markets entered by incumbents and challengers alike, reminding us more than ever that the global payment ecosystem in 2020 will look much different than it does today.

I’ll start with one of the big disrupters: the association model is dead or dying. MasterCard’s IPO and Visa’s pending one come at a time when Bank of America has threatened to pull out of Visa and MasterCard could face up to a 500 billion dollar damage claim.

As the association model decays, new business models are appearing from established companies such as Google and Intuit and emerging ones such as Gratis and Tempo Payments. New products and new ways to pay add another opportunistic factor to the market--from new prepaid and commercial B2B products to contactless payments to the real elephant in the room: mobile. New geographic markets such as East Asia, India, and Europe also present opportunities though for different reasons.

And while all of this is going on, VC investments in the payment space have increased dramatically in the last year – there’s lots of money looking for great ideas.

In light of these particulars, I’d like to open the discussions this weekend with some questions for thought for the group:

  •   How will publicly owned, for-profit MasterCard and Visa disrupt the payment ecosystem? Will they look to buy or become acquisition targets themselves?
  •   Will new players be able to solve the “chicken and egg problem” that bedevils them? How will they get enough merchants and consumers on board to ignite these new payment options?
  •   Old habits die hard. Despite the hype, contactless is struggling in the United States. Where is (or will there ever be) the killer app that will ignite this new technology?
  •   Will emerging technologies lead payments like they’ve led mobile? If several billion consumers move from cash to “cards” unsaddled with legacy technologies, how will this effect mature card markets?
  •   How will mobile shake out? Is SMS here to stay or just a stop-gap while operators, systems, and issuers get their act together? Will mobile phones become electronic wallets with many cards or tied to a particular issuer or card brand?
  •   Deals and dollars have shot up over the last couple of years. But investors are taking a harder look at what gets funded. What simple solutions exist that overcome consumer and merchant adoption and play to investors’ sweet spot?