In a classic scene from the 1967 Mike Nichols film The Graduate, protagonist Benjamin Braddock is pulled aside and given advice for his future that can be condensed to a single word: “Plastics.” If the film were remade today, it’s not hard to imagine that one-word piece of advice would be “APIs” instead.
To address customers’ needs as commerce goes digital, financial services giant Mastercard is weighing the benefits of APIs over plastic after several decades of heavy investment in the latter.
If recent activity is any indication, Mastercard is clearly making APIs a big part of its future. Late last year, the company launched Mastercard Developers, a platform geared toward developers that offers access to a wide range of APIs. The APIs are developed at eight of Mastercard’s research and development labs around the world, and allow company partners to test new applications and technologies such as virtual reality and Internet of Things (IoT)-enabled devices.
To gain a deeper understanding of how Mastercard intends to tap APIs to meet the company’s goals, PYMNTS recently caught up with Oran Cummins, Mastercard’s senior vice president of APIs. Cummins discussed how the company is moving beyond plastic credit cards to offer consumers new ways to pay for services, and how the company’s API investment strategy fits into its broader roadmap of expanding global financial inclusion.
‘A World Beyond Plastic’
Late last month, the company released a set of new APIs aimed at helping partner companies deliver simpler payments and connect with consumers in fresh ways, namely through smartphones. These APIs are giving businesses the ability to develop their own chatbots, a platform that can help restaurants offer mobile-order ahead capabilities and allow merchants to accept cashless payments by scanning QR codes. Other APIs are helping drivers for ride-share companies like Uber and Lyft get paid faster.
The rise of new types of payment capabilities, Cummins said, has caused the plastic payment market to “evolve” and broaden. The new focus is on digital payment methods that don’t necessarily belong in a consumer’s wallet or purse.
“We anticipated a world beyond plastic,” said Cummins, who noted that Mastercard’s global consumer base has roughly 2.3 billion cardholders.
As the payment needs of the company’s extensive customer base change, so too, must Mastercard, Cummins said. The company is investing in a diverse array of API solutions to help meet new opportunities to connect with customers.
“The reality is consumers are [paying] — and will continue to pay — in new ways that have less friction, and are incentivized to do so,” he said. “For us to ensure that our services are embedded in these solutions, we have to make them available as APIs.”
What has Cummins most excited about APIs is offering both consumers and companies opportunities to connect that simply could not be achieved through a plastic payment card. As new digital payment interfaces — such as chatbots, mobile technology and IoT-connected devices like appliances and wearables — continue to emerge, they will not only change how consumers make payments, but also offer companies new opportunities to connect with consumers.
Some of these new types of connections could begin when a customer orders food from a restaurant table or from a mobile device. Some of the API solutions unveiled by Mastercard last month offer restaurants new types of ordering and payment services through the company’s Qkr! with Masterpass solution. With these APIs in place, restaurants can enable customers to place food orders and pay ahead with their devices, pay at their tables or cash in rewards. Restaurants can also use digital receipts to engage with customers after they’ve left.
“You’re having a digital engagement with the consumer, which you don’t have with a piece of plastic,” said Cummins. “That creates the potential to do more, to have a more enhanced engagement with that consumer — to deliver more value.”
Disrupting Business As Usual With Conversational Commerce
Cummins believes one of the ways APIs could disrupt and improve how companies engage with their consumers is through “conversational commerce.” This term typically refers to digital solutions that allow companies to quickly interact, engage and converse with customers through features like customer service.
Chatbots are currently one of the most popular ways businesses are engaging with their customers. Some popular chatbots include Facebook Messenger, WhatsApp and virtual assistants like Amazon’s Alexa. Facebook recently reported more than 100,000 chatbots have been developed for the company’s Messenger platform. Meanwhile, the number of voice commands that can be recognized by Amazon’s Alexa grew from 1,000 to 10,000 between June 2016 and February 2017.
Cummins pointed out many companies use chatbots like Facebook Messenger to fulfill customer service needs. Mastercard’s chatbot feature is being integrated by several big-name food service companies, including Fresh Direct, Subway and The Cheesecake Factory. As the messaging ecosystem evolves, Cummins sees an opportunity to expand services available through chatbots and virtual assistants like loyalty rewards and payment installations.
“The hypothesis is based on the fact that consumers are already there and already doing lots of things — and there is no reason to believe they won’t start buying things,” said Cummins. “As these new environments emerge, we want to ensure payment works, but also we’re positioned to add value around those services.”
Cummins added that the growth of these features can further help Mastercard move beyond its image as a payment card company.
“Conversational commerce is a great example of the sort of engagement you could have today with a consumer that you could never have before on a piece of plastic,” he said.
APIs As The ‘Great Democratizers’
In 2015, Mastercard announced its Financial Inclusion Commitment initiative. With this goal in place, the company said it is aiming to help 500 million people around the world gain access to financial services by 2020.
But a lack of digital payment infrastructure makes it difficult for some markets to access the same financial tools utilized in developed countries, said Cummins.
A report published last year by Visa, Mastercard’s competitor, found a lack of payment infrastructure is a significant hurdle to global acceptance of electronic payments in several developing markets. The report also found there is little or no incentive in these markets to invest in the digital payment infrastructure because of an insufficient ROI.
“In developed countries, we take it for granted that you can pay electronically,” said Cummins. “That’s not necessarily the case in some parts of the world, because the payment infrastructure doesn’t exist there.”
But Cummins said Mastercard sees the potential for APIs to help the company meet its financial inclusion goal in these markets. APIs can tap into the smartphone technology many consumers around the globe already carry in their pockets. While payment infrastructure in these markets might be lacking, access to smartphones is much farther along. A recent Pew Research Center report found the majority of consumers in almost every country own some type of mobile device.
Cummins pointed to the company’s Masterpass QR API as an example of “the democratization of payments” because the API can enable merchants to accept cashless payments. With the API in place, merchants can receive a unique QR code, and consumers can make payments for goods and services using the QR scanner feature in their smartphones.
“We’re seeing smartphones become pervasive first, so [we’re] taking advantage of the reality of some of these markets to enable payment acceptance and to [allow] consumers to pay in new ways,” he said.
Expanding access to digital payments is not just about offering these markets new conveniences. Cummins said APIs have the power to democratize payment acceptance among consumers because APIs themselves were born out of highly democratic environments. In other words, the developers who work with APIs are clued in to their effectiveness and will keep each other up to speed on whether the various solutions available on the market are worth the investment.
“The development community is a very democratic environment, and they sniff out where certain functionality is available — and who does it best,” said Cummins. “You can put all the marketing spiel around that you want, it’s not going to incentivize them to adopt your API over someone else’s.”
Having an informed and engaged development community seeking out the most effective API solutions is a useful resource for a company looking to expand access to payments around the globe. The shared knowledge of the developers helps keep the community current on the newest APIs, which can lead to greater financial access and more empowered consumers.
Extending financial inclusion to 500 million people around the globe by 2020 is no small feat, but Cummins said Mastercard’s years of experience in payments puts it in a unique position to address the changing needs of consumers.
One thing is already clear — as the consumer payment needs shift, and payments become more democratic, the future of payments will belong to APIs, not plastics.
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The PYMNTS.com B2B API Tracker™, a FI.SPAN collaboration, serves as a monthly framework for the space, providing coverage of the most recent news and trends, along with a provider directory highlighting the key players contributing across the segments that comprise the B2B API ecosystem.