Tapping the future
IN DEPTH: Attending the European Business Summit 2015 in Brussels, Portal sat down with MasterCard’s international markets president, Ann Cairns, who outlined the move to contactless and mobile payments.
Europe is tapping into the future of payment technology as MasterCard seeks to help the continent establish contactless payment as the standard by 2020. In the UK, contactless transactions rose by 150% in the latter six months of 2014, a trend that shows no signs of slowing down, whilst in Denmark, Copenhagen legislation has been announced to allow selected retailers to refuse cash payments. Wider afield, less than half of transactions in Canada are now made using cash, whereas in India, the central bank has declared it will allow ‘tap & pay’ technology using mobile phones and the State Bank of India has announced the biggest ever contactless card rollout.
In May, the European Business Summit 2015 saw over 2,300 delegates discuss a digital European economy and realising innovation in the mobile technology age. Portal travelled to Brussels to attend the two-day conference, the largest independent forum for business leaders, academics, researchers and policy makers, which included a session entitled ‘Innovation – How we do research to innovate in the digital era’.
Portal sat down with Ann Cairns, president for international markets at MasterCard, following her address to delegates, where she discussed the rise of contactless payments, the cultural differences that are influencing the rate of uptake of such payment methods, and how the company is looking to work with other technical innovators to realise new developments.
Ann Cairns © MasterCard
Mobile payments
On the sidelines of the conference, Cairns began by outlining that MasterCard is concentrating its efforts on ensuring safe mobile payments through tokenisation: “We are very aware of cybersecurity, and we invest in many different tools for protection. There isn’t one big threat, but we are constantly focused on ensuring there is secure access to the network.
“Recently we have defined standards for tokenisation in the digital world, standards that are the basis for Apple Pay and that are embedded into the Apple iPhone, as we have specified that we do not want confidential information moving around on the internet.
“We are focusing specifically on tokenisation – moving that token from place to place and having that token unlocked in specific places, the same way it works using a card machine in a shop. Through this mechanism, we are trying to minimise the amount of information that is carried across the internet from one place to another.
“More generally, when a transaction takes place, it is only the card number that we look at, and that is the data that we are trying to protect in the new world; we don’t hold any details or move any details around other than the card number. This protects the privacy of the individual.
“We often know trends and government statistics ahead of the government. If you want to know how consumer confidence is, there are sites that can tell you what people have been browsing, but our data shows what was actually bought
on a macro rather than individual level. This provides a lot of good analytical information without doing anything that would be detrimental to the individual; the only data that we have is Big Data.”
On the move
Cairns commented that there is a real enthusiasm from consumers about using contactless payments, particularly in Scandinavia: “There is a general push from consumers, though that varies across Europe. In Scandinavia, they went towards electronic payments very quickly, whilst a couple of weeks ago the UK passed the tipping point between electronic and cash, though it differs throughout the country. Denmark is saying that it is going to work with retailers to go almost totally electronic, but if you consider Germany, they are still very high cash users.”
The transport system is one way of encouraging consumers to use electronic payments more often in everyday life: “For a while now, all London buses have been completely contactless, allowing users to tap their card to pay for their journey when they get on a bus. A few months ago, the whole of the London Underground went contactless, and the take-up was tremendous, growing at a double-digit rate every day; there are now an estimated one million taps a day in London.
“Once we embark on something that affects everybody’s lives on a day-to-day basis, it becomes familiar and people start tapping to get their coffee from Starbucks, etc. We are also working with different merchants and airlines to create co-branded opportunities and to give people access to electronic payments that way.
“Across our network, seven out of ten transactions are now contactless, and Australia has actually raised the limit to $100 (~€70). In the UK it is currently at £20 (~€28), but it’s going to £30. That means you can buy a decent basket of groceries using a contactless payment method in Australia, and it is these kinds of changes that drive adoption. They seem quite simple things, but it’s really just ease of use.”
