Fragmentation vs Ubiquity

There is a fine line in payments to be struck between ubiquity or choice. In other words, should we have one universally accepted form of payment, or a thousand different ways to pay?

It’s often a debate that’s framed in the context of cash versus all others, but as we are seeing increasingly, there could be an argument for having a ubiquitous form of non-cash payments – eg, in the future, a cryptocurrency.

The analogy of cash and prepaid gift cards is useful. Every shop accepts cash, making it an ubiquitous form of payment. But consumers also want choice – so for instance they want to buy a store-branded gift card to give as a present. This closed-loop prepaid gift card might be restricted for use in only one chain of shops. So the customer has a choice of the gift they give – cash or a gift card – but the latter is not universally acceptable.


Nowhere is the choice dilemma more evident than in the person-to-person (P2P) payments sector. You can now send money a thousand different ways. You can attach funds in a Gmail message. You can send money via a Facebook message. You can do it with a phone number in the case of the UK’s Paym.

But for all of these and many other P2P channels you need a bank account or debit card to send or receive the funds. The vehicle for exchanging the money has changed and you can now choose from lots of different models – but the starting point and end points are nearly always the same, usually a bank checking account.

Research by McKinsey indicates nearly one in ten (eight per cent) of people in OECD countries have no access to banking. Mobile money schemes like M-Pesa or open-loop prepaid cards mean some access to financial services but these don’t all join up in a way that makes them totally ubiquitous.


Jessica Trundley, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed, believes this constitutes a problem for the industry, but she thinks there is a way round it.

She notes that while some P2P providers will gain a large market share as cash becomes less popular, this will “suffocate opportunity for ubiquitous solutions that will benefit consumers”.

“Fragmentation is our obstacle in P2P today. If both Ps don’t have something in common (for example, financial institution, phone manufacturer, mobile application, social media, branded debit card), then the payment can’t occur and…back to the basics we go,” she writes on the Atlanta Fed’s Take On Payments blog.

For Trundley, the answer lies in creating a “directory” that all providers can access so they can process payments anyone to anyone.

“Ubiquity means debit card or not, banked or unbanked, same state or not,” she explains. “This can be achieved when financial institutions cooperate through open access to a directory, since all non-bank P2P providers ultimately use a bank to conduct the business of processing payments.”

One potential answer is Bitcoin’s blockchain technology and it’s interesting to see that national central banks and commercial banks are exploring the potential for this in payments.


Written by Andy Brown

Andy Brown

Andy is marketing director for payments at NCR. He has nearly 30 years' experience in e-payment systems from the delivery and support of systems in the Far East and Europe, from both the product management and marketing perspectives. Based in the UK, Andy is responsible for marketing NCR payment solutions.

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