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There was once a dream, a dream that the regulators would create an ecosystem which could dismantle an empire that has stood for decades.
There was once a dream, a dream that the regulators would come in and create an ecosystem which could take on the Card Schemes (They Who Must Not Be Named) and create a genuinely competitive ecosystem to help businesses thrive and overhaul the oligopoly (or some may say Empires) which had stood for decades.
This dream came to fruition with Open Banking, a set of regulations spearheaded by the FCA and the ECB. The goal here was to, well, open up banking and payments. To create competition in a space previously dominated by a couple of players.
Hidden in the skin of someone posing as a friend of consumers and businesses everywhere, were the banks, biding their time and hatching schemes.
But these players had a card up their sleeves. Hidden away, in the skin of someone proposing to be a friend of consumers and businesses everywhere, were the banks.
For so long as the Card schemes had been around, they’d planned and schemed something very clever. As well as the taxing merchants, they would pass a cut onto the banks whenever they got paid. Keeping the banks alive with a little hook and a little taste of “freedom”, they called this Interchange.
So as time went on, the banks grew, and they grew and grew. They built current accounts, whose only income stream was this mystical Interchange. They became reliant on this feed, without which the current accounts wouldn’t function, so they had to keep in.
But then, when the big regulator came knocking, the banks were all the more happy to show face and “help”. They were happy to abide by every rule that was given to them. But they were also more than happy to “work” with the regulator to ensure the regulations were proper and fit for purpose.
What purpose was this? Was it the purpose to inspire competition? Was the purpose to open up the payments landscape? No, unfortunately, the drip feeding the banks had had from the cards for oh so long. Their sole purpose was to keep the cards alive.
The banks knew there was only one real way they could lose, a gem which would utterly transform the payments landscape. A mythical API called Sweeping (or Variable Recurring Payment, VRP).
Bringing what was meant to be a quick and decisive win and turning it into 5 years, 5 long years of hell. Open Banking was taken and twisted…
They sent out everyone they could to “support” the regulator to find the best VRP solution possible. And day after day, week after week, month after month, they push.
Bringing what was meant to be a quick and decisive win and turning it into 5 years, 5 long years of hell. Taking Open Banking and twisting and turning it into a tool which could be used for very specific use cases.
Turning VRP and Sweeping into something so limited that no one, not even the world’s most innovative startups, could use it to take down the goliaths of They Who Must Not Be Named.
Today VRP and Sweeping are laid strewn across this land, in a state useless to most other than other banks and FIs. The dream of you walking into a shop, buying a coffee and leaving with the startup securely and efficiently, letting your bank know to send the payment, is gone.
Open Banking has allowed us to build platforms that disintermediate cards in some use cases, yet it has also built walls. Walls which make it abundantly clear that even the regulation that’s meant to help drive competition simply isn’t there.
In the not-so-distant future, we may see a world where the idea of waiting in a queue, the idea of having multiple apps and cards to shop, and the simple idea of a middleman when you shop is so absurd that you can’t even picture it anymore.
Yet, in the plains, you can see the murmurings of those few startups who are sticking to their missions. That one day, they may raise up, and build a better shopping experience, not a better payment experience.
And that one day, one day in the not-so-distant future, we may see a world where the idea of waiting in a queue, the idea of having multiple apps and cards to shop, and the simple idea of a middleman when you shop is so absurd that you can’t even picture it anymore.
That day isn’t today, but it could well be soon…
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