Mobile Commerce

Banga On How MasterCard Will Scale MasterPass

Presenting at the Sanford Bernstein Conference yesterday (May 27), MasterCard CEO Ajay Banga compared the mobile payments options on the market to MasterPass as an example to express, once again, why MasterPass picks up where he believes other mobile wallets leave off.

During his remarks, he also took time to speak about the other big payment options across the mobile payments market, which includes Union Pay, Apple Pay, soon-to-be Samsung Pay and Android Pay (although he didn’t specially mention Android Pay, MasterCard announced yesterday on May 28 that it will support the service). But in his comments about mobile wallets, it all came back to MasterPass and the company’s plans to scale the digital payments option.

“We’ve reached about a quarter of a million merchants. The pace of signing up merchants have increased. We are in 17 countries launched. We’ve enabled for 30 plus countries already, and are at the building block stage. I think we’ve got another couple of years of building blocks to go, before you get adequate merchant size, scale issuers on it, cards loaded, launched in country that’s one aspect,” Banga said.

“MasterPass is not just a wallet, it’s the entire digital payment system. The wallet is just one part of it, and frankly, we are not launching the wallet branded [for] us. We’re basically giving that wallet out private label to issuers and merchants who want to use it as way of expertizing the launch of wallets,” he added. “I don’t think being in the wallet game is the game that I want to be in. I want to be in the digital world, what I am in the physical world, which is the brand and the front right hand side of the card, when you see it you know your card will work.”

Scaling MasterPass in the digital world will involve ensuring merchant checkouts offer the MasterPass option, which MasterCard is continuing to build. But to help scale MasterPass it’s going to involve putting tokens into MasterPass, which he said MasterCard plans to roll out.

“We’ve rolled it out of the Apple Pay and you’ve heard about Samsung coming and you’ve heard rumors about others coming which you will get to know more about in a little while. …So, if you think through all that, we’ve got to put the same tokens into MasterPass as well; that work is all going on. This is complicated technology and it’s a really complex build on tokens that’s happening to get scale into it very quickly. So, the next two years or three years will be about getting tokens out of the scale, getting MasterPass launched in countries, getting merchants signed up, then I’m working at the same time on improving the consumer functionality in these wallets and digital payment systems,” Banga said.

MasterPass Vs. PayPal 

Banga also provided some insight into what he believes gives MasterPass an edge over third-party payment services like PayPal. He said that PayPal’s early jump in the market, which gave them a 17-year head start, helped start the “PayPal revolution” that was like a “train leaving the station, [while MasterCard was] standing on the platform waving goodbye.

“And now we try to run to catch up with that train, and I don’t want to make the mistake a second time, but all that’s going on in the digital world. My approach has been to innovate and innovate consistently in the digital world, be on the train, be a part of the innovation, so that you can play a much more practical role in the future. That’s why we’re doing all the things we’re doing. Whether it’d be Labs or it’d be the investments we are making in accelerators and incubators or the investments we’re making in firms in Canada that look at your underlying heartbeat and use that as your identifier, more so than even your biometrics, all that stuff is because I want to be in the train, not on the platform.”

He noted PayPal’s advantage was its early lead that left players like MasterCard playing catch up, but he said the tokenized world will help it catch up. But he noted that MasterCard’s advantage is its ability to connect physical and digital payments.

“A MasterPass transaction is the same as the MasterCard transaction. You can connect into it as a Web-based merchant very easily. If you accept MasterCard today, it’s very easy for you to connect into MasterPass with literally less than a day’s work. You connect into PayPal, it has to connect into very different parts of all the way to your general ledger in some cases, that’s not how we build the MasterPass — it’s the simplicity of the connection, first,” Banga said.

He noted that MasterCard and PayPal have a unique relationship because they are “both a friend and a competitor,” because a majority of PayPal’s funds come from cards, like MasterCard.

MasterCard, China and UnionPay

The big news out of China stemmed from the recent announcement that Chinese authorities will open China’s market for clearing domestic bank card transactions that will allow players like Visa and MasterCard direct access to a $6.84 trillion, or so, market. Banga said that UnionPay has a significant advantage over the U.S. networks when they gain access, but that should eventually level out. 

“China UnionPay’s ability to gain traction outside of China has been determined by the fact that it controls the gateway into China. So that is the barter trade that is going on. When the gateway into China opens up, their ability to claim the same level of ubiquity on arguing that point with issuers and acquirers overseas actually will change,” Banga said. “So this is not going to be easy for them just as it won’t be easy for any of us to compete. It’s really interesting to watch. It will be I think over four, five years it will become a relatively level playing field.”

As he wrapped up his comments about what else MasterCard is doing to help evolve its digital offerings, he also branched his comments out to MasterCard’s progress in China with UnionPay.

“We were doing a number of things with China UnionPay on helping them with their acceptance in return for helping us with our acceptance in China —we were doing things in online commerce with them — and overtime we had become partners as well as competitors. And both of us understood that about each other, and we’ve had an excellent working relationship in the last four, five years [for] the majority of new co-brands.”

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