Mobile Commerce

How MasterCard Threads The Digital Payments Needle

Just a day after it was announced that Visa was aligning with Stripe – both as an investor and as a strategic partner — MasterCard CEO Ajay Banga explained MasterCard’s involvement with the Silicon Valley tech company as part of his perspective on MasterCard’s competitive advantage in the digital payments space.

“My view is generally is that there are going to be a ton of players playing there. We are actively involved in Stripe with many different aspects of what they do. We will be doing other things with them,” Banga said during the company’s second quarter earnings call yesterday (July 29). “You don’t have to invest with them to do good commercial deals with them — although it may make strategic sense sometimes to invest. I don’t rule out any of these. I just have a view: keep yourself open, play with all of them, find your company’s best interests there and remain relevant in the value chain. That’s what we’re trying to do.”

For MasterCard, it all goes back to being open and technology agnostic in a space, Banga noted, that’s changing rapidly and won’t have room for everyone.

“We are just keen to be a regular player playing with all of them. We’ve had a view through many earnings calls and investor meetings that we’re not going to pick winners and losers in this. Because this thing is evolving at a rate that is very fast and people who looked like winners three or four years ago are no longer even players there. So rather than placing bets, we’re being relatively agnostic in all these spaces,” he said.

Banga On Digital Payments, MasterPass And Security

There’s one word that Banga told investors characterizes digital payments: complicated.

“I think the digital world is a complicated one where you’ve got to find your way to thread your needle through it,” he added.

Banga used the network’s decision related to ACH as one area of complexity and complication in the space.

“I do see the fact that ACH [can] get around the networks, get around the issuer’s compensation in that sense. And that part I don’t like. If you remember, that’s why we put out the digital wallet operator rules. Which, by the way, the other networks have not yet clarified on. And we put that out for a reason. Because we wanted to the rules to be clear,” Banga said. “And the rules are going to be that the brand of the issuer, the brand of the network, has the full right through the transaction. That’s what Apple has done, that’s what a lot of the other digital giants are doing. PayPal does it differently.”

Banga also provided an update on its own mobile and digital payment platform, MasterPass, sharing that the company has boosted its acceptance rate to 24 countries — with India being the most recent addition, announced just yesterday. In MasterCard’s first quarter earnings call in April, Banga announced that MasterPass was live in 16 countries; three months later MasterPass is now live in 24 countries.

This quarter, Banga also turned his attention toward what the CEO always talks about every time MasterCard has the chance to speak to analysts and investors: security and tokenization efforts. To start, he shared his thoughts on the state of cybersecurity and need for the industry to collaborate.

“We are significantly investing in cybersecurity-related technology to offer much greater protection to our cardholders, to merchants, to issuing banks,” Banga said. “There is no silver bullet to completely eliminate fraud. But if you apply a sensible, multi-layered approach that has some coordination across the industry, we’re all convinced we can help significantly reduce that risk. And protecting card credentials through EMV, through secure code, and now through tokenization are only a few examples of our efforts in this area.”

MasterCard recently expanded its tokenization services to include private label card issuers for use in digital wallets through partnerships with Synchrony Financial and Citi Retail Services as well as tokenization services to merchants with apps, eCommerce and recurring billing card-on-file programs.

How MasterCard’s Q2 Earnings Figures Shaped Up

MasterCard posted a strong quarter, with net income up 4 percent to $965 million. The revenue increase for the quarter was small, increasing just 1 percent to $2.4 billion.

MasterCard also saw a 17 percent increase in cross-border payment volume and a 13 percent increase in processed transactions to 12 billion. Worldwide purchase volume in Q2 grew 12 percent from the same quarter the year prior to $841 billion. As for the number of cards issued, the total number of MasterCard and Maestro-branded cards issued was 2.2 billion.

“Our business continues to perform well with good transaction and volume growth, particularly in cross-border, despite the mixed global economic environment and foreign exchange headwinds,” Banga said in the company’s prepared earnings release. “We are executing on our strategy to grow our business by focusing on winning new deals in our core payments business, while building out our data analytics, processing and safety applications. A blend of acquisitions and organic investments in these spaces remain at the foundation of our strategy.”



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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