A card network-driven single user experience for online payments is getting caught up in and age-old rulemaking dispute between merchants and card networks. It's another hurdle for the network's initiative, which is already seen as rival to PayPal and Amazon instead of a partner.
A new merchant focused trade group spun off from the National Retail Federation on Thursday, called the Secure Payments Partnership, says it is mostly focused on merchant concerns regarding security and technology issues for credit and debit cards. But a line deep in its announcement claims Visa and Mastercard "control security standards," which implies a war may be brewing over the so-called "buy button" for online payments.
The Secure Payments Partnership does not have a specific grievance to the networks' single button, which is being built off standards from EMVCo. But it does reopen the same turf war that has taken place over mobile payments, debit routing and interchange pricing.
"The button is a perfect example of issues where we would like to have insight and input," said Stephanie Martz, senior vice president and general counsel of the National Retail Federation, in an email. "We're in favor of innovation and convenience for our customers. But we don't know what's behind the button. If there is only one routing choice we would be very concerned."
Visa and Mastercard, which did not return requests for comment by mid-day Thursday, are the biggest proponents of the single button.
The button will use EMVCo standards to build an experience for online and mobile payments that works the same from one digital wallet to the next. The CEOs of both Visa and Mastercard have said the single button will make checkout easier for merchants, which won't have to worry about adjusting to different methods of digital payments.
The button could rely on 3D Secure 2.0 for enrollment. 3DS 2.0, which is designed to improve security at checkout, also comes out of EMVCo — and it similarly shifts the power balance among merchants, banks and consumers. Although merchants choose to put 3DS on their sites, the issuers control key elements of the experience, such as what type of authentication to request.
Similar to plastic cards, which work the same way almost everywhere, the networks' single button claims consumers can make online payments without worrying if their digital wallet "will work" with a specific retailer. Of course, the button also has the potential to boost interchange revenue by routing more payments through the card networks.
But it's more a concept than a realty at this point, given there are few tangible details on how the networks' button will work. Competitive pressures could hamper development, particularly if Amazon and PayPal choose to oppose it.
"The retailers' issue on the button is that they feel that would have no control over routing and end up with higher fees," said Raymond Pucci, an associate director at Mercator. "The networks have said this is not the case…so this is another round of the long-running battle between merchants and card networks and issuers."
The networks' button is seen as a counter to Amazon's encroachment into traditional retail segments, and a way to respond to PayPal's scale in the U.S digital payments market. The button could threaten agreements the card networks made with PayPal two years ago to resolve certain competitive disagreements.
It's even unclear how much transaction volume the card networks will cede to each other. Neither network has said exactly what will happen with their own digital wallet brands after the button is built, walking a line between ensuring a seamless experience while maintain the right to develop value-ads that still compete with each other.
Given the growth of digital payments and the migration to omnichannel shopping, any advancement will boost online sales — and thus revenue — for all parties involved. While that is good for merchants, issuers and the card networks on the surface, merchants may not be willing to risk any tradeoff in their access to customer data.
"It appears to be a battle for any piece of payment turf that can be battled over," said Thad Peterson, a senior analyst with Aite Group. "Clearly buy buttons — including the latest effort by the four leading payments networks to offer a combined buy button — could help reduce payment friction, and in so doing lessen cart abandonment, a key element to merchant sales."