MasterCard approach to mobile commerce and payments seems to be a bit different from the approach taken by Visa
and American Express
. There are fewer partnerships, at least in the US, and for the moment, no relevant acquisitions.
For starters, there isn't a 'MasterCard Wallet' in the US although the company is involved in two major initiatives:
- Google Wallet: They were the first to partner with Google - at the moment, only two cards are accepted in Google Wallet: Citi MasterCard and Google's prepaid card - and this partnership continues to be the main company focus. Participating in the testing process and then in the national rollout has allowed them to learn a few things around mobile commerce, NFC and consumer adoption such as the need to have a good locator service and an audio confirmation of the correct download and deployment of the app. Small things that greatly contribute to consumer experience and, thus, to adoption.
Their position as single provider will soon change as Discover, Visa and American Express will also be available in the next release of Google Wallet - planned for later this year. But this is not an issue for MasterCard, in fact, the company understands and supports this development since they also believe that in order for an e-wallet to become widely adopted, it needs to be convenient and actually improve upon our current physical wallets. Having several e-wallets would reduce the value to the consumer and limit adoption.
- ISIS: Isis is a joint venture in the United States of AT&T, Verizon Wireless and T-Mobile USA, the top three telecommunications operators, and the credit card companies Vis, MasterCard, Discover and American Express The approach taken by ISIS is fundamentally different to that of Google: The carriers that are part of Isis will charge banks / credit cards for the network and cell phone space used for mobile payments. Not only the corresponding data charges – as Sprint does in the Google Wallet solution – but additional, or alternative, fees. MasterCard, like the other credit card companies, has opted to back both approaches since, from their perspective, the choice should be left to the consumer and they want to be part of whatever solution their customers favour.
The fact that Isis will not launch its first trial until the first half of 2012 - it will take place in Salk Lake City, Utah, and Austin, Texas - will allow MasterCard to apply the knowledge acquired while working with Google to make this deployment easier and smoother for themselves.
Outside of the US, MasterCard has been involved in a number of initiatives in markets as diverse as Canada, the UK, Turkey and India. Some of these initiatives have been large-scale trials that may not yet have developed into full-fledge commercial products - for example in Canada or India - while some other - the most notable case being the UK - are now services available at a national level. Let's look in more detail at a few of these initiatives:
- India - Partnership with Vodafone and Citibank: This was the first large-scale trial launched in India. It started in June 2009, reaching over 3,000 customers and involving the 250 retailers that accepted PayPass for the 6-month duration of the trial. Over 43,000 transactions were recorded (an average of 14 transactions per user). Considering that there was a financial incentive to use the mobile payment application over 12 times, it could seem that the main reason for usage was financial benefit rather than convenience or interest for the technology. However, it is also true that users that participated in the trial and that also had Citi card, steeped up the use of the latter ones with retailers that did not have PayPass. Possibly proving that, easier methods of payment will be well received in developing markets even though adoption may be slow and need to include education and incentives.
Possibly, this first foray into mobile payments in India gave MasterCard a good platform from where to jump into other opportunities within emerging markets such as the two that are presented below.
- Kenya and across Africa - Partnership with Airtel: In partnership with Standard Chartered and Airtel - Airtel Wallet and Airtel Mobile Money, Mastercard is launching a service that allows on-line purchases from your mobile phone using a 24-digit number uniquely assigned to a customer for a specific transaction. The purpose, once again, is to empower the large number of mobile users across Africa to purchase goods more easily.
There are also other opportunities that, although have not yet crystallized, could turn out to be great wins for MasterCard including possible deployment of MasterCard Mobile Payment Gateway in Indonesia
- the company already has the blessing of the Central Bank but needs to get banks and telcos on board - and testing of in-flight contactless technology
- with cards and NFC technology to achieve real-time online card authorization and reduce fraud.
Clearly Mastercard is working hard to further promote and leverage PayPass, its contactless payments system, which is already widely used across the world. It is only reasonable to assume that the company will use this infrastructure to move ahead with NFC as the next wave of contactless payments.
Next week we will discuss some of the other initiatives where Mastercard is involved, focusing on their R&D activities around the QkR app, motion with Xbox, sound and QRs in ads.
In the UK, all three major carriers have launched or are planning to launch their own mobile payments initiatives
will introduce its own Visa-branded prepaid payment applications on its NFC phones later this year.
2) Orange UK
, part of Everything Everywhere
, launched its Quick Tap FNC payment service with UK issuer and acquirer Barclaycard in May of this year.
3) Vodafone UK
is planning to enter the space but has not yet revealed its plans.
At the same time, they also plan a joint venture to provide a "one-stop shop" for mobile advertising, payment, ticketing and other services in the planned NFC mobile wallet they will be launching next year. To make this a reality, the operators plan to invest together
between $16 and $80 million – depending on how well the initiative is received – to develop the technology and market it to retailers.
This UK NFC joint venture (no name or logo has yet been published) has been built in a near exact model as it’s US cousin, Isis:
1) The three carriers hold an equal state.
