Increased regulation and protectionism “difficult” for global payment providers
In an Interview with Third Bridge Forum, the specialist said that although payment protectionism is not new, it will become “more acute” in the aftermath of COVID-19 and in view of the Russia-Ukraine conflict.
On the conflict, the specialist told us SWIFT sanctions on Russia has resulted in Visa and Mastercard ending unnamed licences in the country, which they said will raise the cost of making payments for a number of years. However, the specialist told us “a handful” of Russian banks had been left in the SWIFT network to enable European customers to pay for oil and gas.
The specialist said the European Payments Initiative (EPI) has been designed by the European Commission and European Central Bank to counter US payment systems such as Visa, Mastercard, Paypal, Google and Apple. In the specialist’s opinion, EPI is unlikely to launch. However, if it does either this year or next, they believe it will likely be “inferior” to US payment systems for the foreseeable future, and unlikely to have a material negative impact on US payment providers.
The specialist told us there is pressure in the US to lower debit interchange price caps, and the specialist believes the Federal Reserve Board (Fed) will make “some modest reduction[s]”. On regulating credit interchange, the specialist said the chances of this are low over the next five years, despite factions of the US Senate wanting to impose price caps. While we were told the US is also unlikely to regulate network fees, they told us there is a “greater than 50%” chance that over the next 10 years the European Union might.
The Fed is expected to launch its Real Time Payments network next year, but in the specialist’s opinion, it is “inferior” to private options due to the domestic characteristics of it, and is unlikely to significantly impact Visa Direct or Mastercard Send.
Overall, the specialist said the payments ecosystem is now more difficult but has historically been resourceful in adapting to regulations. How these payment players adapt in light of new regulations is something the specialist said to “keep an eye on”.
To access all the human insights in Third Bridge Forum’s Global Payment Providers – 2022 Outlook & Regulatory Impacts Interview, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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