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Does this imply that the existing 800K SME clients of Deutsche Bank cannot accept digital payments as of now? I'd be shocked if the answer to that question was a YES even for half of that installed base. When I was in Germany in the late 1990s and early 2000s, virtually every retail SMB used to accept debit card and stored value "cards" that were essentially chip embedded into debit cards that could store up to €25.

It was only when it came to credit card that acceptance was low: Let alone SMBs, even outlets of FORTUNE GLOBAL 500 companies refused to accept credit card. In one extreme case, an electronics chain store issued a cobranded credit card but refused to accept it in its own outlets. When I asked the cashier why his company even did a cobranded credit card, he replied, "Marketing gimmick"! 

#MeToo. I've been using credit card for 35+ years. During this period, I've never ever paid a single penny in fees or interest. But I'm still bullish about BNPL for a few reasons: (1) During most of those 35 years, I've been a supplier of technology to banks and credit card companies. Maybe because of that, I know that credit card offers fraud protection etc. However, even today, I reckon that the average credit cardholder is not aware of this benefit of credit card. IMO, banks have kept this feature under wraps. So much so that, a few years ago, American Express claimed this standard feature as a USP of its credit card in India. I'm guessing the average BNPL customer won't miss the lack of fraud protection in BNPL. (2) Many BNPLs give free credit for as long as 4 months. 56 days free credit offered by credit card is good but 120 days free credit offered by BNPL is better. 

As I highlighted in BNPL Ain't Killing Banks. It's Making Them Rich, BNPL has been around in UK for 100+ years and India for 50+ years. Historically, BNPL has been provided to Consumers buying big ticket goods by the Retailers from whom they buy them (with the retailers, in turn, probably financing those loans with big loans from banks). The new wave of BNPL really signals the outsourcing of BNPL by Retailers to third-party BNPL providers like Affirm, Klarna, PayPal et al - rather than a new payment method. Then and now, short term BNPL is fee-free and zero-interest and is really tantamount to free loan - unlike credit card.

I'll add JPMC-Nutmeg as one more success story of the "FI Innovation Playbook" I outlined in Fintech Shouldn’t Stop Chanting The Disruption Mantra:

"Don't drink the Kool-Aid of every shiny new technology; Wait and watch for fintech winners; Buy / make only what works. This playbook has several success stories e.g. eCount in Prepaid Card, Revolution Money in Gift Card, Simple in Neobank, and Zelle in Online & Mobile Account-to-Account Payments."

Since you've mentioned microloans, I'd argue that you've left the domain of Open Banking and entered the remit of Open Finance.

Open Finance has surely created tremendous value in USA, as testified by the nosebleed valuations enjoyed by do many Fintechs that access bank info via Plaid / Finicity et al. It's also clear that banks are not feeling too threatened by these Fintechs - otherwise, they could easily have cut off their data firehose, which is something that very few banks have done. (For the uninitiated, unlike EU, there's no OB regulation in USA, so banks that are sharing their customer data with third parties via Plaid et al are doing so voluntarily).

But have US banks gained anything financially by giving away their customer info to Fintechs via Open Finance? Has a single bank made a mention of the financial gains from Open Finance in its quarterly results briefings? If not, what makes US banks give away their crown jewels to their wannabe competitors? Those are the questions I've been asking myself and others for a while now.  

Hopefully, you have an answer!

Great post! The tradeoff between security and convenience in payments is evergreen. I've lost count of the number of articles and comments I've written on this topic. Also, because of the following Security Design Challenge I outlined in Why Do People Obsess Over Security And Then Make Payments Without A Password?, there's a limit to how far you can go towards achieving a balance between friction / security and frictionless / UX through payment workflow design alone. 

"My mobile wallet / payment service provider (PSP) should let me access my money easily. At the same time, it should not allow anyone else to access my money, no matter how hard they try. Per se, the PSP doesn’t know who is trying to access the money. It can only find that out by taking some action to distinguish between me and that anyone else. Designing that action without causing too much friction presents a unique challenge in payments."

Over 10 years ago, I wrote about the role of AI / ML algorithms in credit card fraud detection and prevention. I'm guessing your tip #2 has gone fairly mainstream by now. 

OTOH, I've never heard about the tactics described in your first and third tips. They seem to be truly new and innovative ways to tackle this enduring challenge. Kudos for a refreshingly new take on this subject!

For years, payment gurus have been predicting that A2A payments will dent card payments. A2A has made rapid strides in emerging markets where card and POS penetration are low e.g. India. But, in advanced markets like USA and UK where card and POS penetration have historically been high, card payments still dominate. Let's see if things are different this time. 

Even in a former market like India, while UPI A2A has grown by leaps and bounds, it's arguably not at the cost of card payments - there were 1.5M POS terminals in India when UPI was launched 4-5 years ago, that number has shot up to 5M now.

If it's started by a "pair" of people, how is it decentralized?:) On a side note, doesn't the Bitcoin blockchain already support cross-border fund tranfers? 

That's clear. I'm only curious about the cohort - however small or big it is - that does select Credit Card as the mode of repayment of BNPL installments. Like, do they like to kick the can down the road - or is there some other reason to explain their counterintuitive behavior?

I highlighted Confirmation of Payee and Enhanced Remittance Data as two among Five Ways to Stimulate Electronic Payments back in 2013. (For some inexplicable reason, some of my posts, including this one, have suddenly become invisible.) Eight years later, we haven't seen much progress on either initiative. Like SCA and ISO20022, I wonder if CoP and ERD have also become fall guys of the pandemic outbreak.