From card controls to treasury management to new mobile channels, the pace of payments tech innovation-and the number of feisty startups-are accelerating, and MasterCard has opened a new research and development lab in an attempt to make sure it doesn't fall behind the curve.
Led by Garry Lyons, the former CEO of Orbiscom, the new R&D unit, called MasterCard Labs, will include a team of tech engineers that will drive innovation through a cycle that includes conceptualization, proof of concept, pilot and support of commercialization. MasterCard developed inControl in partnership with Orbiscom, and then later purchased the tech firm in late 2008.
The unit's employees will be based in existing facilities in Singapore; Westchester County, NY; and St. Louis-which is home to the firm's global tech and operations. A MasterCard spokesperson says the company is creating a "carved-off function" with a sole mission to drive innovation.
"There are a lot of things going on with payments, which can create a need for a firm to have this type of work," says Gwenn Bezard, research director at Aite, who says the lab is part of an effort to produce the kind of major tech and product breakthrough that's eluded the large card firms in recent years.
"The lab is a way of thinking about customer retention from a product perspective," says Rodney Nelsestuen, a senior research director at TowerGroup. "And with the lab you have a proof of concept, which probably saves [resources] in the long run."
Products such as inControl, PayPass, MoneySend and the Marketplace online mall are part of MasterCard's attempt to build an international network of new payments products and technology. The R&D unit will be responsible for building more products that further this effort. "Our goal is to accelerate the process of turning innovative ideas into real products that can generate real revenue," the MasterCard spokesperson says, noting a particular focus in mobile banking, e-commerce, data security and person-to-person payments.
Innovation has come fast and furious from other corners of the payments industry, with emergence of new networks such as Bling Nation, and the purchase of Revolution Money by American Express. Analysts say MasterCard's lab is likely not a direct response to these developments, or a play aimed at Visa-Bezard says MasterCard does not suffer from an innovation gap against Visa-but rather a strategy to get out in front of innovation, rather than waiting for development elsewhere.
Bezard says he doesn't think the big card firms like Visa and MasterCard are "losing sleep" over ventures like Bling and Revolution Money. But he also says there's a realization at the larger card firms that "they will need to be in the driver's seat, not in the back seat" when developing new technology.
The lab will also work closely with Josh Peirez's innovative products team at MasterCard. In an earlier interview, Peirez told BTN that MasterCard is interested in developing new payments technology in an environment in which banks may lack the IT funds for large scale payments tech projects.
Red Gillen, a senior analyst in Celent's banking group, says MasterCard's challenge beyond developing and testing will be distribution and building a case for adoption among consumers.
"How do you get the product out? Direct to merchant? Or a bank? Or a mobile carrier?" he says. "Also, I think that a quick development cycle isn't necessarily a good thing. It's better to do one thing right that will last over a multi-year cycle."
