Jean-Philippe Joliveau

International Commercial Development at Nexi

Message Posts: 1 Comments: 2

Bio Promoting Nexi's processing solutions and services. Career History Previously I worked in the card payment division of Atos, then Worldline. With SIA since 2008, now part of the Nexi Group.

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If merchants are involved, why not cardholders too?

10 Jun 2008

I am intrigued to read that the bill will allow merchants to take 'a seat at the negotiating table'. This is seemingly OK as merchants supposedly suffer from high merchant fees, generated by high interchange fees. However, in other countries where authorities played with legislation to reduce the interchange fees, often this led to increased card m...

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If merchants are involved, why not cardholders too?

Dean,I am not convinced that the introduction of mobile payments will substantially change the situation of the business. Whether you pay with a plastic card or a mobile phone is not fundamentally different in the process, what changes is only the technology used. The payment process in both cases means you need to transfer funds from an account owned by a consumer to an account owned by a merchant. It does not matter if you use a card or a phone to start the process.Your view is mobile payment will be free. This remains to be seen, as there are anyway technological costs to set-up and run the infrastructure, and also to guarantee the transaction safely arrives to destination.Transaction costs may not be a relevant problem in closed-loop systems, where the same operator offers his customers the means to pay at his own merchants. But it is not the same if you want to offer payment services at merchants who are not your customers.Now you can do that by signing bilateral agreements with merchants, but it is easier if you can link to a network that already multilaterally connects merchants and consumers accounts, especially if your goal is the widest acceptance of your payment means. The concept of payment scheme is born, with an issuer and an acquirer, and both need to cover the costs of the service. For the issuer, this can be done either by charging a fee per transaction or through the mechanism of the interchange fee which transfers the costs to the merchant.We can discuss whether the level of costs we are talking about is fair or not, whether card companies are unduly profiting from the system or not, it does not change the fact that there are costs involved in processing a transaction. Email is 'free', but is not a payment transaction. When I send an email, nobody guarantees me that it will arrive at destination (although it usually does) and there is no possibility to prevent it from being intercepted by unauthorised people. This must not happen for a payment transaction which involves money and part of an interchange fee is used to cover the cost of ensuring the transaction is safe, when it is started by a credit card as well as when it is started by a mobile phone. The advantage of starting the transaction with a mobile phone will certainly increase the security level from the very beginning of the transaction but I will still need some network to convey it if I want to pay something with my account in Italy at a merchant in the U.S.So if you had to invest $5 billion in a transaction system, I would not advise you to invest in a card based system; that is not the point. The question would be to decide whether the system must be global of closed-loop. If it must be global, I am afraid there are not many alternatives in managing it. As you say, 'Not that we'll doing it too much different from before'.

13 Jun 2008 Reply Read article

If merchants are involved, why not cardholders too?

Hi Dean- 'merchants should apply a surcharge'I believe this is the right way to discourage the use of cards (you acknowlege this by saying that the option for the cardholder is to cut the card and send it back, which is certainly what they will do). Does this mean that regulators plan to ban card payment? This is not really the case in Europe, where 'war on cash' has been declared and card payment is one (not the only one) of the instruments which should be used to fight it. Regarding the surcharge, there used to be a fee on each payment with a debit card in Italy. The card, however, was free. Debit card payment was confidential. The banks then decided to eliminate the fee and apply (what a surprise) an interchange fee instead combined with a membership fee. The number of cards issued dramatically increased in the following years. So yes, I think consumers would stop using the card, but not because they 'realise how much it costs them on each individual transaction', but simply because there is a cost on the transaction, which is a strong immediate deterrent. And based on this reasoning I think it would be necessary then to put a fee for any type of payment, not just card, and especially cash, measured to the cost of its management which is subsidised by every one of us through taxes.- 'As for consumers negotiating fees, well they could just cut the card up and send it back. The card issuers will soon reduce fees in the absence of customers signing up'My suggestion was provocative. Today, neither merchants nor consumers negotiate interchange fees. Fairness would have it that if merchants are invited to the negotiation table, consumers should also be invited, otherwise they will loose without the possibility to defend themselves (except as you suggest by retreating completely and renounce the card means of payment). It is interesting, though, that you do not propose the same method to merchants. Could we not say 'they could just give back their terminal and accept cash only. The card acquirer will soon reduce fees in the absence of merchants signing up'. But this is not happening, on the contrary, more merchants are signing up to accept cards. And complain about fees.- 'Cards are dying anyway'This is a point of view. In that case, though, I am wondering why senator Dick Durbin is bothering?

11 Jun 2008 Reply Read article