Cultural differences
Despite the substantial uptake of electronic payments, the cultural differences between countries regarding the place of cash in society mean acceptance varies between different territories.
As Cairns outlined, tackling financial inclusion is a further barrier: “Our core infrastructure works the same way across the world, but how we position ourselves in different markets takes into account what consumers want to do in those markets, as well as what other partners in those markets are doing. Some governments are very forward-looking in terms of driving cash out of their economies, whilst others take more of a backseat approach. We are trying to work with the public and private sectors to examine the benefits of going electronic, discussing transparency and safety.
“Financial inclusion is not just a problem in emerging markets but also across Europe. There are over 100 million Europeans who are financially excluded. This can be worse than being financially excluded in Africa, where at least there may be an informal barter system in place. If you want to buy something online but do not have any access to electronic products, this is not a good position to be in in Europe today.
“Such environments mean consumers often end up paying more money for exactly the same item. This is sort of a double jeopardy in that the poor are being charged more because they do not have access to new mechanisms. A way of addressing this is through prepaid cards, which at least give people the ability to go online.”
Co-existence
Despite the trend towards mobile payments, Cairns said that plastic cards, and even cash, will not suddenly disappear from the pockets of consumers.
“85% of the world’s consumer payments are cash, and in several countries, that figure rises above 90%; for example it is around 91-92% in Russia. Cash is going to co-exist for quite a long time, but countries will reach a tipping point,” she said.
“Plastic cards will also co-exist. In the developed world, we have a lot of ATMs and point of sale machines, as well as parking meters and vending machines, which take plastic; our infrastructure is very well developed to work with a card.
“In some of the developing markets, they don’t have that infrastructure, and that’s why you see African countries effectively leapfrogging and going directly to mobile payments. People are going to want to simultaneously have the same experience, whether they’re buying online, through their telephone or in a mall; they just want something that is going to work for them.
“We are effectively designing a one-click checkout, something that has exactly the same consumer experience. When we buy a product, we want the payment to happen seamlessly, safely in the background and in a way that is chosen. I want a good buying experience and a choice.”
Innovation
To realise new technology, MasterCard is playing its role in open innovation, collaborating with other companies and opening up its application program interfaces (API) to help realise new app developments.
“We are trying to build a common experience across the world and ensure interoperability,” Cairns told Portal. “Europe is a place where if the right decisions are made, you allow innovation to flourish and enable effective cross-border shopping. This is a good move and is what consumers will expect in the future.
“In our labs in Dublin, we incubate and work with start-ups through partnership agreements; we also buy companies and undertake capital investment. If the companies we work with can get access to Horizon 2020 funding in addition to working with us, we are very happy to be part of that ecosystem that encourages more innovation, because one company cannot do it alone.
“Working in collaboration with lots of different partners, the pace of our growth is very fast. We will have to buy as well as build, and many of the good ideas can come from smaller companies. We are opening up our infrastructure through open APIs. If you consider development on the internet, people are looking for zero-cost models, and we are giving them that platform.
“We are holding ‘hackathons’ across the world to encourage the development community, and we believe this is the way forward in this space. Once you start getting your name and your message out there, there is quite a lot of enthusiasm.”
Realising potential
MasterCard is clearly leading the way in regards to moving to contactless and mobile payment technology, recognising the methods that will encourage consumers and businesses to increase its uptake. Yet the multinational is also identifying the wishes of local consumers as to how, when and at what speed these new processes should be implemented.
In addition, the company is working with tomorrow’s digital and app innovators to realise the next technological breakthroughs. By incubating and working with start-ups in Europe, as well as opening up APIs, MasterCard has the potential to help the continent respond to international competition.
If Horizon 2020 is to help the EU maintain an innovative edge in tomorrow’s payment technology, the European Commission needs to ensure that adequate and targeted funding is made available to projects supporting this breakthrough. Such efforts will ensure that consumers really do tap into the benefits of the multibillion R&I framework programme.
Ann Cairns
This article is also published in the seventh edition of Portal, which is now available to read online.
