Could that competition come from the Feds themselves? What if the Feds decided that it was desirable to have a national debit scheme for the US, much like the ECB wants a pan-European “third scheme” in Europe? What if the Feds were to decide to get more involved in retail e-payments to drive along innovation? What if the Feds were actually thinking about
The Federal Reserve also can help bring innovations to the system by subsidizing new services which otherwise would be slow to develop due to the costs involved, he said. It would help coordinate services so they would be compatible, such as creating uniform transaction standards or common technologies… He said an example of “underinvestment” by private transaction companies is the continued use of cards with magnetic strips and the slow transition to “smart” cards with computer chips which have a greater range of functions[[From Omaha.com Money Section]]
Wowser. That definitely falls into the category of Quite Interesting. And the next step, surely, would be to interconnect the US and EU “third schemes”. There’s already a link between the ACH networks.
The Federal Reserve Banks in the US and European payments processor Equens have joined forces to provide a low cost channel for processing payments between Europe and the US. The new cross-border service will provide a standardised channel — using the International Payments Framework — for processing low-value payments in multiple currencies, including the USD and euro, and forms part of the FedGlobal ACH Services that were announced at the Payments 2009 conference in Orlando, Florida recently[[From FinancialTech Insider: Equens and Fed Banks join forces on cross-border payments]]
A Federal “third scheme” linked to an ECB “third scheme” under a new international acceptance brand? The “Central Bank Express” card or something similar? None of this will happen, of course, but it is at least fun to speculate. I would imagine that a more likely future is that the Feds will end up doing what European governments did and simply force the issuers to migrate away from magnetic stripe (because card fraud funds other kinds of crime, so governments want to reduce it even though the level is acceptable to issuers). Since this has little business case in the US, as a quid pro quo the banks will be allowed to keep interchange at a reasonable level. In time, new lower-interchange competitors more targeted at merchants (eg, Revolution in US and PayFair in Europe, just as examples) will come along and started growing volume.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [[posted with ecto]]