Some thoughts on Mastercard's P2P payment platform

MasterCard recently announced the launch of a mobile-based service for P2P transactions. (Read more here). This is a great idea and makes a lot of sense. The concept is that you register your MasterCard for the service. You could then use your phone to send money from your MasterCard to any other MasterCard. The money is merely debited from your MasterCard and credited to the receiver's MasterCard. Makes you think why nobody thought of this before.

The fact is that it has been thought of before (many times). Read about the previous attempts here, here and here. If you take some trouble you will find much more references and these are the ones that have been reported on. I do know of a few projects that were attempted but nothing was ever published about them. So what went wrong? Why is it not a roaring success?

The simple answer is: "the business case". The thing is that all MasterCard's are issued by banks on the understanding that they get paid for each transaction done with the card. This payment is a share of the merchant fee (also referred to as the interchange fee). In other words, merchants pay for every payment received by means of a card. In P2P transactions the merchant is absent and it is always difficult to find some-one to pay enough to satisfy two banks.