2) The joint venture will deploy and manage advertising and loyalty programs.
3) It will also act as its own trusted service manager, which would give them the necessary control to keep competition – other carriers or other wallet solutions – out of the majority of the UK market since, together, they control around 90% of the UK market. In the words’ of the partners
"This will enable consumers to transfer their entire physical wallet into a new secure, SIM-based wallet regardless of which NFC enabled mobile device, or mobile network they are using," say the partners. "Companies and organisations that provide anything from credit, debit and loyalty cards to membership cards and transport tickets will be able to create secure mobile versions of their products. Consumers will be able to use their mobiles to pay for goods, services and travel using contactless technology (NFC) with one touch of their phone, or online via mobile or PC."
The new business will provide a single contact point for advertisers, media agencies and retailers looking to reach consumers on their mobile phones. The joint venture company (JV) "will enable them to book advertising space and create campaigns as well as provide offers, coupons and loyalty cards which can be stored on the phone and redeemed in shops. For consumers, the JV means that they will be able to receive discounts and offers from brands that are relevant to them and that they want to receive."
Everything Everywhere, Telefónica and Vodafone will also "continue to develop their own competing products and services tailored to their own customers, which will be based on the open platform infrastructure provided by the JV."
Although the partnership will certainly speed up development and adoption, it also raises issues around competition. Specifically, on September 7th, Three UK asked the European Commission to block the joint venture. Mr. Lerner, Three UK regulatory affairs director, expressed his concern
that, given their size, the partners could impose high transaction fees on consumers and set a difficult precedent in Europe.
It needs to be noted that Three UK, the fourth largest wireless provider in the UK with 6.9% of the country’s subscribers, was not included in the agreement. It may have been because its profile differs from that of the main provider: It is an aggressive, low-cost seller of phone and Internet services and a relatively new competitor in the UK (launched in 2003).
And indeed, this is an important battle both for the future of NFC payments in the UK as well as across Europe. Wireless carriers are developing similar initiatives in, among other countries, Denmark
, the Netherlands
– in this case the telcos would by-pass card networks and banks using their own banking or e-money license. A thumbs-up or thumbs-down decision from the European Commission would be a very strong signal to the providers in each of these countries.
was formed in November of 2010 when AT&T Mobility, T-Mobile USA and Verizon Wireless, three of the largest US wireless service provider, united to build a nationwide mobile commerce network utilizing smartphone and near-field communication (NFC) technology.
Initially, the aim was to develop an alternative payment network that would attract merchants and retailers to switch from existing networks via lower fees
. The company planned to issue its own credit and debit cards, with the uptake expected to be large enough and the fees reach enough – even if lower than those of their competitors – to compensate for the expensive proposition of setting-up and running a payment system.
However, an amendment from Sen. Dick Durbin’s (D-Ill.) in a major financial reform bill
passed last summer put limits on the amount of money large banks could charge merchants on swipe fees for debit cards – reducing charges up to 70%, therefore drastically reducing the fee-reduction benefit.
As result, Isis changed its strategic direction and, in May of this year, decided it would be more cost-effective to run its service on existing payment networks – Visa, Mastercard or American Express, for example – and ‘just’ build a mobile wallet, similar to the Google Wallet that would be announced later in the month.
Initially Isis had a very limited set of partners joining the venture – Discover Financial Services and Barclayscard US – making it difficult to imagine this new team winning great mind- or market-share. This has completely changed with the July announcement that four major credit and debit card issuers are now backing ISIS
, American Express
(this last one being the first one that has joined both Google and ISIS initiatives, making it a numbers’ game).
This major partnership announcement was compounded by another one, at the very beginning of August: C-SAM Wallet Management Platform and SDK would support ISIS Mobile Commerce Platform
. Basically, the C-SAM platform will enable Isis to offer smartphone users a comprehensive mobile wallet for conducting secure near-field-communication (NFC) transactions related to payments, rewards, coupons, tickets, transit and other services.
Isis now has two major revenue streams:
1) From the service it provides to banks to extend their credit card services onto NFC-enabled smartphones
2) From advertising services it provides to retailers via coupons, rewards and loyalty cards.
And that is indeed a major difference with Google Wallet
: The carriers that are part of Isis will charge banks / credit cards for the network and cell phone space used for mobile payments
. Not only the corresponding data charges – as Sprint does in the Google Wallet solution – but additional, or alternative, fees. They are, in fact, charging a ‘toll’ for using their network. This means that the consumer will still have to pay merchant fees and now will also have to pay ISIS carriers when they use NFC payments, because the solution provider is being charged by them. This difference in approach will probably leave Sprint permanently out of the ISIS ‘team’. What will it mean for Sprint?
Furthermore, because the network carriers within Isis will also act as the Trusted Service Manager (a role that First Data is playing in Google Wallet), they will have the key to allow or reject other mobile payment solutions to work on their networks. Will they use this control to ‘ban’ Google Wallet from their networks?
Now Isis just needs to start working on the banks!