When it comes to payments, bank CIOs hear a different tune in each ear: Embrace emerging channels, yet achieve cost certainty. For Josh Peirez, who became MasterCard's first head of innovative platforms about eight months ago, there's opportunity in that tug of war, as the card firm develops or acquires new payments technology.
MasterCard created Peirez's position to provide a special focus on fast emerging payments technology and platforms, including P2P, mobile, iPhones, BlackBerrys and other advancements, such as inControl, that increase user control. Peirez has also served as Mastercard's chief payment system integrity officer and as group executive for global public policy, where he testified against price control legislation and antitrust exemptions to lower costs for payment card acceptance.
BTN: How would you assess the current pace of payments innovation?
Peirez: We're on the upward swing of an exponential development curve that mobile devices and the Internet have allowed. There have been smart phone developments, such as iPhones and Blackberrys, that allow consumers to manage and control their own accounts anywhere at anytime. That has created an environment unlike anything that we've ever seen.
Can you give examples of how MasterCard has engaged this new environment?
We look for revenue potential and if we're able to solve a customer, bank or merchant need. For example, on the commercial side, we developed Payment Gateway, which allows large corporations to be able to settle directly with the suppliers and vendors they use, with a purchase card or through ACH, which allows for straight through processing. And on the consumer side, the acquisition of Orbiscom [and the corresponding development of inControl] allows users to take more control over managing their own finances by setting limits on their credit card spending.
Has use of inControl expanded beyond the RBS pilot?
RBS is running it as a corporate application, allowing corporations to define limits on how cards are used by employees. Citi has also signed on, with a global agreement to cover 17 markets. Citi, which was originally a client of Orbiscom, is using inControl to cover [corporate and commercial] card use in 17 different markets in 17 different currencies. And there are some other institutions that are close to signing or who have signed on, including consumer applications, so there's some momentum there.
How do you find opportunities when most of your bank customers aren't making large IT investments?
Financial institutions have limited budgets for IT development, particularly in the U.S. with all of the regulatory changes that card issuers have had to deal with (such as regulations on credit card practices and the proposed Consumer Financial Protection Agency). Banks have limited capacity to make changes or do creative things to build more business because they are too busy with the new regs. We have made the investments in the new technology so the banks don't have to.
Can you explain that strategy?
An example would be the purchase of Orbiscom. In the past, a bank could have leveraged the Orbiscom capability, but the bank would have had to go through the time and expense of installing it. But we do the heavy lifting for the banks [by buying and integrating Orbiscom's technology]. So It took Citigroup a year to deploy Orbiscom's platform, but after the acquisition, Citi was able to deploy inControl in 45 days.
But doesn't MasterCard take on the expense of development, which is then passed along to banks?
Because we have the scale of providing the functionality to [many banks], the cost is spread out over a number of players, so there's no direct pass-along of the cost of deployment. The banks just pay for the services as they're used, and can charge their consumers for use. And secondly, there's a very big distinction between upfront investment in a tech deployment, where you don't know what the uptake will be and without knowing the payback.
What's your current mobile payments strategy?
Mobile is a tremendous opportunity, and we look at it in three areas: We want to make sure our existing products work well in the mobile channel. So people can use a MasterCard to make purchases in the mobile channel, iPhone or other system. We also want to develop products for the new types of transactions that are enabled by mobile devices, such as application downloads, or virtual currency purchases for avatars or online gamers. And we are also tapping those kinds of small dollar transactions that are occurring at a tremendous clip. And we want to ensure we are providing services that enhance user experience, such as providing ATM locators.
Are you worried security fears will hamper mobile adoption?
In the U.S., any MasterCard holder, whether it's debit, credit card or prepaid card, has zero liability for unwarranted purchases. That includes purchases through mobile channels. So when people talk about security in mobile channels, my argument for consumers is to not give out any other [non card] information. With zero liability, you'll have zero financial loss. When we enable NFC payments, the PayPass application is stored in a secure environment on the phone. So it's as secure as the information residing on a credit card.