advertisement
advertisement

MasterCard Aims To Take Mobile Wallet Rivals Apart

Written by Frank Hayes
May 9th, 2012

What Google, PayPal and ISIS are trying to assemble in mobile payments, MasterCard wants to dismember. On Monday (May 7), the number-two payment-card brand unveiled a mobile wallet and an E-Commerce payment system that are designed to cut out any middlemen horning in between customers and retailers and payment networks.

Ironically, while MasterCard’s PayPass Wallet for NFC-equipped phones got most of the attention, that’s still largely a pipe dream—MasterCard hasn’t even talked any mobile operators into giving it access to the NFC chip. But the online payments effort will offer tokenization to reduce PCI scope for E-Commerce. The bad news: You can probably forget about any interchange relief.

According to MasterCard head of PayPass Wallet service Ed Olebe, the big deal isn’t the mobile wallet for smartphones, which will use a phone’s NFC chip to mimic any contactless payment card that’s been installed. That’s all it will do (think Google Wallet or ISIS without the coupons, special offers and extra features). But that approach has the benefit of working without any changes to retailers’ in-store POS systems, as long as they currently work with PayPass.

And how many today do work with PayPass? About 400,000 locations can handle PayPass worldwide, compared with about 30 million locations that take MasterCard overall. That’s 2 percent. The ratio is better in the U.S. and better still among big chains, but the vast majority of customers—and associates—still expect swiping, not tapping.

But MasterCard has just started talking with mobile operators about access to the NFC chip, hasn’t finalized how the wallet will work and, according to Olebe, is “waiting to see how this plays out” with in-store mobile payments from Google Wallet, PayPal and ISIS, which so far are barely a blip when it comes to payment volume.

No, what MasterCard is really pushing here is an online payment infrastructure that it will license to banks, merchants and other payment-chain players. The idea is that at checkout time, instead of clicking on a PayPal button, the customer would click on a button that takes him or her directly to a bank site that would authenticate the customer and then send the E-Commerce site either a token or an encrypted card number, depending on what the retailer’s system requires.

MasterCard declined to say anything about whether retailers would get a break on interchange if they adopt the new systems. But the card brand is clearly trying to cut out alternative payments schemes that want to get a piece of the payment-card action—and doing it by breaking the process into smaller pieces.

You can do that if you’re a card brand. You make your money from interchange, so you don’t have to piggyback coupons and ads on top of a payment system, the way Google and ISIS do. And PayPal may be the Bigfoot of online payments, but it still collects most of its money through interchange-laden payment cards, with its profits coming from more fees from sellers.

If MasterCard can break off those added-value pieces to offer a payment service that does nothing but payments, it could be very hard for middlemen to compete, especially at the in-store POS.

Coupons? Catalina machines already crank out paper coupons; there’s no reason they couldn’t send coupons straight to a phone via an NFC-based app. Special offers? They could be texted to a phone or beamed to an app. Loyalty programs? Chains already collect their own CRM data and aren’t enthusiastic about sharing it with third parties (and possibly competitors) anyway.

It’s already proving hard for Google Wallet and PayPal to get an in-store foothold—retailers and even payments-company executives admit that customer usage is almost invisible. (Whether ISIS will have any better luck has to wait for its launch this summer.) If the business models for these companies are broken up, getting any traction against traditional plastic may be impossible.


advertisement

One Comment | Read MasterCard Aims To Take Mobile Wallet Rivals Apart

  1. Adrian Lane Says:

    Frank,

    Could you please validate the use of tokenization in the wallet’s payment scheme? I’m looking at the wallet API and there is no mention of tokenization, only OAUTH identity tokens.

    -Adrian

Leave a Reply

Readers, specifically those who want to comment on a story:
Our Comment SPAM system is getting very aggressive these days and has been blocking legitimate comments. If you post a comment and don't see it appear within 2 hours or so, can you please send a heads-up to customer-service@storefrontbacktalk.com? Ideally, please include the time you posted the comment. That will allow us to try and hunt for it. Thanks! P.S. We're working on fixing the system, but we don't want to lose any valuable comments in the meantime.

Newsletters

StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 17,000 retail IT leaders who subscribe to our free weekly email. Sign up today!
advertisement

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

StorefrontBacktalk
Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.