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A year from now, MasterCard and its PayPass tap-to-pay network will serve as a cornerstone of mobile-payments in the U.S.
MasterCard
At least, that’s according Ed McLaughlin, head of emerging payments for the world’s second-largest payments network.
“The PayPass functionality will serve as an anchor,” McLaughlin said in a recent interview with CNET.
Those are bold words considering the mobile-payments business is still in its infancy. But MasterCard has reason to be confident. It’s the only credit card company to play a role in both of the major burgeoning alliances, including the Google Wallet initiative and ISIS, a joint venture between three of the four national wireless carriers.
Google is preparing for the launch of its mobile-payment service in the coming weeks, which will allow select Sprint Nextel customers with the Nexus S smartphone to be able to wave their phone to make purchases from drug stores, pay for cab rides, and buy groceries from PayPass locations. ISIS, a partnership between AT&T, Verizon Wireless and T-Mobile USA, plans to begin its trials next year.
MasterCard has opted to take a different route than its larger rival, Visa, which is planning to launch its own digital wallet featuring one-click checkouts, coupons, and other offers that would put it in direct competition with Google. Instead, MasterCard has opted to license out its PayPass technology to as many vendors and partners as possible.
Where Visa is looking at the larger opportunity of jumping into a new business, MasterCard is banking on the belief that the capability to pay with a phone will spur more purchases, improving its core business.
“By making it more convenient for users, we absolutely see more transaction,” McLaughlin said. “For lower priced transactions, people love the tap and go.”
Google Wallet also comes with a prepaid payment option, allowing you to link the account to any other credit card. Because Google Wallet uses MasterCard’s payment network, MasterCard gets a cut of any transaction made with that prepaid account.
“Welcome to the MasterCard PayPass prepaid fold,” he said.
The payment mechanism will also draw in new merchants. McLaughlin pointed to the proliferation of payment terminals in taxis and at select subway turnstiles in New York as new locations and business opportunities.
MasterCard also sees an opportunity to for the transition to mobile and digital payments to drive more transactions in emerging markets such as Brazil or Russia, where 80 percent to 90 percent of the purchases are made using cash. McLaughlin said in some of those countries, consumers might skip the card and go straight to the phone as a payment mechanism.
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McLaughlin doesn’t believe mobile payments will replace the card or cash in all situations. But like the growing comfort in online purchases, people will incorporate mobile payments where it is appropriate.
With a high-profile partner such as Google, it’s easy to get overshadowed. But McLaughlin insists MasterCard is bringing critical value beyond its payment network. The company is opening up its access for developers looking to create apps that integrate with Google Wallet. In addition, MasterCard is providing insight into consumer purchasing behavior, which will help with delivering offers, coupons, and other promotions.
The MasterCard network is also ensuring that those coupons are redeemed, and that offers are correctly targeted to the right individuals. The data can be helpful to both Google, which delivers the offers, and to the merchants, allowing them to better understand their customers’ purchasing habits.
MasterCard also powers the personalization aspect of a digital wallet, allowing users to choose what alerts come, and block certain kinds of purchases.
“Everyone got so focused on the payment transaction itself, and not all the other value being created,” McLaughlin said. “It’s like saying an Android phone is just another way of generating calls.”
With Google, ISIS, Visa and other companies looking at mobile payments, there’s the risk of consumer confusion. But McLaughlin doesn’t believe that’s the case.
The different players will offer consumers more choice. There may be one type of digital wallet appropriate for business travelers, including access to hotels and airport lounges. Another version may be more suited for working mothers. Different issuers can provide different services.
“I don’t see it as fragmentation, I see it as a personalization of environments,” McLaughlin said.
Either way, it’ll still have to run on a payments network, either run by MasterCard or rivals Visa and American Express, a potential boon to their core businesses.
McLaughlin, meanwhile, wouldn’t go into details about the differences between working with Google and working with ISIS and the carriers. He would only acknowledge that they were different, and their approach was based on their respective backgrounds. He added their approaches have been different from the international carriers that MasterCard has worked with, from the U.K. to Turkey.
While Google launched first with MasterCard, McLaughlin said it was a matter of timing. He believes Google Wallet should and will open up.
ISIS, meanwhile, initially launched with only a weak No. 4 player in Discover and Barclays and its only partners. Within months, it shuffled its strategy and announced partnerships with all of the major credit card companies. McLaughlin said ISIS needed to make a big statement about openness and did.
While mobile payments have been hyped up for years, McLaughlin said it is finally coming around with so many players involved in a meaningful way.
“It has become less theoretical and more tangible,” he said. “Google putting it out there in a public way has helped catalyze a lot of initiatives in the country.”
