Payment company executive sees mobile technology as opportunity to improve user experiences and security.
James Anderson, senior vice president and head of the mobile products division at MasterCard, is vice chair of the Near Field Communication Forum, an industry group that develops specs to ensure interoperability among devices and services. (Flickr photo)
James Anderson is senior vice president and head of the mobile products division at MasterCard. Over time, the well-known payment industry company has deployed new technology to keep pace, moving from manually operated machines and carbon slips to telecommunications-based point-of-sale transaction processing and rolling out contactless payment technology with chip-level security.
Driven by smartphone and tablet adoption, a growing number of the 23 billion transactions MasterCard processes annually through its worldwide network are mobile. In anticipation of growing demand for m-commerce, the company has been working on mobile for more than a decade, pursuing secure common platforms that will enable payments on multiple mobile devices.
Anderson sat down recently to talk about how he sees mobile technologies changing people’s lives.
How does one of the world’s oldest credit card companies keep pace with the rapidly changing mobile world?
We’ve been working on mobile for a while — 10 years or more — and what we’re trying to do is leverage the fact that consumers see the mobile device as incredibly important to them and they also see payment as incredibly important. We want to bring those two together, to deliver great user experiences and obviously grow our business.
Mobile is just a very common phenomenon now in many parts of the world. We’re seeing merchants who are getting 10, maybe 15 percent of their transactions coming off mobile devices.
Everybody talks about multiple connected devices and I subscribe to that theory. I just look at the user cases that consumers have and even the pocket sizes. You know, there’s small pockets and there’s big pockets and people want screens that fit into both of them. I just see the type of behavior people engage in is different and the type of screen size that they need is therefore different. So I think that at least in the developed markets we’re going to have the luxury of multiple connective devices to get our tasks done.
With the Google Wallet smartphone app installed, shoppers with NFC-enabled phones can pay by waving their phone near a NFC terminal and entering a PIN. (Flickr photo)
In emerging markets, there may not be the “luxury” of multiple devices, but is there demand for mobile payments?
In the emerging markets, we obviously have card products, but we do see the ability to leverage a mobile device, which [has] penetrated extremely successfully into emerging markets. We do see the ability to make that into a payment device as an extremely compelling way for people to first interact with our network. So we’ve launched different programs. We have a partner program where a number of vendors have come together and are implementing MasterCard products targeted at emerging markets.
I think that’s going to be a big phenomenon starting in 2012 and going on for the next couple of years. As we see initial versions of mobile money in emerging markets really blossom into full-functioning payment solutions for consumers, we think there’s a great story there. This really is a development activity for markets that can eliminate a lot of friction from their economies by leveraging the convenience of electronic payments.
What security issues arise with more consumers going mobile?
Security is part of what we design into all of our products and all our services, and it’s the same for mobile as it is with [a physical] card. Because of the scale in which we operate, we really try to build on common platforms in order to get a big, mass adoption. For example, we built PayPass [MasterCard and Intel are collaborating to improve security and the consumer experience on a variety of emerging payment technologies, including PayPass], which is our contactless technology, on top of our chip technology, and that’s a very secure-by-design technology. We actually have a secure element which is a chip that’s actually temper resistant to product the payment application that the customer or the bank has put on there.
Technology is absolutely critical. What’s exciting is we can actually communicate with the mobile device because it is an interacting device. We can actually give the consumer evidence of the security. We can really reinforce the value of the product to them through different things and that’s what we’ve built into a lot of our products.
What do you see as the next significant technological step for the payment industry?
The nature of payments is it tends to move a little slower than other technology trends. I think the big trend in 2012 is probably something that we started working on in 2006, which is NFC. Near Field Communications is a radio technology for short-range communication. We run payments over it but it can run many other services, and after running a lot of investments by a lot of people it seems like this year we’re going to see a lot of NFC devices and we think that’s going to be in a lot of NFC services, one of which is payment. We think it’s going to be very compelling for consumers. [Anderson is vice chair of the Near Field Communication Forum, an industry group that, among other things, develops specifications for NFC technology that ensure interoperability among devices and services.]
MasterCard PayPass replaces the magnetic strip on credit cards with a microchip and can be tapped on a point-of-sale terminal rather than swiped — the technology can be deployed in phones, key fobs and plastic tags. (Flickr photo)
How do you see mobile changing the shopping experience?
There’s a tremendous opportunity to use mobile in retail. Look at the retail experience. On the Internet now you can find out product availability instantly. You go to Zappos because you want to find shoes. You don’t ask somebody if there is a 9 1/2 and 20 minutes later they get back to you. Instantly the webpage refreshes and tells you whether they’ve got availability in 9 1/2s.
That’s not available in the physical world today even though somewhere there’s a system that knows whether they have 9 1/2s in the stockroom. Bringing that out and exposing that to the consumer, in my mind can really reinvent the brick-and-mortar retail experience. It has a lot of legacy infrastructure that makes it hard, but the opportunity is profound to make the retail shopping experience better, and the only really viable device for doing with the consumer is a mobile phone.
What are roadblocks to wider adoption for mobile payments?
We’re the payment piece at the end of a process. Our job is to make the payment piece almost disappear and be frictionless for our retail customers — to deliver a better user experience. So last year we launched Google Wallet in conjunction with Google and Sprint. So, that’s the first wave.
For us at MasterCard, scale really matters. We have 1.8 billion cards. So we deal in very, very large numbers of cards and customers, and transactions. And so, the mobile team is working on how we scale up these value propositions. We’ve done a lot of work in terms of the underlying technology to make it open and make it useable by anybody. We think we’ve created the right foundations. We’ve done a lot of partnerships with people like Google to get the initial deployments and now we’re looking to scale it out so we can really get mass market. Handsets are the critical piece of the puzzle. If somebody can’t get the handset with the right capabilities then however great our product is they’re not going to use it.
Where does the cloud fit in?
There’s a couple miracles of modern life, you know, one of which is that I get off a plane someplace, I take out my MasterCard and I check into a hotel. And they let me in. And the only reason they let me in is because I’ve got this small piece of plastic. And why does that work? It works because of the power of the cloud. That merchant is able to essentially connect back to the issuing bank 4,000 miles away and basically address the risk of the fact that I’m walking into the hotel and they need to get paid. That’s basically enabled by the MasterCard cloud if you want to use that terminology. So, we’re big believers in a cloud that’s going to be applied everywhere. Clearly, the idea of remote resources in a server accessible anywhere is an amazing, new powerful concept. MasterCard has been doing it for 30 years and we’re excited to be part of the future, and we’ll take care of the payments.