Faster payments are quickening the pace of billion dollar acquisitions in the payments space.
The news comes as the payments arena is a-swirl with headlines about speeding up transactions around the globe (witness, for example, this week’s announcement that the Federal Reserve plans to build out a faster payments service in the U.S.).
For Mastercard, the acquisition furthers the continued strategy to move well beyond cards and deepen its presence in account-to-account activity and extend its position beyond credit and debit cards.
“This is really about continuation of Mastercard's expansion into being a multi rail provider,” Paul Stoddart, president of New Payment Platforms at Mastercard, told Karen Webster Tuesday. The Nets deal, he recounted, follows logically from recent acquisitions, like Vocalink, where infrastructure was the focus but now looks toward applications and new use cases as revenue drivers. Vocalink’s infrastructure has underpinned real time payments platforms in countries as far flung as Peru and Saudi Arabia. More recently, Mastercard, with Vocalink, struck a deal with P27 Nordic Payments Platform to provide the Nordic market with a real time and batch payments system.
But the stage is set for apps as torque for top line growth in the real time payments arena. As Stoddart said, Nets gets about 80 percent of its revenues from services such as bill payment in Norway and Denmark. The immediate impact of the acquisition will be felt in the Nordics, where clearing services already exist, and then well beyond that region.
“We obviously expect that the collective set of technology and the services that we're buying can be further exported more widely across Europe and into other markets,” he said, with the goal to create an interoperable market of payments schemes that can facilitate account to account payments, in real time, across countries.
As is specific to the Nets transaction, he added, the near term roadmap includes examining synergies between the two firms, particularly as it relates to open banking and the revised Payment Services Directive ( PSD2).
On A Grand Stage
Stoddart told Webster the pan-European roadmap comes as there are pain points common across markets and across borders. As he said, the bank notes may be different, the languages are different and each of the EU’s members may harbor the belief that each country has its own economic and national realities. But the reality is that across borders many of the needs of consumers and business are the same.
“We [all] have to buy things; we have to pay bills. We need to send money to each other,” he said.
The devil is in the details when it comes to deploying new infrastructure or augmenting new rails. With a nod to the fact that any real time payments scheme has some degree of localization (in terms of regulation, for example), he said that “based on Mastercard’s experience, we see about 75 percent commonality across markets in terms of technology standards, the ways in which the banks want to engage and connect to the clearing system and the ways in which settlement with the central bank happens, too.” That commonality has been furthered a bit with the introduction of PSD2.
In the age of electronic payments, and especially the age of real time payments, said Stoddart, Mastercard sees opportunity tied to standardization of technologies and informational flows.
The Use Cases
But it is, especially, with the adoption of ISO 20022 — the messaging standard that has been spreading around the world — that new use cases such as request to pay (RTP) can be monetized. Within bill presentment, he said, is an area that is ripe for disruption, “one of the key innovations … is leveraging this new message type called ‘request for pay app.’”
By adding these and other new application layers, said Stoddart, Mastercard will expand real time payments use cases on offer. He relayed to Webster the initial three areas of focus, among them are peer-to-peer (P2P) payments, where, anecdotally, people may pay each other back for a dinner.
The second use case on offer revolves around bill presentment and payment. There’s some precedent here in the states, as Mastercard said in May that it would buy Transactis to digitize bill presentment and payments.
“We see this is a very large opportunity globally,” he told Webster, as upon closing the Nets deal the company can focus on the domestic needs of individual countries, in Europe and beyond.
“So where we built a clearing system in the Philippines we will launch Bill Pay in the Philippines. We've built [infrastructure] in Peru will launch [bill payment] in Peru,” he said by way of example.
The third use case revolves around digital payments made to merchants.
“That's probably the least developed use case at the moment,” he said, adding that “we are working in the UK with Barclays, with HSBC, Worldpay and Barclaycard merchant acquiring to roll out pay by card in the UK and we are working in other markets to launch pay by account this year and next year.”
Asked about a time frame for the deal’s closing, Stoddart confirmed the intent to complete the acquisition by the first half of 2020.