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Banga Talks MasterPass, Tokens And A “Genie In A Bottle”

In a strong first quarter that produced a 17 percent net income increase to $1 billion, MasterCard CEO Ajay Banga focused his comments during the company’s call with analysts on key payments metrics as it continues down its path to global expansion with its growing merchant base.

For MasterCard, this starts with MasterPass, but where the rubber meets the road is the number of merchants willing to accept the payment platform into their system. It’s clear from the figures that Banga provided that MasterPass is making progress.

“Our MasterPass platform [is] live in 16 countries around the world. And I’m very pleased to share that we’ve since added Korea to the list of live markets as well as more than doubled our global merchant acceptance of MasterPass to nearly a quarter of a million merchants,” Banga said. “And there are more in the pipeline. It’s like one of those ads you hear on TV that says, wait, there’s more to come.”

MasterCard has also formed new partnerships, such as McDonald’s in the UAE and across 14 markets in the Middle East, Africa and Europe. These partnerships have allowed MasterCard to make its mobile payments footprint in those regions’ restaurants and has helped expand online ordering payment options. Public transportation has been another key area that MasterCard has focused on in terms of contactless payments.

“We just recently announced a global partnership with Cubic Transportation Systems. They’re a leading provider for smart city transit solutions in London and Chicago and other such cities,” Banga said. “As part of that agreement, MasterPass will be integrated with Cubic’s NextWave ticketing and journey planning app, which really means we’ll have to accelerate conversion of cash payments in transit into these digital payments.”

Apple Pay was another subject on Banga’s agenda, as it has been for the past two quarters; but what stuck out in the first-quarter earnings call was the mention of the new payments player on the block: Samsung Pay. MasterCard announced last month that it would work with Samsung Pay to enable the mobile payments option for its cards. Banga also made use of a common phrase now bandied about in the mobile payments world: technology agnostic.

“We are technology agnostic when it comes to mobile and digital payments, and we are determined to support implementations based on different market models,” Banga said.

And that they should. MasterCard (and all of the networks, really) have a vested interest in making sure that they are widely accepted and in whatever payments schemes that consumers want to use at their favorite merchants.

Banga was quick to point out several other examples of MasterCard’s global achievements related to contactless payments.

The Commonwealth Bank of Australia, Banga said, recently launched its Tap & Pay mobile payments for Android devices. He also pointed out MasterCard’s agreement to help the Egyptian government bring financial services to more than 54 million with its national ID program that incorporates the country’s first national mobile wallet, which Banga said provides consumers with a number of payments options.

“It’s much broader because it provides every Egyptian citizen with the tools to electronically receive government payments and a companion card to be used in purchases, bill payments, domestic remittances,” Banga explained.

Last quarter, Banga focused his mobile payments comments on the security features of Apple Pay and MasterPass as it relates to MasterCard’s tokenization efforts. He mentioned that MasterPass will maintain the security seen in Apple Pay, and remarked that “tokenization will become kind of fiddlesticks in the game on eCommerce.” While tokenization wasn’t a main topic this quarter, one question on the subject did come up about the tokenization service rate card that MasterCard published last year. For now, it seems, Banga said MasterCard’s focus is on getting tokenization standards accepted into the market.

“As we’ve all done, including our competitors, we’ve all said there is no implementation of that rate card until 2016, at least, in January. That’s kind of what we’ve all said,” Banga said. “The idea right now is to ensure tokenization gets adopted in the market. And remember, even if we do something in January with the tokenization rates, right now tokenization is only going in for transactions over the phone, over mobile phone kind of transactions. And as you know from your own research and details on this, that’s still a small part of total expenditure and transactions in the United States.”

And on the topic of tokenization, Banga also provided some colorful commentary related to the security of tokenized digital transactions.

“I just would like to put that genie into its bottle in where it belongs. It’s very important. It’s very critical for securitizing, or for securing digital transactions, no doubt. It’s got an implementation time line which is going to take some time for it to become more ubiquitous than just the phone-based transactions today. That’s the context I’d like to put it in,” Banga said.

“We are very committed to it. We’re investing a very large sum of money in ensuring our capabilities in it. We are investing money in rolling it out into other markets overseas. And different people claim different dates when they’re going to reach the market. I would tell you discount all that until you see it in the market. This is not an easy thing to get done. It’s not an easy thing to roll out. So we’re working very hard on that,” he continued.

For now, he said, conversations about tokenization adoption and merchant rates are all speculative until more concrete data is able to be gathered.

“We are far away from a stage where tokenized transactions comprise an adequate percentage of the total to drive great changes in the marketplace, other than the excitement around finally getting a really secure system for digital transactions,” Banga said.

Outside of Banga’s comments on mobile payments and tokenization, he also spoke about the mPOS rollouts in the company’s first quarter. This included a mPOS device with the First Bank of Nigeria and with Guaranty Trust Bank to enable micro, small and medium businesses to accept card transactions for the first time. Or, moving to Hungary, MasterCard partnered with Allianz, an insurance company, to help their sales agents accept contactless payments using the mPOS that accepts mag stripe cards, as well as chip and contactless cards. This allowed those agents to accept electronic payments to avoid taking cash payments or making their customers pay via a bank transfer.

Other big news for MasterCard was the announcement earlier in the week that MasterCard will acquire Applied Predictive Technologies – a cloud-based analytics provider – for $600 million. The acquisition will expand the services MasterCard can offer to its merchants – particularly APT’s Test & Learn platform, which helps businesses tailor investments and enhance their bottom line by using data to calibrate marketing, merchandising, operations and capital initiatives. APT will gain access to MasterCard’s analytics suite, consulting capabilities, marketing services and global footprint.

In terms of specific earnings figures for the quarter, MasterCard’s purchase volume was up 12 percent, year over year, to $783 billion. MasterCard reports that it has 2.2 billion MasterCard and Maestro-branded cards in market globally. MasterCard’s transaction volume rose 12 percent, year over year, to $11 billion. Net revenue for the quarter was up 3 percent to $2.2 billion.

“We are managing well, despite a mixed economic environment and challenging currency situation,” Banga said in the company’s earnings statement. “The underlying fundamentals of our business remain unchanged, driving our ability to sign new agreements with Citi and Itaú, work with digital giants and expand our support of the merchant community. This, combined with our focus on costs, allowed us to continue to deliver solid results in the first quarter.”

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