Why Mastercard's mixing 'at home enrollment' and contactless

As the U.S. plays catch-up in contactless card adoption and biometric cards gain momentum, Mastercard senses an opportunity in the convergence.

Combined with the "war on cash" by retailers and governments, it adds another incentive for rapid contactless adoption.

“The big push is go contactless and we’re perfecting" at-home biometric enrollment, stated Bob Reany, executive vice president of identity solutions at Mastercard.

Mastercard is not alone. JPMorgan Chase & Co. recently announced it would roll out contactless chip cards for all of its new and replacement Visa credit cards in the first half of 2019, followed by debit cards later that year.

The moves signal a shift in the U.S. market where some were predicting contactless cards would struggle to achieve scale. As one of the largest card issuers, Chase’s move is a boost for the technology’s U.S. adoption. In contrast, contactless adoption in other countries has been massive, with the U.K. just reaching the 50 percent market share level of in-store transactions and Australia having a 92 percent contactless penetration level in its market.

Similarly, biometric card pilots continue to be announced or launched seemingly almost every quarter with Mastercard at the heart of many of them. In 2017, the company unveiled its next-generation biometric card when it concluded two separate trials with Pick n Pay, a leading supermarket retailer in South Africa, and Absa Bank, a subsidiary of Barclays Africa.

Mastercard will also test a biometric contactless card with Intesa Sanpaolo. The pilot is planned for 16 weeks in Rome, Turin and Milan, Italy and will leverage a biometric sensor from Sweden-based Fingerprints AB on Gemalto supplied cards with Zwipe technology — all enabled to run on the Mastercard network.

As the world readily adopts contactless and banks test biometrics in preparation for a global push, the real question is where does it leave cash at the checkout lane?

While merchants such as Starbucks and Shake Shack explore going “cashless,” the reality is that as consumers adopt contactless cards, cash tends to fall to the wayside. In the U.K.’s meteoric adoption of contactless cards, consumers in that nation have readily dropped their use of cash. In a new study by the industry group UK Finance, it was found that debit card usage exceeded cash usage for the first time in 2017. A major driver of debit card being favored is the fact that 78 percent of U.K. debit cards in 2017 were contactless enabled.

“Contactless cards are a great way to drive cash out, especially for lower-value transactions. Both consumers and merchants like the speed, and unlike mobile wallets, the change in customer behavior is minimal — they are still using a card, just now tapping rather than inserting" or swiping, said Zilvinas Bareisis, a senior analyst at Celent.

While the Intesa Sanpaolo pilot is not using Mastercard’s home enrollment kit that the company launched in May. Instead, an in-branch biometric enrollment is being deployed. But that’s not to say any future wide-scale rollout won’t use at home enrollment. Given the current state of consumer privacy rights and declining branch visits, it’s the natural next step in biometric adoption.

“Remote enrollment doesn’t push for a central depository of biometrics. It keeps the biometric in control of the consumer,” Reany said. On the issue of visiting a branch to enroll, he said, “It’s not practical for people to go to a branch.”

While Mastercard rival Visa has positioned itself at the center of any potential contactless renaissance and will be the major beneficiary of the Chase contactless retrofit, it is just one of the major card networks trying to drive contactless adoption.

In May, Mastercard announced its road map for contactless payments consistency across the Middle East, Africa, Europe, Latin America and Asia Pacific. It’s an initiative to create greater payment consistency that will make contactless payments standard in the next five years. In the road map, Mastercard has established a road map that calls out the following requirements for the aforementioned regions: 1) October 2018 all new acceptance terminals will have EMV chip and contactless enabled; 2) April 2019 all new cards will have EMV chip and contactless technology; and 3) April 2023 all merchant terminals will be EMV chip and contactless enabled.

While the world embarks on a contactless “tap and go” journey, with U.S. issuers closely monitoring the situation, biometrics could be the key that finally propels the U.S. market into contactless cards.

Issuers in the U.S. are still considering the merit of contactless cards, given that they are slightly more expensive than regular EMV cards. Biometrics would add even more to the cost of the card itself and would require a new process of secure biometric enrollment, Bareisis said.

That’s where Mastercard’s kit could drive biometric contactless adoption, since consumers could self-enroll in the comfort of their own homes at any time of day. A biometric as an in-store authentication method relieves consumers from having to remember a PIN that could become compromised and eventually need to be changed. Mastercard’s biometric technology, coupled with home enrollment, could ultimately cause contactless cards to become mainstream in the U.S.