Mastercard said its MasterPass service, effectively an app, would let customers pay for their goods without approaching a cashier by instead scanning a bar code and creating a digital receipt on their phone or tablet that can be shown as they exit the store.
It can also be used for easier online payments, allowing customers a “one click” way to pay without the hassle of having to input their credit or debit card details each time.
MasterCard already signed a deal with Capital One, Citi, Bank of America and Key, so that clients of the bank holding company can look forward to easier payment integration.
The program’s advantage is twofold: more digital payments mean more time saved, and the transactions are way safer than credit card purchases. This happens because the payments get superior encryption from the new tokenized technology.
The American company MasterCard said that in early 2016, its devices the MasterPass system will be functional and would be rolled out in Australia and Canada by the end of March. The U.S.-based credit card Company will begin the deployment of the program in the United States, ahead of the UK in the summer and increase its spread to global markets in due time.
MasterCard says Canadian banks are still evaluating the mobile-payments market, which is why none are ready to move forward yet. On the other hand, BMO-Harris Bank, a Chicago-based subsidiary of Bank of Montreal is among the U.S. launch partners.
“It’s started the clock ticking with the banks to think about how are they now going to compete in this new digital space,” said Jason Davies, head of digital payments and labs for MasterCard Canada. “This is where this market is going to be moving to.”
Most common used devices used for this purpose are contactless credit cards, smartwatches or smartphones. MasterCard wants to gain the technological edge, and that is why the corporation gathers as much support as it can. The move is meant to stave off arrivals by smartphone makers such as Apple and Samsung into the transactions market.
Banks and merchants looking to take advantage of the PayPass capabilities can easily do so. Those capabilities include checkout, fraud detection, and authentication services, as well as the ability to handle a purchase made wherever PayPass is already accepted.
“The regular consumer still trusts their financial institution with payments,” said Pablo Cohan, senior business leader of U.S. digital payments for MasterCard. “The issuers or the banks are going to be controlling that experience.”
MasterCard realized that the widespread use of technology, coupled with the increasing development of mobile payments can bring big money to the financial services corporation. Moreover, the company acknowledges that the days of the credit cards are numbered and is taking steps towards adapting to the new realities.
“Consumers have no reason to use their bank app to make a transaction,” said Brendan Miller, principal analyst at analyst firm Forrester. “There has to be some sort of utility there, like I’m going to get some sort of offer, some sort of loyalty (reward), otherwise I just pull out my credit card.”
MasterCard and the banks are also facing the additional obstacle of not being able to offer their tap-and-pay solutions on iPhones. Apple does not yet allow outside developers to access the iPhone’s NFC chip, and it hasn’t announced plans to do so. In Canada, about 40 per cent of smartphone owners use iPhones, according to comScore.
“It’s a big problem,” Miller says.
PayPass will appear as a payment icon on regular and mobile Web sites, similar to Amazon’s one-click button, which makes the act of purchasing goods and services on the phone a lot easier than filling out a bunch of information. After clicking on the icon, consumers need to enter the same password and user name that’s associated with their bank accounts to complete the payment. That’s a boon to smaller merchants looking for an easy way to drive online and mobile transactions.