The pandemic has introduced new variables into innovations, payments and commerce — setting up headwinds in some cases as businesses shutter, and tailwinds as consumers and enterprises embrace digital transactions by necessity.
And looking more deeply into the European Union, where some green shoots of recovery are showing, Mark Barnett, Mastercard’s new president of Mastercard Europe, told Karen Webster that addressing the needs of a diverse, 53-country ecosystem hinges on offering multiple ways to pay over multiple rails.
Improving Connectivity And Moving To Cashless
The transition to contactless and real-time payments brings with it the need for greater connectivity across Mastercard’s European market, which touches 950 million people and an ecosystem that includes retailers and a range of other businesses.
Barnett said acceptance — a critical component of moving to cashless by giving people places to spend their digital currencies — is improving. Connectivity has been growing by 10 percent a year, an encouraging sign in bringing commerce into the digital age.
“And we’ll look to push harder on the growth areas in those places where there is generally a lot of cash, but they’ve discovered contactless,” he said. “Because we think those payments are safer and secure, we might double down on P2P, for example.”
The Role Of The Network — And The ‘Network Of Trust’
The role of the network is illuminated in open banking, where networks such as Mastercard ensure that merchants, consumers and FinTechs are being served in a way that is secure but also ensures a range of choices for consumers to get what they need.
The network effect that ties it all together, Barnett said, has three components. Stretching back over decades, Mastercard has connected 60 million merchants with several billion consumers with issuers and acquirers across “a technical network that all runs on the same standards,” he said. Second, Mastercard has created franchise rules that ensure know your customer (KYC) and anti-money laundering (AML) mandates are being followed.
For the third component, Mastercard has put together consumer protections and streamlined chargeback dispute processes.
With all three components in place, he said, Mastercard has created a “network of trust.”
Illustrating the breadth and depth of network trust, he said, “I can go anywhere in the world, walk out of a shop with a Persian rug, and the shopkeeper knows they are going to get paid. They have only a 16-digit number and an expiration date, but they are going to get paid as long as they have done everything right. And if anything goes wrong with the transaction, I know I’ll get my money back too.”
Drilling down a bit, he recounted that open banking needs to “solve a few of the problems that we solved in the cards world before it is going to become useful for payments.” That’s what Mastercard is trying to do with a series of products, said Barnett.
Open Banking Connect offers a single, universal connect to ensure application programming interfaces (APIs) can talk to each other in a seamless way. Open Banking Protect offers real-time verification of third-party registration status with fraud monitoring and alerts. Open Banking Resolve offers a centralized inquiry and dispute resolution service.
Those standards are critical in a highly regulated industry like financial services, and as Webster noted, there has been a renewed focus on creating standards and processes to protect all parties in a transaction and streamline FinTechs’ connections to banks.
In one example, in mid-May, Open Banking Europe published draft signature standards for bank APIs. Frictions still remain on the road to standardization, and deadlines loom. For example, many EU countries have decided upon Dec. 31, 2020, as the new Strong Customer Authentication (SCA) compliance deadline. Barnett said although timescales may shift, Mastercard is seeing renewed interest in open banking payments.
The progress that is being made, he said, comes despite the fact that “we started to see cross-border, in-person type payments — for airlines, hotels and that sort of thing — decelerate at the end of February and into early March as economies were progressively locked down.”
The only things operating were supermarkets, pharmacies and online retail, he noted.
In supermarkets, he said, “We saw a massive jump in contactless,” especially as industry and geographic-wide increases came to 50 euros ($56) from 45 euros ($51).
And in eyeing which behaviors will “take,” he said contactless has become a habit and that people are doing things online that had previously been done in brick-and-mortar locations.
Along with contactless payments and gains in eCommerce, he said there is room to accelerate country-level transformations toward digital transactions.
To get there, he said, it’s “more about sequencing rather than doing things completely differently.”
Mastercard, he said, is mindful that certain geographies look different from one another from a payments perspective. There are different rates of uptake in eCommerce and preferences tied to debit and credit and prepaid cards.
“As a payments company, we enable our customers — whether they be banks, whether they be FinTechs, or whether they be merchants — to build experiences for customers, and we want to give them choice on how they pay,” Barnett told Webster.
Through the last decade, he said, the firm has been building (and acquiring) capabilities across a broad range of functionalities.
“There’s a long list of services we now provide our customers to put around core payments capability,” he said.
That includes a particular focus on real-time payments and the security concerns surrounding them.
In battling the increasing trend of fraudsters targeting digital, faster payments — through authorized push payment scams — Barnett said that at times there can be “too little friction in the process.” In the U.K., Vocalink’s proof of pay and funds repatriation can help address those concerns by authenticating who is receiving and who is sending at both end points of the transaction.
As an example of moving money in real time through far-flung regions, he noted that as of last year, Mastercard has contracted with P27 to build the world’s first multi-currency cross-border clearing system — using card rails to allow account-to-account transfers and P2P payments. (The P27 Nordic Payments Platform is owned by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank.)
Looking ahead, he said, progress remains based on a number of factors, from developing vaccines to governments’ lifting various lockdowns as restaurants reopen and consumers return to brick-and-mortar retailers.
As it stands now, Barnett told Webster, “We are in a long process of normalization.”