In the UK, we’ve been punching in pin numbers when using credit and debit cards for so long now that signing to make a payment seems unusual.
All that may be about to change. According to a new report by the Aite Group, increased levels of card fraud will see 70% of credit cards in the US shifting to chip-and-pin - or EMV as it’s more formally known - by next year.
EMV is named after developers Europay, MasterCard and Visa and at this week's Credit Suisse 3rd Annual Future of Payments and Commerce Conference in San Francisco, Mario Shiliashki, Group Head of US Emerging Payments at MasterCard, emphasised the importance of this transition as digital commerce takes a hold:
One of the things that we stand for is safety and security. The trust that we have in system, the trust that we have in our brand is built on that. For that to continue and to enhance, we need to continue to build the safety and security of the network of transactions and everything that's attached to them.
Moving to EMV in the US is one of those critical milestones and on the path to better safety and security. The US is the only significant market that is still reliant on the mag stripe.
One mechanism for enhancing security is tokenisation and MasterCard's digital ambitions mean investing in this technology:
In the digital world, in the online world, one of the bigger Achilles Heels has been having to store your credentials, your card number and credentials across multiple servers, across multiple players. That of course exposes us, merchants, consumers to fraud.
Ultimately the best way to solve fraud is to remove that information from the processor's hands or make it completely unusable. One of the ways to do that is tokenization. So, what a token does is it basically acts as a certificate for the card number that you have. It replaces that card number, and so rather than storing your actual card number, 16-digit card number, it will store a token that is linked to that number.
That then allows us to not just have better security for us, but also allows us to segment and block transactions that are away from a particular device or particular environment that token was meant to be. So, let's say you have a token for e-commerce transactions only that is stolen, and is used offline at a physical point of sale, we can take that and block it much quicker than just the actual physical PIN number would use.
On top of that, to digitize that token, we can attach a pictogram or a key to that token that makes it even more secure, so the equivalent to an EMV transaction offline in the online world.
We are building our MasterCard Digital Enablement system as we call it. And through that, we can, on behalf of our issuers and merchants, tokenize and digitize those transactions. If they choose to do that through us of course that's a revenue opportunity there, but generally again driving more transactions through the network that are much safer.
Cash to digital
The world is changing, argues Shiliashki:
As we think about in general the commerce space, we see a real transition right now from physical to digital. We see what we call a convergence between physical and digital world, where more and more people are transacting in different ways, merchants are connecting with their customers in different ways.
What we see is a new set of transactions that are happening, that don't necessarily fit within the construct of even five, ten years ago. If you think about how we transact, but beyond transaction, how we talk to each other, how we connect with merchants, how we travel, how we check-in to the hotel, how we check-in at the airport, all these experiences are very different today than they were even a short five years ago. Optimizing our network to harness the power of our network and to drive these new experiences is really where our focus is.
MasterCard’s strategy for addressing what it calls emerging payments is a three step program:
One significant Mastercard digital initiative is its MasterPass offering:
One is optimizing our network and making sure that the platforms we provide to our customers, both traditional and non-traditional are as integrated into their solutions and as robust and flexible and scalable as we can make them. We have a good start there.
The second piece is then building the product on top of these platforms. They can provide both merchants and consumers, our traditional and non-traditional customers the ability to build their businesses on top of our platforms and on top of our products, and drive innovation that way.
The third one is working with traditional and non-traditional partners from telcos to handset manufacturers, from digital giants to start-ups to independent developers and helping them drive innovation through our products and on top of our platforms.
MasterPass is our digital platform for wallet services. We are actively driving that into the market. Right now we are in eight markets and over 40,000 merchants across those markets. We have a pipeline of many additional markets and many additional merchants. Ultimately, the goal is to be everywhere MasterCard is, and our goal of about 75% of all of the [Gross Dollar Volume] coverage in the next couple of years.
Those are aggressive targets, admits Shiliashki, backed up by additional functionality enhancements, including later this summer the ability to embed MasterPass in a mobile app:
An interesting statistic came out earlier on recently that over 80% of all browsing on mobile devices is in apps in mobile browsers. The ability to embed our products and particularly MasterPass in apps is one key for us. So, later this summer we will have that live.
Overall, MasterCard has a clear goal: converting cash to digital. Shiliashki concludes:
Today, 85% of the world's transactions are still in cash. Driving that to digital is one of our big opportunities, and opportunities ahead of the entire industry, and so that is certainly what we are aiming at doing with all of the things we are doing in digital and in emerging payments and across MasterCard.
Whether we then drive more spend for merchants? We certainly would like to believe that that's the case, that we can drive new transactions by making things safer and more secure and with a lot less friction and much more convenience for the consumers and the merchants. That is the longer term play, right?