Mobile Commerce

Banga Talks EMV, MCX And Blockchain

MasterCard’s propensity toward digital seems to be coming full circle for the payments network.

At least from the answers given by MasterCard CEO Ajay Banga during the company’s third quarter earnings call yesterday (Oct. 29), it’s clear that his company is embracing digital to the fullest — and remains open to exploring a wide array of new digital payment relationships. 

Banga addressed analysts after posting strong Q3 results, which came with net income of $1 billion (up 1 percent), a net revenue of $2.5 billion (up 2 percent), 12.3 billion processed transactions (up 12 percent), and a 16 percent increase in cross-border volumes. Earnings posted at $977 million.

Analysts kicked off the conversation with a topic that is at top of mind: the USAA flip to Visa from MasterCard.

Banga offered up pretty frank responses to the questions, noting that MasterCard “just couldn’t win.”

“It’s pretty sad for us,” he remarked. “We feel bad about the fact that we no longer have them as a client over the course of the next year. The fact is we tried our best to pursue that business, but at a point, we lost it and that’s just the way it is.”

He noted that Visa was already doing some work with the company on other services, and attributed the USAA loss as “the nature of the business.”

“We win some businesses and we lose some businesses,” Banga said. “This was a business we couldn’t win and we had to get away from it.”

Moving back toward MasterCard’s focus at the moment — its digital momentum — Banga shared his thoughts on the post-EMV liability shift and its potential impact on contactless payments. He spoke specifically toward how the industry is really seeing a convergence of physical and digital worlds that all began with the introduction of mobile.

Banga On EMV And Digital Payments


First, toward EMV, Banga said: We’re pleased with the progress we’ve seen so far. We now expect 60 percent of cards and approximately 40 percent of terminals in the United States to be chip-capable by the end of this year. It’s true for us, but it’s true for an industry as a whole. We expect almost all cards on the market to be upgraded to chip by the end of 2017. We’ve already seen tens of thousands of chip transactions.”

But the benefits of EMV go beyond the point of sale — at least digitally speaking, he said. 

“Another benefit of EMV is that it will likely give a boost of adoption to contactless or NFC payments, because the latest generation of EMV-enabled terminals also contain contactless capabilities,” Banga said. 

This, he added, also aligns with MasterCard’s continual plans to advance its digital strategy. Which, for MasterCard, means to: “eliminate the boundaries of our consumer’s pay by delivering secure digital payment experiences to virtually anything.”

“Every device can be a device of cause. That’s the idea. So mobility, cloud-based payments, The Internet of Things, and big data are all coming together,” Banga said. 

Banga Gets Questioned On MCX


Fresh off the news of the Chase Pay launch, which also came with the new that MCX would be joining as a partner, Banga was naturally questioned about MasterCard’s thoughts on MCX in the future.

But before he could get into his thoughts on MCX, the analyst also asked him about MasterPass merchant acceptance, wondering why some major merchants haven’t jumped on board. 

“Building acceptance is a relatively long milestone,” Banga explained. “We’ve kind of all forgotten that because we’ve built it in the physical space over a period of time with cards that became more and more ubiquitous. … It’s a little bit of a chicken and egg.”

He also said it’s like a snowball rolling down a hill, noting that sometimes you get chunks at a time, and other times you just get one or two merchants at a time. 

Merchants begin to accept electronic payments when there’s enough boom from consumers for that. Consumers also tend to pick up electronic payments when there is enough acceptance from them,” Banga said.

That conversation led to his thoughts on MCX.

“I think MCX is interesting. I haven’t changed my opinion of my previous view. I haven’t yet seen anything new rollout from them. I consider them to all be very large and useful merchants with whom we have many relationships. So we’re working with all of them. So we’ll see when they launch something what the consumer experience is.”

“In digital payments or mobile-based payments, a lot of this is going to be about the consumer experience, because if it’s going to be clunky, then what problem are you trying to solve with that technology that the consumer is seeing today with a card? You’re not solving for their convenience and for the ease of use. It’s all about the consumer experience in addition to all the other elements of the ecosystem.”

In terms of forming a formal relationship with MCX? That may be a while. 

“I’m waiting and working with (MCX), we need them. We talk to them. We’ll see,” Banga said.

Banga on Blockchain


Speaking of trendy topics, Banga also got questioned about his thoughts on where the blockchain fits into the financial mix and where he thinks blockchain’s technology fits in.

But this isn’t the first time Banga has spoken about the topic. He shared his concerns about the potential kinks in the system that may need to be worked out before mainstream financial backing can be secured. 

“I think blockchain has potential. I’ve said this quite a few times now on panels. I think the real issue here will be, will legal dispute settlement systems accept a distributed ledger as a way of resolving a conflict if and when it were to arise between a payer or receiver?” he remarked.

“Finally the whole payment system works on two or three things. Trust that the money will get there. Two, that it will be accurate. Three, that if it’s not accurate there will be a methodology to get your money back. I think that’s going to have to be more in the methodology of reaching people, which in this case is the distributed change of ‘you don’t know who the hell they are.’ That’s a little complicated,” he added. 

What also needs to be worked out, he noted, is where the proper regulations come into play, how the blockchain benefits the remittance market (and in a way that can be regulated), and then, of course, the basics of how to get a universally accepted system into place.

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