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The world’s two largest payment operators made news in late February by unveiling key industry partnerships and technology systems that intend to make it easier for consumers to make purchases on mobile devices, online and in physical stores all without having to pull out a physical card. Visa Inc. and MasterCard Inc. made the announcements at the Mobile World Congress, a conference in Barcelona that brings together executives from across the mobile space.
Both of these payment behemoths are angling to capture more electronic transactions by eliminating the need for the physical card at the POS terminal. Furthermore, they hope that their respective announcements will accelerate the transition to mobile payments worldwide and give them the coveted lead position in the mobile race.
MasterCard unveiled its new MasterPass platform, which will allow cardholders to store their card information into a single platform that can be used to make a payment via a smartphone, tablet or similar devices at registered merchants. In store settings, the transaction can be completed by tapping an NFC-equipped mobile phone to the register or by scanning a digital barcode. The platform also allows customers a one-click payment option with online payments. The wallet is open meaning that consumers can load their MasterCard, as well as card information from competing brands. In addition, financial institutions or technology providers can build their own wallet on top of MasterPass. Besides payment, the app also will offer an enriched shopping experience, including account balances, real-time alerts, loyalty programmes and other offers for consumers. Unlike other NFC-driven m-payment products on the market, this system is cloud based instead of relying on the phone’s secure element to make the connection to the bank.
MasterCard said it would rollout the product in stages with it first launching in Australia and Canada by the end of March, the US later in the spring and the UK over the summer. Launches in Belgium, Brazil, China, France, Italy, Netherlands, Singapore, Spain and Sweden also are in the works. As part of this announcement, MasterCard also unveiled a deal it struck with VeriFone Systems Inc., a maker of payment terminals, to integrate MasterPass into mobile equipment that retailers can use to help consumers check out while standing in line or browsing aisles in stores. MasterCard also announced it is working with mFoundry Inc., a developer of mobile-banking apps that was recently acquired by FIS Global, to equip the mFoundry’s banking app with MasterPass, making it available to the vendor’s nearly 900 bank clients by early 2014. Banks can wrap their own cards into the MasterPass virtual app to make it a branded experience for consumers, but banks will pay to use the technology.
Separately, Visa unveiled that it is ramping up its partner programme to help integrate its payment technologies into mobile devices. The new initiative, which has been dubbed Visa Ready Partner Program, aims to help mobile device manufacturers, technology partners, mobile network operators and others gain access to Visa’s payment gateways more quickly. Visa also unveiled a Visa Ready symbol to identify payment devices that have already received approval to be used. The programme will be a resource for developers to determine whether devices, software and other technologies used to initiate or accept Visa payments due in fact meet Visa’s requirements. These announcements likely tie to the launch of its digital wallet. In autumn, Visa ended the beta phase of the rollout of V.me, which is Visa’s digital wallet platform designed for both online and mobile commerce. While the service is currently focused on integrations with online shopping in the US, Visa previously said it plans to roll the platform out to international users and POS terminals in early 2013. V.me’s security system depends upon the device’s secure element, as well as cloud servers to store customers’ card credentials.
As part of Visa’s most recent announcement, Visa also entered a deal with Ingenico-owned Roam, which makes mobile credit-card readers that have grown in popularity among small merchants. Visa and Roam will jointly promote their respective merchant products likely to small businesses worldwide. Visa also unveiled a partnership with Samsung in which the mobile phone maker said it will embed Visa PayWave technology into several of its new NFC-enabled phones. Such a move could presumably make it easier for newcomers to tie their Samsung phones to financial institutions and their personal accounts. Customers won’t need to download a specific mobile payment app upon buying the phone. The new partnership with Samsung could help to kick-start NFC-enabled payments around the world as Samsung is the largest manufacturer of smartphones globally based on sales and Visa is the world’s largest payment processor.
One holdup to Visa’s plan is that wireless carriers in the US still have a say in what features come preloaded on mobile devices. These players have previously stopped NFC-based mobile payment technology from being loaded onto devices sold on their networks. One example is the Google Wallet, also pre-loaded on some Samsung phones, which today is only supported on the Sprint wireless network. Verizon, AT&T and T-Mobile prevented the app from having access to the secure element on its devices. NFC-enabled digital wallets have traditionally required access to a secure element on the device, which stores the credit card information, digital coupons and loyalty programme information. However, in the last year technology specialists have found ways to circumnavigate this requirement. The main reason these three US mobile operators have blocked the Google Wallet is that they are investors in another NFC-mobile payment joint venture called Isis, which is currently only available in the two US test cities of Austin, Texas and Salt Lake City, Utah.
Together, these recent announcements did quicken the pace in the race among both payment and non-payment providers to establish a leadership position in the fast-changing emerging payments market. A variety of companies from tech titans to mobile network operators to traditional payment providers have been vying to take a stake in the burgeoning mobile payments business worldwide, and for good reason. Euromonitor International estimates m-commerce will grow 386% from 2012-2017 to about US$400 billion worldwide in 2017. More mobile transactions mean more cashless transactions, which is ultimately the goal for payment titans like Visa and MasterCard. Although Visa and MasterCard process almost 60% of the US$13.8 trillion card transactions in 2012, what both want is a piece of the US$14.9 that was conducted in cash payments in 2012.
In theory, both of these moves could make it easier for companies looking to create a mobile wallet app to integrate the potential services into the consumer’s mobile device and ultimately the world’s two largest payment networks. Adoption has been slow in some markets because only a few phones are equipped with the necessary technology, a limited number of merchants have made the necessary upgrades to terminals and consumers haven’t been given enough of a reason to mass adopt. Anything that would make it easier for other companies to tie into the existing payment rails could spur the adoption of the much-hyped mobile payment world, but Visa’s and MasterCard’s success ultimately will depend upon the buy in from other players in the ecosystem, such as retailers, mobile phone makers and wireless carriers. If there is one lesson to take away from the mobile payments war thus far, it is that no one company can do it alone, and each of these payment behemoths still need more players on board before either of these solutions could be labelled as game changers.