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@Melvin Haskins:

Thanks. IMO, Amazon has higher chances of breaking through the Visa / MasterCard duopoly in the Western Word by creating another credit card network than by creating an alternative payment network based on bank account, etc. The former requires Amazon to be 10X better than Visa / MasterCard. The latter requires Amazon to be (10X^3) better than credit card rails, as Stratechery highlights in this article. While the former is not easy, the latter has proven impossible despite the attempts made by so many companies over the last 10-odd years.

Okay, so you propose Amazon to become both a Credit Card Issuer (like JPMC, BarclayCard) and Credit Card Network (like Visa, MasterCard).

Credit Card Issuer: While Amazon has a near trillion dollar market cap and nearly 300 billion dollar revenue, it's not exactly a company known for throwing out cash. According to an article I read a few years ago, Amazon is perpetually on a cashflow treadmill between when it receives money from its customers and when it pays its suppliers. Apparently, even if treadmill stops for 60 days, the company will go bust. Any idea how Amazon will find the huge amounts of money to lend for a credit card business?

Credit Card Network: So many companies have tried to create alternatives to credit card rails by using FPS and other A2A RTPs. I can't recall a single one of them going mainstream (in a market where credit card is well established like USA & UK and unlike China & India). All of them provide compelling value proposition to Merchants but don't provide any benefits to Customers, who, therefore, stay with Credit Card to continue to enjoy rewards, deferred payment and other advantages of credit card. Any idea what Amazon can do differently in order to succeed where so many other alternative payment providers have struggled? 

Also relevant in this context is Amazon's initiative to give loans to merchants on its platforms. There was a lot of brouhaha around 3 years ago when Amazon announced some numbers. As usual, many pundits predicted that Amazon will kill traditional lenders aka banks. Nothing like that has happened since then. At the time, Amazon had given just $3B loans in 6 years to 20K borrowers. If Amazon really has the money and the motivation to get into credit business, I guess it might find it easier to simply expand this existing merchant lending program than launch a new credit card program. 

I thought Amazon already has a credit card for years? 

All these myths are indeed the case. But, in our discussions with CUs in the US, we've sensed one more concern among CU leaders and that's loss of personal touch and involvement in local community's financial health, which are typically in the charter of community banks. Going by personal experience and anecdotal evidence, that's a valid concern. No point in denying it.

I think the key to getting CUs onboard digital banking in specific and modern technology in general is to portray the big picture of what they will enable them to do in business terms, which their current style of working will not, and how that will compensate for the lack of personal touch.

A recent example that comes to mind is the new SBA PPP loans business generated by Citizens Bank based on the Twitter exchange between its CEO Jill Castilla and Billionaire Entrepreneur Mark Cuban. 

A month ago, I predicted in response to this Finextra article that regulators could use Covid-19 crisis as the fall guy to defer / cancel SCA mandates. UK regulator already took the cue. I'm quite sure many others will follow.

Dwolla, PayM, PingIt, PopMoney ... I've lost count of and forgotten the names of all the startups that have attempted to disrupt Visa and MasterCard in the last 10-15 years, and, that too, with the same value proposition for merchants and the same lack of value proposition for consumers. Hope this time is different. 

Does this post have some connection with Finextra's core topics of finserv, fintech, banking etc. that I'm somehow missing?

@Melvin Haskins: 

Thank you for your comment. 

As I pointed out in the original post, "A nation tends to be homogeneous on some parameters (e.g. nationality) ..."

A survey of 2K people each in New York and Wyoming will show that a majority of them are American citizens, with the minority comprising tourists, immigrants on H1B, F1, Green Card but not US passports. Regardless of the diversity of population between these two states, this finding will be correct for both states. 

OTOH, someone can counter that by saying, we really don't need a survey - of whatever size - to reach that motherhood conclusion. 

So, in addition to the last paragraph, one more key thing that determines the validity of survey findings based on a particular sample size is, what is the characteristic being surveyed and whether it's deep enough to require a survey at all. 

IMO, the other important factor is, is there a rigorous quantitative measure of representativeness of sample and homogeniety of population. I've reached out to at least 10 people, including a couple of people with degrees in Data Science, quizzing them on this point. I haven't received a single reply.  

Intrigued, I looked up my 30 year old MBA text book on quant methods. It says this subject lies at the heart of the objectivist-subjectivist controversy and no definitive answer can be given on it. I didn't bother to go back to my 35 year old philosophy (Humanities elective during Engineering, if you want to know!) text book to figure that one out.  

Someday, I hope I can provide a more definitive perspective on this subject but, as of now, my blog post has to end on a note of suspense!

That resonates strongly with the FI Innovation Playbook in my post titled 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.

And, going by Covid-19 will reset fintech market valuations; spur M&A, the fund squeeze has come, likely increasing the number of fintechs available for purchase by banks.

Apart from cryptowallets, I've never come across MFA in the USA. So, for general bank accounts, MFA / OTP is not too relevant. Everything else pertains to reliability, not friction.

Let connection break, app seeking access ("fintech app") to bank account via Plaid will retry on its own, without bothering end user, so no friction. Let screen layout change, scraping will bomb, again fintech app will handle it without bothering end user, so no friction. Even if one whole day or even week's transactions are not downloadable due to some scraping problem or whatever, sky will not fall. In any case, according to Stratechery, data failures for these reasons is only 5-10%. 

In any case, even with API-based access under Open Banking, the API can bomb, leading to all these problems, so there's that... 

The security risks are extremely obvious - for the last 10-20 years.

Despite all of the above issues, Mint, Betterment, Robinhood, and all other well known fintech apps accessing bank accounts use banking creds and scraping, not Open Banking API.