June 17, 2014
For a very long time now, VISA and MasterCard have dominated the fintech world, enabling the rails for card acceptance. When an issuer bank has to transfer money for a transaction done by its customer to the receiver (merchant) bank, they need a network to complete the transaction. It is like charging a small amount every time (say a portion of $2 on a $100 transaction) but on the millions and millions of transactions that are processed. So much so that they add up to Tens of Billions of dollars every day. The following exhibit shows the average daily transaction value of popular payment networks. The interesting thing that the chart depicts is how China Union Pay and Bitcoin have come a long way challenging the incumbents.
China Union Pay is on its way to cross the transaction value of that of MasterCard. It is already way ahead of American Express by 5000 million dollars in terms of transaction value. Do you know that Union Pay has more cards than Visa or Mastercard? yes it does. Bitcoin, the crypto currency, has shown very good progress. Even though people expect it to follow the hype cycle, it has already crossed Western Union in terms of volumes of transaction and is not far away from leaving Discover network behind. Bitcoin is only 27% short of PayPal’s daily transaction volumes. The reasons behind the rise in Bitcoin have been the talk of the town so I am not going to expand on that. Here is an exhibit depicting Bitcoin’s popularity over time vs. the incumbents. I have used Google Trends:
I also came across a graphic from The Nielson Report that you should have a look at to gain further insight on the topic. The following exhibit depicting China Union Pay against Visa and MasterCard in the Asia Pacific (Volumes).
EMV: Mainstream by 201X? Can we trust Bitcoin to eliminate Interchange?