Mobile Payment Industry News: Monnet Could Challenge V/MC with Introduction of European Debit System

Friday, July 10, 2009

Monnet Could Challenge V/MC with Introduction of European Debit System

Monnet Could Paint Visa and MasterCard into a Corner

Well this is certainly an interesting development. Europe has already converted to Chip and PIN, and because the US has not yet made the shift, they are seeing an enormous increase in Card Not Present fraud. One of the underlying reason is because Visa and MasterCard push the less secure "signature debit" over the more secure "online debit" with rewards programs, which allows fraudsters to clone European Cards and use them in Card Not Present environments.

So, now they may have inadvertently created a monster.

Deustche Bank and the European Central Bank are talking about a new project they call Monnet, an alternative pan-European Debit System designed to challenge the dynamic duopoly debit system.

I have long and often wondered (since the introduction of the check card) when a consortium of banks would band together to create their own debit system. It looks like Monnet may have just painted Visa and MasterCard into a corner on this one.

I would suspect that Monnet would be based on the Chip and PIN system, which is more secure than what Visa and MasterCard have been pushing with their signature debit. I have long said that signature debit should be scrapped in it's entirety and replaced with PIN debit. Maybe that is exactly what will happen in Europe. As I said, interesting. There is absolutely no reason whatsover to believe that the 31 European countries, and their banks would not be successful in pulling this one off. More so than Google over Microsoft with an operating system.

Once and "if" they are indeed successful at introducing their own debit system, then there would be only one thing left to do in order to eliminate "card not present" fraud. What's that you say? Simply eliminate the "card not present" environment...by equipping European Online Shoppers with their very own End-to-End-Encryption POS device with integrated PIN Pad.

Wonder where they could get one? Oh, that's right! HomeATM is EMV...oops, let's start calling that "Chip and PIN" ready.

Here's the story from Bloomberg, along with a bonus (PDF) from eFinanceLab in Frankfort.

Deutsche Bank, Lenders Push for New Debit-Card System (Update1) - Bloomberg.com

Deutsche Bank, Lenders Push for New Debit-Card System (Update1)
By Cornelius Rahn and Aaron Kirchfeld

July (Bloomberg) -- European banks, including Deutsche Bank AG and Societe Generale SA, will likely create a group in October to push ahead with plans for a debit-card system to challenge Visa Inc. and MasterCard Inc., Deutsche Bank Chief Operating Officer Hermann-Josef Lamberti said.

“We all knew it was important to get the Germans and the French to agree,” Lamberti said today at a conference in Frankfurt, where Deutsche Bank is based. “When the rest of Europe sees that these two can agree, then the result has a chance to evolve into a solid European system.”

The European Central Bank and the continent’s lenders have been pushing for the creation of a third pan-European debit system as an alternative to MasterCard’s Maestro and Visa Europe’s V PAY. Societe Generale and BNP Paribas SA, both based in Paris, and Deutsche Bank are among banks working on the project called Monnet.

The goal is to have banks from 31 European countries join the payment system, Lamberti said. Bundesbank board member Hans Georg Fabritius, speaking at the same event, said Europe should have at least one card system based on the continent.

“A duopoly of the two international card companies is an unsatisfying vision for both political and economic reasons for us in Europe,” Fabritius said.

He called Monnet a “promising” cooperation between large German and French banks. So far the project is no more than a concept, and the participation of more European countries would be “beneficial,” he said.

MasterCard, which is based in Purchase, New York, is the second-biggest electronic payment network after San Francisco- based Visa.

Here's the bonus coverage on Monnet...