Speaking at the Barclays Emerging Payments Forum on Tuesday (March 15), MasterCard CEO Ajay Banga told attendees that MasterCard has no problem with the many mobile wallets today, as long as they don’t cross the line and try to change key parts of payments infrastructure.
Banga said that current mobile wallets are supporting MC’s goal of converting cash and checks into digital transactions. As long as they keep doing that, Banga will be happy to play along. “I will support everything so long as it protects the ecosystem and does not damage the relationship between merchants, banks, these (mobile wallet) players and us. The moment it changes that and it starts playing with the data, then I’ve got a problem. If it’s basically a passthrough and it’s not affecting the ecosystem and it’s actually attacking cash, I’m all for it. If you do things that make it complicated for the ecosystem to work cleanly, I’m not going to be supportive.”
In other words, send MC more business and they are your friend. Try to intercept that business and you have made a new enemy.
MasterCard’s CEO stressed that he has no desire to be in the mobile wallet business. “I don’t want to be in the individual wallet business. I want to be the provider of infrastructure. Most young people would still prefer to get their payments from a bank—which is interesting—provided the bank gives it to them in a seamless, cool, easy way,” Banga said. “But cool alone will not cut it. It’s going to have feature functionality, real time alerts and so on and so forth, (things) that make it useful for them.”
But, the cardbrand stresses, it must never be invisible to the merchant the type of card that is being used for the purchase.
“The digital wallet operator rule that we’ve put out–which haven’t yet come out from the other networks but we did–my view is the merchant must know which card was used to purchase the product. Was it an American Express Black card, was it a Citibank American Airlines Card, was it a Chase Sapphire card?” he said. “It’s not about the brand. (Merchants) should know which card was used and which value is coming to them for what kind of transaction,” he said.
That’s where the CEO cautioned vendors against getting too creative and complicated within mobile wallets. And he pointedly referenced some of PayPal’s efforts.
“The data should flow cleanly back and forth. That enables the issuer, it enables the merchant, it enables the network to control fraud and do things with it. The moment you create a staged wallet, where you create a mix of different cards funding as well as ACH funding and then you swizzle it together to play essentially the arbitrage game and then use that arbitrage to try and undersell us or cross sell us into a merchant place, I don’t particularly like it,” he said. “Which part of that is complicated? You’re using my rails to play games with my client and me, that’s the problem. I’ve said that to PayPal, not once but many times.”
Elaborating on PayPal, Banga said “now their model is their model. They’re also very large customer, they’re also growing very handsomely and, by the way, you know a large part of their funding in their wallet comes from cards—55 percent plus. Their steering to ACH is still irritating, even though that has subsequently reduced.”
Banga said that PalPal CEO Dan Schulman has been “making comments all about not necessarily steering but allowing consumers to make their own choices. And that if consumers make a choice to go to ACH, then we have got a competitive issue of trying to offer a product that’s as competitive, that’s a fair level playing field. But you can steer them to ACH and put a credit card on the back and the guy doesn’t have a balance in ACH to use the credit card so you don’t have a credit risk. That game doesn’t work. So that commentary has been had clearly with PayPal over the years. It’s an ongoing dialogue and until and unless they change that staged wallet, they will pay the stage wallet fine. They will. When they change that and they become a passthrough wallet like Apple Pay or Samsung Pay or others—Softcard, who had a unfortunate name but they changed to Softcard—those guys had a passthrough wallet. So that’s all. A passthrough wallet to me is the merchant and consumer knowing exactly which card is being used for what purpose and you can do much better with fraud, you can do much better with chargebacks and disputes and it’s another way for you to handle a chargeback or a dispute, with a mixed funding source.”
Banga also expressed frustration with less-than-optimal customer and merchant interactions as the U.S. gets used to EMV, including the temporary EMV signature. There is the actual time delay and then there is the shopper perception of time delay.
“If it’s a credit card, there’s not much difference. I use my credit card all the time with the chip thing here. It’s the same thing, other than the fact the damn thing lies in there. But I’m used to doing that because I travel around and I use it there. The debit card is different. If you’re using PIN debit, the PIN goes through the issuer to be validated and comes back. There is an extra layer of security happening along with the crypto code that goes along, but that just causes that extra tiny amount of time. On the other hand, if you’re using a signature debit, if you think of how your experience works at CVS or Walgreens or one of these stores, it will ask you ‘Are you going to go debit or credit?’ If you go with credit, but it’s actually signature debit? If you do that, it will ask you ‘Would you like a chargeback or not?’ And you’re going to answer that, meanwhile the bloody button doesn’t work so you pick out the black thing and you punch it over there and then that happens. And then once you’ve done that, it says ‘Would you like some money back as a cash back?’ and you say no, just approve this thing and then it goes through. That just adds to floor time. I believe, over a period of time, this will get resolved but you’re going to have to give it some time.”