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@AdamN: TY for sharing this Stripe link. I've added it as a comment below my post. I'm glad that I'm not the only one harping about how the push for greater security can result in lost revenues. Well before Stripe, other PSPs have advocated CVV / AVS checks as a tradeoff between security and convenience. Just that regulators in some countries (e.g. India) pushed ahead with 3DS and stuck to their stand despite receiving feedback about loss of revenues caused by 3DS friction whereas regulators in some other countries (e.g. USA) didn't. In extreme cases, the Indian regulator actually went on record saying "security first, convenience later". There are examples of SaaS and ecommerce companies who relocated outside India just to avoid the burden of 2FA / 3DS.

Having run the FPS implementation for a Top 3 UK bank back in 2008, I got a chance to observe it from very close quarters. While it has its advantages, like the ability to mimic the realtime settlement nature of credit card, credit card offers many other benefits to the payor that are unmatched by FPS, even excluding rewards viz. repudiation, deferred payment, greater security, zero fees. Therefore, no matter how widespread ACH / FPS rails become, alternative modes of payments like credit card will always remain and the payor will always want to have a lot of say about which payment mode they wish to use. I'll never say never but I don't see the day when the payor will be ready to totally relinquish their choice of payment mode to a hub or whatever you call it. That said, once the payor decides a payment mode, it might be possible for a hub to automate the specific route / brand within that mode e.g. If payor selects ACH, hub can automatically decide whether to route it via NACHA or Clearing House; if payor selects Credit Card, hub can automatically decide whether to use HDFC-VISA-3323 or AMEX-5333 or whatever card. It already works this way for cross-border remittance: Once the remitter selects wire transfer @ US$ 45, the bank automatically decides which correpondent bank and route to use.

Does anyone how much extra revenues merchants gained by not being overzealous about security, causing too much friction and suffering from shopping cart abandonment?

Mitigating Fraud Does Not Pay The Bills

Question is who is driving the substitution of cheques by card. Far as I know, it's being done by the card issuers, who have the obvious vested interest in the form of interchange revenues. If interchange vaporizes, card issuers will stop pushing cards and move on to the next instrument on which they will make money. Post Frank-Dodd-Durbin driven debit interchange cap in the USA, there are already reports confirming predictions that banks are pushing customers towards credit cards (on which no interchange caps apply). So, I don't expect rewards-based incentivizing to vanish anytime soon. Just that it might become sustainable on some other instrument.

All these factors will become important after mobile wallets have crossed the immediate hurdle, namely, provide a compelling reason for people to ditch their physical wallets.

Yeah right. 83% of Lending Club borrowers use the funds to pay off loans and credit card debt from traditional FSPs (http://t.co/SL7oYPazC1). So, the traditional FSPs have got their money back already. Now, they can go ahead and lend to anyone and everyone, confident that they will get their money back via LendingClub and the scores of other nonbank lenders. If at all anybody will be "left standing by a number of short-term lenders", it will more likely be the VCs who have invested in them at skyhigh valuations.

@JamesBill + 1. On another note, I'm a little surprised not to find any mention of power bank. While it might not be as high tech as NFC / UICC / USIM etc., to me it seems like a straightforward and practical solution to this problem. In any case, even without Apple Pay, aren't most people compelled to carry around a power bank these days? To me, power bank is the AmEx card of today and "Never leave home without a power bank" is more compelling than "you can leave your wallet at home".

@GaneshG:

I won't claim to understand all the technical details contained in your comment but let me recount my interactions with the founder of one of these companies a couple of years ago, assuming it's related to what you've said:

I pointed out that his product’s best card decision was based solely on the best Earn Ratio (i.e. Spend:Point) whereas, for a cardholder, the best card really depends on the best Burn Ratio (i.e. Point:Gift) and many other factors that were not considered by his product.

Apparently, incorporating Burn Ratio into the best card decision is fraught with a lot of challenges since it varies from time to time and, even at a given point, may vary from one gift line item to another. From personal experience, I can readily agree that Burn Ratio is extremely dynamic.

So, yes, there's ample scope for improvement in the products from a consumer p.o.v but I'm not so sure whether the provider will find technical feasibility or have compelling business reason to go ahead and develop the additional functionality.

The situation on the ground in my personal experience:

• Mobile POS sucks. 50-75% failure rate with the few merchants that use it. Many stores who tried it have given it up. The ones that can afford it use sturdy POS terminals with GPRS connectivity e.g. Ingenico, which work very well. The ones that can't afford that have gone back to the PIN-based variant of fixed line POS they had before, which is a pain.
• In a 15 minute straw poll at my supermarket, 50% payments were by debit or credit card.
• Increasing number of ecommerce companies are supporting Card on Delivery, so we can avoid the friction of using cards online but still get to enjoy the benefits of credit card viz. rewards & deferred payment.
• While RuPay stickers are visible at merchant locations, most cards actually used are V / MC.
• HDFC Bank has introduced PayZapp, which IMO is the most frictionless and compelling mobile wallet: It supports 2FA without making the payor jump through so many hoops and does not require pre-loading of money for bill pay and ecommerce transactions. While it's currently only available for HDFC Bank customers, PayZapp will definitely drive greater cash-to-card movement. 

I too strictly follow the advice of never using Debit Cards online or offline, except for making ATM cash withdrawals. In my experience in Germany, UK and India, banks issue a single card that doubles up as ATM-cum-Debit card, so I can't totally avoid debit cards! Apart from better fraud protection, credit cards also provide rewards and deferred payments, so I try and use credit cards as far as possible at POS (but never for cash withdrawal at ATM on account of the hefty charges).