Mastercard Moves Digital Payments Forward With New Masterpass Capabilities
I’ve spoken and written before about Mastercard’s transition from its roots as a payment processing network and card brand. Recognising that its traditional source of revenue was coming under greater threat it has evolved to position itself as a central payments technology provider and enabler. Whilst utilising its core network and relationships with banks and consumers it now has a variety of platforms capable of delivering digital payments to cards, online and mobiles, employing technologies such as chip cards, encryption, tokenisation, biometrics, data analytics and gateways to make connecting easier and more secure. This is all designed to increase access to our money to help make payments simpler and more convenient; after all, the more we spend, the more money Mastercard and its banking clients make.
Last month Mastercard announced several additions to Masterpass, its digital payment service for consumers (and issuers). The end result is a big expansion of Masterpass capabilities which I think will help move digital payments forward. I had an advance briefing ahead of the announcement to find out more about the pending news and what it involved to allow time to look more at its implications for the industry.
Masterpass and MDES
Masterpass is a digital payments solution offered to card issuers, acting as a digital wallet for consumers by securely storing card details for quick access and checkout both online and mobile across different devices. Originally it was primarily web-focussed, aimed at online implementations and e-commerce. The main selling point was that it removed the need to enter card details for every purchase or for the registration and storing with multiple merchants. For retailers it offers simpler integration and quicker checkout via a single button whilst adding analytics for fraud detection. It can perhaps best be summed up as Mastercard’s consumer-facing platform, in effect it is a B2B2C platform.
Mastercard’s other main platform is the Mastercard Digital Enablement Service (MDES). This is a pure B2B offering, supporting all of its issuers by enabling them to put their (digitised) “cards” into any environment or device, such as a smartphone, tablet, smartwatch, car, fridge or wherever there is demand to do so. MDES does this by use of digitised tokens, using them to replace the card’s primary account number (PAN) and issue them digitally to different devices. MDES also incorporate host cloud emulation (HCE), access to and management of secure elements alongside tokenisation.
Competition has Resulted in a Fragmented Ecosystem
Having developed these solutions and launched them into the market, Mastercard has looked to enhance and refine what they offer to its clients and end-users. There remain barriers to wider consumer adoption in different areas, offerings from banks and retailers – and the approaches and technologies employed – are causing quite a fragmented ecosystem to form.
There is a lack of openness from some major players in the payments market which sees standalone developments, proprietary solutions, less integration and multiple technologies all jostling for space, consumer attention and understanding, and the adoption and support of issuers and retailers. At the same time, the US, the largest market in terms of card issuance, penetration and transaction value, is coming to terms with a relatively drawn out migration to EMV – taking away focus and momentum from mobile payments. Mobile was already suffering with a lack of ubiquity and uncertainty about what was accepted where, spend limits, support for different apps and wallets and how it was managed across different devices; all very different to how payments developed online.
Masterpass Gets Several Enhancements
Mastercard has responded to this situation by adding a lot of MDES capabilities to Masterpass, expanding Masterpass’ focus from e-commerce and allowing it to encompass the web mobile, in-store, in-app and beyond for future use cases. Masterpass has now gone “omni-channel” (to borrow a phrase from the retail sector) with digitised EMV grade transactions and tokenisation now part of Masterpass.
Security has been enhanced too with the addition of digital secure remote payments (DSRP). This is already part of the MDES offering supporting Apple Pay and OEM Pay and now it is within the Masterpass platform too. What it adds is dynamic data to every transaction, essentially an online EMV transaction, making it virtually impossible to replicate or clone as each transaction has unique data. This already occurs within contactless card payments and now it will be part of issuers’ mobile apps and wallets.
Adding more functionality in the form of loyalty, e-receipts, balances and transfer offers to Masterpass is another improvement. Many current mobile offerings do not yet differentiate enough from (contactless) card purchases which means that it is difficult to convince consumers to adopt them. Adding more data and communication around services, updates and special offers will help this process. When I asked it was stated that messaging and use of users’ data can be supported but it needs to be actioned and driven by the banks before it is added.
On-Going Market Progress: Further Integration, In-App Payments and the IoT
Three to four years ago I wrote of the issues of the industry focussing on secure elements and the limitations of having the capability to issue a card digitally but only to one device. The card could not be shared or used simultaneously across different devices and there was no way to complete or authorise a transaction on a PC or tablet from your mobile phone holding your card and account details. This has now largely been addressed with advances in tokenisation and improved back-end infrastructure and the market has continued to press ahead.
It is important for Mastercard to maintain its position by continuing to develop its technology portfolio and its platforms’ capabilities. Combining aspects of its B2B offering with its consumer-facing platform provides a more integrated experience for consumers by allowing banks and other issuers to incorporate several applications within a single package. For now I expect that banks will test the waters, keeping their existing banking apps separate from newer payment capabilities (which will probably be offered as a separate bank-branded payment app). This is sensible as it allows both to evolve and adapt to consumer preferences with new features being tried and tested as user behaviour evolves. Putting it all together immediately would increase the workload and require more explanation and education.
Once this has been tried and tested and consumers are familiar and comfortable with both offerings, I expect that everything will come together in a single app combining both banking and payment functionality. If things progress well and different stakeholders work together to move things further ahead I would like to see more open integration offered with other apps, such as those from retailers, being able to make use of the secure banking-plus-payment apps and the authenticated banking identity. This would cement the role of the banks in the (payment) ecosystem and give them (and Mastercard) a new service offering.
Future Evolution and Opportunities for Banks
Much is made of the future of banks and their role in a digitised world – will we still need them? As the Internet of Things (IoT) moves closer, with an ever increasing array of connected devices at home, in our cars, offices and whilst out and about there will be a need to deliver secure access to them and us, to complete secure transactions (payments and identity exchanges) and to protect our identities whilst doing so. Moves like I have suggested above, to extend banks’ secure apps and service capabilities into other verticals, such as retail, enterprise and government, would surely cement their place. Confirming who you are when ordering your weekly shop from your fridge and authorising the payment within the retailer’s app, or processing a payment when parking your car or a toll when entering a city would all benefit from future evolutions of Masterpass, MDES and use of banks’ secure apps.
Will this happen? Not for any time soon. However, much as I wrote about the need to issue and utilise digital cards across multiple devices and to not be constrained by the current status quo four years ago I hope that in another four or five years I will be writing about Mastercard, its banking clientele and others helping to deliver these new scenarios for consumers.