MasterCard continues to invest in the future of digital wallets

MasterCard recently introduced MasterPass at the Mobile World Congress. In the last few weeks, MasterCard has sought to clarify the relationship between MasterPass and the omnichannel payments platform announced in February.

MasterPass is a range of services built atop the omnichannel payments platform, including a turnkey white label solution and a robust API that can be embedded into other applications designed for wallet issuers to help them extend and enhance their on consumer relationships. In other words, MasterPass does all the heavy lifting, leaving Banks to extend their traditional issuing role to include a MasterCard branded digital wallet. Banks known to be working with MaterCard on MasterPass include Citi, Bank of Montreal and Handelsbanken.

MasterPass addresses the needs of merchants and acquirers by including a range of checkout services that can be used to enable faster and safer checkouts online, at the register or elsewhere in the store. MasterPass supports a broad array of payment authentication techniques, including NFC, QR codes, tags and mobile devices.

For example, MasterCard is partnering with VeriFone to enable MasterPass services at the point-of- sale, both at the checkout counter and in the aisle, enabling shoppers to access their MasterPass wallet accounts from mobile devices to pay for purchases.

Although most banks have historically eschewed digital wallets in favour of accounts, I believe that the issuing and acquiring of [open loop] digital wallets will become as common place as issuing and acquiring MasterCard or Visa bank cards. The digital wallet platforms being developed by MasterCard and Visa will take advantage of the broad card switching and processing infrastructure already in place around the world.

What neither MasterCard’s MasterPass nor Visa’s appear to be addressing adequately is the complete absence of issuing and acquiring infrastructure in developing and emerging markets and the rapid ascendancy of mobile money issuing and acquiring platforms and solutions. Right now, the scalability of most mobile money solutions if being impeded by the lack of mobile money clearing houses and the absence of common mobile money standards… but regulators in developing countries are starting to demand order and interoperability between mobile money solutions, so this limitation is expected to be short lived.

Thus, for emerging markets banks a two pronged strategy embracing both 4 party (open loop) mobile issuing and acquiring solutions as well as 3 party (mobile money) solutions is essential as the digital wallet solutions from MasterCard and Visa have no assurance of success in Africa, once merchants and consumers become accustomed to paying and being paid using mobile money. Furthermore, the arrival of NFC capable handsets in developing markets will impose a common communication protocol for effecting payments using mobile money and may catalyse the development of a common mobile money standard (including things such as routing, settlement, interchange, etc.)… further entrenching these kinds of solutions in the markets where they are already dominant.