A week ago I presented a paper on cloud based payments and the OpenPay cloud payment architecture that we are working on at Standard Bank… The above headline screamed across a couple of websites and the discussion on that statement has since taken on a life of its own on a number of Linkedin groups – where everyone is an expert at everything.
While many of the comments express an understanding of what I meant, many are taking the statement literally… and without the context of the presentation for guidance, this is understandable (unfortunately I am not able to share the presentation, just yet). So, below I am going to attempt to clear things up for everyone.
A number of the comments on Linkedin are making reference to the emergence of one or more new networks that might supercede the likes of MasterCard, Visa and their ilk… this is a highly unlikely scenario in the short to medium term… and my presentation never insinuated that we might be presiding over just such an evolution in the global payments landscape.
I delivered my presentation at a cloud computing conference, where most of the delegates were corporate leaders in the information systems and technology space. These delegates understand cloud computing technology (and the nomenclature that goes with it) intimately, and therefore I did not see the need to explain what I meant by a cloud network (in the singular).
So, for the benefit of the people on Linkedin I will elaborate:
Cloud networks are by themselves not a singular construct, and neither are they animate by themselves… the ultimate cloud network is the Internet itself. This construct is significantly different to the singular networks of todays payment networks (not withstanding the multiple network redundancy built into them). I will not regurgitate the presentation here, but what it attempts to foretell is the emergence of a collaboration of networks (which we refer to as the cloud, in the singular) that enables and implements the protocols and capabilities necessary for routing, discovery, authentication, identity, security, etc. (notice how similar this is to what that ultimate cloud, the internet, already does) so that authorisation messages can find their way to what we currently refer to as issuers (but we will probably have new nomenclature for these constructs) and settlement requests can be honoured with confidence. In this landscape, MasterCard and Visa do not disappear… they become equal peers (albeit enormous in size) to all other alternative payment ecosystems (such as those that many comments above mention).
I realise that I am oversimplifying things above, but, the gist of the presentation is that the problems that MasterCard and Visa attempt to solve, largely exist and are perpetuated by their own very existence and the role that they play in that existence; and that moving them to the periphery (where they rightly belong) makes way for cloud based alternatives that are far superior to what we had (and needed) 40 years ago.
The final myth that I’d like to dispel is that “not needing MasterCard and Visa” means that there no longer will be cards and therefore they [MasterCard and Visa] will no longer have a role in payments. This is completely false, MasterCard and Visa realise that the competitive landscape is changing and they are reinventing themselves as we speak in preparation for this new and emerging reality. The proper context of the statement is from the perspective that non-card transactions do not need to emulate card to get through authorisation and settlement (which is what virtually everyone is trying to do now in order to get scale and interoperability). It goes without saying that the cloud will continue to route card transactions to the card networks, but as more and more ecosystems realise that cards (as a construct, not as a physical or electronic manifestation) are no longer necessary, fewer and fewer will impose this archaic construct on their customers (merchants, consumers, mobile network operators, banks, etc.)
I hope that this helps the discussions, that are taking place here and across many forums on Linkedin.