Banks get another ally in mobile payments with the new Masterpass

July 14, 2016 | by Will Hernandez

In an effort to make its digital wallet service a more complete product in what is an evolving digital era, MasterCard today announced multiple enhancements to Masterpass that will enable bank issuers and merchants to give their customers more options to pay online, via mobile apps and, for the first time, in-store with NFC-enabled mobile payments on Android devices.

MasterCard's announcement comes at a time when competing card networks and fintech companies also are increasing their respective digital efforts.

Visa recently introduced the Visa Digital Commerce App, an issuer-branded mobile commerce product that enables financial institutions to offer their own mobile app to customers.

Apple's long-rumored push into the online checkout world became a reality last month when it announced Apple Pay payments will come to the web this fall as part of an update to the Mac operating system.

Even retailers such as Starbucks, Walmart and others continue to make improvements to their respective existing digital payments products, or introduce new ones.

MasterCard's support of NFC-enabled mobile payments on compatible Android devices through Masterpass could very well be the linchpin of the new enhanced service because with a few exceptions, banks have been unable to compete with third-party mobile wallets in today's market. Keep in mind that Apple does not allow third-party developers to access the NFC chip/secure element on its devices.

A mix of national and large regional banks in the U.S. initially will support the enhanced Masterpass through their existing Android mobile banking apps and they include Ally Bank, Associated, Bank of America, Bank of the West, BMO Harris Bank, Capital One, Central Bank, Citi, Fifth Third Bank, First Hawaiian Bank, First Tech Federal Credit Union, Key Bank, People's United Bank, Security Services Federal Credit Union, SunTrust and Virginia Credit Union.

Rollouts from these issuers will begin later this month, MasterCard said today in an announcement.

Europe and the Middle East/Africa region will be the next markets where the converged Masterpass solution will be live by the end of 2016, according to a MasterCard press release. Additional rollouts in North America, Europe, Latin America/the Caribbean, the Middle East/Africa and Asia-Pacific will continue through 2016 and into 2017.

While MasterCard from the beginning has worked with issuers and the major mobile wallet providers to make its cards eligible for such services, the company has also told banks that they need to develop their own mobile-payment strategy.

"We have a very conscious strategy that banks should be into Apple Pay, Android Pay and Samsung Pay because we think certain customer segments have a natural affinity for those digital brands and we want our cards to be used there," James Anderson, group executive for platforms in MasterCard's emerging payments division, told Mobile Payments Today in an interview Wednesday ahead of the announcement. "We also think the banks need their own digital offerings. We think the banks have the assets to differentiate their offerings and frankly, we think they have an imperative to have their own offerings because they need to maintain relevance with their cardholders."

Anderson's plea to banks to have a mobile-payments strategy on the Android operating system is not new. He said something similar back in January at the annual Consumer Electronics Show in Las Vegas when he participated in a panel discussion about mobile payments with executives from Citi and Samsung Pay.

Many industry executives and observers share Anderson's opinion and they have been more vocal about it in the past 12-to-18 months as the Pays slowly become more mainstream with consumers. But there's a void MasterCard now can help banks fill as it relates to features that are still lacking with the major third-party mobile wallet providers.

"When we started this journey, we didn't start going to digital [payments] so that we could replicate the existing functionality of a card into a smartphone and say, that's it, we're done," Anderson said.

MasterCard will enable banks to add a set of services connected to the payments function that can include debit balance display, a credit open-to-buy feature, card benefits reminders, purchase notifications, purchase history and points balance.

A couple of enhanced services can include a wallet loyalty scheme and pay-with-points. It will be at the bank's discretion to add or remove services. MasterCard will provide an SDK to banks and the processors those financial institutions work with to make changes.

As a side note, the key difference between Visa's latest product and MasterCard's enhanced Masterpass is that the Visa Digital Commerce App is a white-label service while banks add APIs to their existing mobile app to activate Masterpass' new features.

"It did take us a little longer than we wanted to make that [mobile] payment work, but we're there," Anderson said. "But we haven't yet as an industry, or individually, really followed through on value-added services. And I don't even like that term. It's the stuff that makes it better."

Anderson compared this transition to what Starbucks did when it added a mobile component to its loyalty program. Consumers who were accustomed to paying with their Starbucks gift card started to use the app more, even if the only difference between the two was better loyalty tracking. But then Starbucks started to add more features to the mobile app such as order ahead-and-pay and a connection to the music streaming service Spotify.

"It's not a perfect analogy because it's a retailer and a simpler environment, but I think right now we're at the point where Starbucks was about two years ago," Anderson said. "Once you get on a digital platform, it gives you new degrees of freedom.

"So what we're proposing with Masterpass is a way for the banks to do that at a scale with a partner that can really help them with the bits and pieces they might not be able to do on their own."

Industry observers agree that the new Masterpass should help banks better compete with the Pays, especially as far as the value-added services are concerned.

"I've argued from the beginning that wrapping a lot of the current services in mobile banking around a mobile wallet will be that value proposition that drives adoption," Daniel Van Dyke, who is a mobile research specialist at Javelin Strategy & Research, told Mobile Payment Today in an interview.

But Van Dyke and others agreed that more mobile-payment options also can lead to more confusion among consumers, who haven't been adopting the Pays like some had hoped.

"I think these [new services from Visa and MasterCard] are all steps in the right direction [for banks], but there is a lot of competition for consumers' attention and I'm not sure if the consumers really know where they want to go themselves," Ed O'Brien, who is the director of the banking channels advisory service at Mercator Advisory Group, told Mobile Payments Today in an interview.

As for MasterCard's other Masterpass enhancements, there are some new partners worth noting on the merchant side.

Saks and Lord and Taylor will add Masterpass online checkout on their respective websites.

The Cheesecake Factory also will add an in-app Masterpass checkout option that will enable diners to pay-at-the-table using either an iOS or Android device.

The Metropolitan Transportation Authority in New York also will add a Masterpass checkout option to a mobile ticketing app it released last month for its commuter rails.


Topics: Card Brands, Contactless / NFC, Handsets / Devices, HCE, In-App Payments, Loyalty Programs, Mobile Banking, Mobile/Digital Wallet, Trends / Statistics



Will Hernandez
Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago. View Will Hernandez's profile on LinkedIn

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