For over two years now, conventional wisdom and industry pundits agreed that the general strategy of MasterCard and Visa would attempt to make mobile payments simply another form factor of a credit or debit account. The tactics that these companies would use to accomplish this strategy, however, had been the subject of extensive speculation and conjecture. The recent article in the Wall Street Journal detailing MasterCard’s joint effort with Google and Citi, the tactics of MasterCard became remarkably clearer.
MASTERCARD AND MOBILE
MasterCard’s mobile payments strategy seemed significantly less potent and newsworthy than Visa’s lately. Back in 2009, MasterCard’s Mobile Payments Gateway appeared to be a strong start. It was heralded as a turnkey processing platform designed to allow virtually the entire mobile payments ecosystem–acquirers, issuers, merchants, and mobile network operators–to customize their own mobile solutions based on the infrastructure of MasterCard’s network.
Then on June 3, 2010, MasterCard launched a product called Money Send. This product allows customer’s to send request money via an iPhone app through banks and credit unions. The idea was that users could create a type of bank account linked to an existing MasterCard credit card or checking account. While this product seems like a reflection of the PayPal model, MasterCard does not seems to have a lower cost operational model than PayPal because MC’s Money Send will have to move funds, not just numbers, from one MasterCard account to another.
Absent the announcements, neither MasterCard’s Mobile Payments Gateway nor MoneySend seems to have attracted any significant attention. Although the adoption of these programs are currently unknown, the MasterCard 2009 annual report made little mention of either MoneySend or its Mobile Payments Gateway in financial terms. We are still waiting for MasterCard’s 2010 annual to be released end it will be interesting to see whether or not MasterCard feels comfortable sharing the quantitative results of these programs to its investors.
DOES GOOGLE = EXCITEMENT?
Anything new involving Google is worth noticing. Right? That seems to be the philosophy that MasterCard is following in its upcoming test with Google. In that proposed tests in San Francisco and New York, MasterCard will make its money off of traditional payment interchange. Google apparently makes its money by either managing/selling consumer data to advertisers, or by managing elements of advertising campaigns such as Coupons and rewards programs. It is true that significant revenue can be made by compiling and analyzing consumer data and by managing rewards functionality–the loyalty industry proves that. But, this could also be an attempt to leverage the investment that Google made in its “checkout” service. Lagging far behind its competitors like Amazon.com and Walmart.com, Google checkout is a feature-rich service that just wasn’t able to attract as many merchants as Google had originally hoped. Don’t be surprised if an element of this test between MasterCard, Google, and Citi involves a user interface that is designed and managed by Google.
According to the Wall Street Journal article, the Google/MasterCard test will rely on NFC. If Google is going to use its checkout functionality as the user interface for each of the consumer or the retailer (or both), there are several different ways that communication can be established between the POS and smartphone without using NFC, which would speed up adoption and not require widespread adoption of NFC in POS terminals and consumer SmartPhones. A decent bet would be that Walmart.com, Amazon.com (two retailers that can combine to process 15 million transactions in a single day), and other online retailing powerhouses will find a reason to make an announcement and establish a partner in this arena soon.
MASTERCARD’s STRATEGY: EXCLUDE MNO’s
But the most interesting element of the MasterCard/Google venture is that it seems to intentionally remove the network of the mobile carrier completely. Unlike MasterCard’s earlier Mobile Payments Gateway product, MasterCard seems to want to keep the mobile network operator away from the information flow, and therefore out of the revenue stream of mobile payments transactions. By leveraging NFC (which lets the smartphone speak seamlessly to the POS, and the company that seems to be mentioned in every partnership announced in Mobile Payments, VeriFone, this system will have the ability to manage all transaction data, payment processing, and rewards integration, with out sending a single byte of data through the mobile networks operator. That will make a significant hurdle for Isis, Vodacom, and other mobile providers to participate in the transaction flow, and therefore the future profit centers of mobile commerce.
© 2011 David W. Schropfer
Read copyright notice