As VocaLink looks to soon power a real-time ACH infrastructure in the U.S. — in addition to supporting payment systems in the U.K., Singapore, Sweden and Thailand — the two companies are focused on what’s next for faster ACH networks.
There’s no question that the global opportunity is there — of the world’s top 50 markets, ACH payments represent 50 percent of the transactions made by consumers, businesses and governments. And there is another upside: only 18 countries around the world currently make real-time ACH payments available.
With the demand for immediate payments on the rise, Mastercard’s acquisition of VocaLink will clear the path to see exactly where the partnership can take faster ACH payment technology and how those payment landscapes will be impacted.
To see what’s next, Michael Miebach, chief product officer of Mastercard, told Karen Webster that one need only to look at the reason why these two companies were brought together in the first place: to extend Mastercard’s reach to a whole new set of payment flows, segments and use cases that the company has not traditionally been a part of and to scale VocaLink’s technology around the world.
And once the transaction is finally closed in a few weeks, Miebach said that Mastercard and VocaLink can begin jointly reaching out to key markets and engage in dialogues to gather input that will help determine their now collective priorities.
Examining What’s Possible
Miebach explained that the acquisition of VocaLink will give Mastercard the opportunity to redraw the lines of what’s possible in commerce.
While the capability of tapping directly into a bank account to enable payments is exciting, Miebach said, there’s also the challenge of overcoming the threat of disruption that some banks and merchants fear most.
Miebach said that although there will be markets and use cases in which payment card technology may not necessarily be in the best position to optimize a particular payment flow or solve a particular customer need, Mastercard is focused on identifying and pursuing those segments where there are opportunities to apply ACH technology as a starting point.
Like bill pay, and commercial payments where there are clearly identified needs and friction points that the application of faster ACH technology can address, he explained.
In the U.S. market specifically, VocaLink has been identified as the infrastructure that The Clearing House and their member banks want to leverage for the faster payments opportunity.
Miebach said delivering on that infrastructure is expected to take place during the second half of the year, and at that point in time, the focus will be on seeing where the infrastructure can take faster payments going forward.
At this point, Miebach said that’s still evolving, but emphasized that he believes Mastercard will be exceedingly well positioned in that dialogue to drive partnerships with different players, including banking partners, merchant partners and innovators.
“I think right now the focus will just have to be to get [The Clearing House/VocaLink] infrastructure in and equip the U.S. payments market with faster ACH technology,” Miebach said, “and then we’ll start to see what we’ve seen in the U.K., which is applications mushrooming on top of it.”
Ditching the Paper Check
One of the biggest opportunities presented by VocaLink’s faster ACH payments is the ability to modernize the paper-based, analog businesses that still use checks to pay bills.
“If you look at the world of payments that are non-cash, you have to get excited about the huge opportunity that’s being presented by checks,” Miebach stated.
He explained that the capabilities of ACH coupled with the evolution of the technology itself presents a significant opportunity for businesses to lessen their grip on paper checks.
Miebach mused that even with all of Mastercard’s efforts to displace cash around the world and the progress being made, the actual percentage of cash usage isn’t actually declining all that much because of the overall growth of spending.
So, while cash may be a payment method that just sticks around forever — or at least for a long time — checks are definitely on Mastercard’s list of a more near-term use case for where ACH technology can make a big dent.
So too are cross-border payments, he said.
“If you think about the ability of connecting fast ACH networks around the world, that gives you another glimpse of what might be possible,” Miebach said.