MasterCard's MasterPass Navigates a Fluid Emerging-Payments Market

With its MasterPass program, MasterCard's mobile-pay strategy seems to be solidifying. But the details show that payments technology is still very fluid.

The MasterPass wallet demonstrates the need to provide a number of different ways for merchants and issuers to handle mobile and online payments. It supports Near Field Communication-based contactless payments like Google Wallet, mobile bar-code payments like Starbucks and LevelUp, and online payments like PayPal and Visa's V.me.

Overall, MasterPass is "a platform play for MasterCard, it's based on the fact that we are living in a more connected and digital lifestyle," says Brian Gendron, a MasterCard spokesman, in a phone interview Monday from the Mobile World Congress in Barcelona.

As the debate over the future of NFC at the point of sale rages, more companies are testing alternative payment systems that can work with more phones or rely on the cloud. Despite the range of options available to consumers, there's not been a lot of in-store adoption, particularly in the U.S.

"I wouldn't call [point of sale] adoption widespread by any stretch of the imagination, but there is some progress," says Rick Oglesby, a senior analyst at Aite Group.  "The need for tech diversity is to help figure out how to make it widespread. It creates more options so providers can test and figure out what works best for consumers and merchants."

With MasterPass, MasterCard has partnered with more than a dozen  companies around the world that develop mobile payments technology—including Cardinal Commerce, Cart32, CO-OP Financial, mFoundry and VeriFone. 

MFoundry, for example, will enable issuers to integrate mobile banking with mobile payments, which potentially benefits marketing and customer relationship management. 

CO-OP Financial, a credit union cooperative, will help MasterCard with distribution among its 3,500 credit-union members, with 30 million cardholders.

VeriFone—the terminal maker that also works with Google, Isis and PayPal's digital wallets, will work with the its merchant customers to integrate MasterPass as a cloud-based payments option within its GlobalPay Mobile Point of Sale (mPOS) and GlobalBay Clienteling software applications. These applications are commonly used in tandem with VeriFone Payware Mobile card-acceptance devices for large retailers.

"Upon integration, shoppers can access their MasterPass wallet accounts to pay from anywhere in the store on mobile devices—such as smart phone and tablets—using the GlobalBay software," said Andy Payment, a VeriFone spokesman, in an email.

Though MasterPass supports NFC payments, VeriFone is focusing on its cloud-based application.

"I wouldn't say that NFC is falling out of favor, but I would say that players across the ecosystem are broadening their approaches to support lots of different technologies, something that becomes a lot more feasible if you embrace the cloud," Oglesby says.  "A cloud-based wallet can use any technology to complete a transaction locally, while local storage of payment credentials imparts limitations that tend point towards NFC."

But the cloud's benefits don't outweigh NFC's long-term appeal.

"In the end, NFC provides more convenience so it's likely to play a significant role in the long run, but sitting on your hands and waiting for it doesn't make much sense in today's environment either," Oglesby says.

Even the mobile-pay providers that seem to have taken sides are at least partially supporting multiple payment options. LevelUp and PayPal offer software-based digital wallets, but both have limited support for NFC as well. Isis, which has largely favored NFC, also provides a plastic card for payments at retailers that don't have the hardware in place to accept mobile payments. Google was reportedly considering a plastic card as well for its NFC-based Google Wallet. PayPal offers a plastic card too, but it says most of its point of sale payments take place without it.

"MasterCard is playing catch-up here, with Google and PayPal," says Aaron McPherson, practice director at IDC Financial Insights.

Visa's V.me is primarily an online payment system, though the company says it will support point of sale payments at the merchant's request. Visa, which did not return requests for comment by mid-day Monday, has entered into a partnership with Samsung to allow financial institutions that are planning to launch mobile payment programs to use the Visa Mobile Provisioning Service to download payment account information to NFC-enabled Samsung devices. Samsung has also agreed to load the Visa payWave applet onto its existing mobile devices featuring NFC technology.