Card Networks Take On Plastic With Mobile Platforms

Andrew R. Johnson
February 25, 2013

The world’s largest payments networks are angling to capture more electronic transactions by eliminating plastic from the equation.

Visa Inc. and MasterCard Inc.  on Monday unveiled industry partnerships and technology systems intended to make it easier for consumers to make purchases online, on mobile devices and in physical stores without having to pull out a credit or debit card.

MasterCard said its new MasterPass platform will allow cardholders to store their card information in a single software program that can be used to make payments through merchants who sign up for their service. Consumers can load information for credit and debit cards from competing brands—Visa, American Express Co. and Discover Financial Services —and not just those carrying MasterCard’s logo. The software program will be accessible on smartphones, tablet computers and other devices.

The Purchase, N.Y., company announced MasterPass at the Mobile World Congress trade show in Barcelona, Spain. Separately, Visa unveiled partnerships with mobile-phone manufacturer Samsung Electronics Co. Ltd. and point-of-sale equipment maker Roam to advance use of its mobile-payments technology.

The payment networks have long set their sights on eliminating cash to capture more transactions over their processing networks.

Now they are increasing their focus on technology consumers can use to make purchases by simply entering a password or other easy-to-remember information on an e-commerce website, or by tapping a smartphone against a merchant payment terminal instead of swiping a physical card. When paired with special retailer deals and other consumer incentives, such services could increase transaction volume and provide new revenue streams for the payment networks, banks and merchants, analysts say.

MasterCard’s MasterPass is one of a growing number of applications analysts have dubbed “digital wallets” that allow consumers to store multiple accounts in a single program. Visa in November said its own service,, has attracted more than 50 banks that have agreed to make it available to their customers, and companies including Google Inc. and eBay Inc.’s PayPal also have their own programs.

But payment networks and technology companies face an uphill battle in encouraging consumers to adopt such services. In the U.S., consumers have been slow to adopt mobile-payments products that enable transactions by tapping a phone instead of swiping a piece of plastic.

That is partly due to there being few phones equipped with the necessary technology, slow adoption by merchants and the fact that swiping a physical card is easy, analysts say.

“Regardless of how advanced a technology is, if there is no merchant adoption, then there will be no consumer adoption and vice versa,” Sanjay Sakhrani, an analyst with KBW, wrote in a research note this month. But the intense focus on digital wallets by traditional card companies and new entrants “is an indicator of the…inevitability of mobile payments.”

Visa said Friday it created a program that will allow mobile-phone manufacturers, point-of-sale terminal makers and other companies to more quickly certify their products under the card company’s security standards.


“Visa does not want to be the bottleneck” that slows down the introduction of new payments technologies, said Bill Gajda, head of global mobile products for Visa.

On Monday, Visa said it is working with Samsung, which is planning to equip its new mobile devices with a Visa technology called payWave. As part of the deal, banks will also be able to securely load their customers’ card account information into computer chips located in the handsets.

Visa is also working with Roam, which is part of Ingenico SA. Roam makes mobile credit-card readers that have grown in popularity among small merchants. Visa said it will promote use of Roam’s devices among merchants to “displace the use of cash globally.”

For MasterCard, its MasterPass platform is an “opportunity to get at the 85%” of global transactions that are paid for with cash and checks, said Ed McLaughlin, the company’s chief emerging-payments officer.

While some transactions made with MasterPass would have otherwise traveled over MasterCard’s processing network via use of a plastic card, Mr. McLaughlin said the service can help improve the shopping experience for consumers, potentially increasing overall use.

“We see this as another channel of transactions for MasterCard,” Mr. McLaughlin said in an interview.

MasterPass includes technology merchants can use to accept payments by tapping mobile phones equipped with technology called near-field communication, or NFC, against a checkout terminal; by scanning digital barcodes and other methods.

To help spur adoption, MasterCard struck a deal with VeriFone Systems Inc., a maker of payment terminals that will integrate MasterPass in mobile equipment that retailers can use to help customers check out while standing in line or browsing aisles in stores.

It also is working with mFoundry Inc., a developer of mobile-banking apps, to equip its apps with MasterPass, making it available to the vendor’s nearly 900 bank clients.

To make a purchase on a website, a MasterPass user would enter a password on the checkout page of a merchant who has installed the service as a payment option instead of typing in their card number, security code and other information that experts say slows down e-commerce transactions.

MasterCard says the service will also be available in physical stores. For example, a consumer could use their mobile phone to order a product by snapping a digital barcode and have the item shipped to their house, Mr. McLaughlin said.

Banks including Fifth Third Bancorp, Bank of Montreal and others have signed on to offer the service. Merchants including AMR Corp.’s American Airlines and have agreed to accept MasterPass as a payment option.

MasterCard is rolling out the service in stages. It plans to make it available to U.S. consumers this spring.