By adaptive - September 1st, 2015
Technology is changing the way consumers pay for goods and services, while offering them more choices and convenience than ever before. That has created a challenging and competitive environment for incumbent payment systems; they must adapt and change technologically or risk becoming obsolete.
MasterCard’s James Anders, group executive of emerging payments, discussed the rapidly changing landscape in payments in an exclusive interview with Open Mobile Media’s Robert Gray.
OMM: What are the foremost emerging payment methods that consumers will be using soon and which do you think will catch on?
Anderson: Our approach has been to make sure we can support the main ways consumers pay today with devices they have strong affection for. There are two use cases, at the point of sale, and, more generically, remote payments--or those not at point of sale.
For the last 10 years we have been investing in contactless for the method at point of sale. We continue to see traction in merchant adoption in contactless. And the news around digital players adopting contactless has been of great value.
For remote payments we have a solution payment method, DRSP (digital secure remote payments), which is like a chip card transaction but instead of a chip card and terminal it’s between a device like a phone and a merchant’s site or application.
We see growing omni-channel demand from merchants. They want payments and not to be constrained to a certain methodology only on a card, they want it however (and wherever) they interact with customers. It allows them to engage in an app and still get the benefits of secure MasterCard payments. It’s embedded in Apple Pay for in-app payments.
Apple has been helpful as a catalyzing factor on the market, they are extremely important. We were excited to work with them and have their endorsement for MasterCard as a way of doing payments.
OMM: How do you see MasterCard’s competition changing in the coming years? Will you be competing with tech giants including Apple or Google?
Anderson: We’ve always had traditional competitors and now non-traditional ones, who are also partners. If you go back a couple of years there was more concern about how digital payments would work and whether they would work or need a whole new structure.
People can take an existing MasterCard account and put it on an iPhone or other device and they can spend from a MasterCard account on the device. I see that continuing for quite a while; the complements of our companies are stronger than either of us alone.
We expect to have long and fruitful relationships with digital players, but only as long as we innovate.
OMM: What do you see as the most pressing challenge facing the traditional banking systems in the US?
Anderson: Banks have exciting opportunities in digital, a new way of interacting with consumers--online and mobile banking—and several banks are saying mobile is the most-used channel for interacting with consumers. We view digital payments as an extension of that conversation banks are having with consumers.
Banks have always been trusted entities to get payment services from and digital players have concluded they want to leverage the bank-customer relationship and not leverage a new one.
OMM: From your point of view, how will consumers be paying in a decade or two? Do you think cash or plastic will ever truly go away?
Anderson: If you look at the history of payment over the past 400-500 years, almost every payment method has been additive and few go away completely, though they get substituted and get less relevant. Cards substituted for paper-based (transactions) over the past 40 years and we expect digital to substitute cards and cash quite aggressively. Cash will always have a place, some transaction types are easier and it’s the universal currency of the realm. There will be use cases where plastic is suitable and consumers embrace it and use cases where mobile or cash use cases pick up.
One of our strengths is we have a modern network of 40 million locations that accept our product. It’s not trivial to reinstruct 40 million locations to take another method, it never happens over night. If you look at the affection and pull that mobile devices have for consumers,
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