The U.S. Isn't First for MasterCard's New Payments Tech–Here's Why

Another digital wallet is coming to the U.S. — but it's taking the scenic route.

Australia in particular is at the forefront of changes in the payments industry. Famously, its 2003 introduction of merchant surcharging for card payments is still referenced today by U.S. companies experimenting with the practice. It's also one of three countries that will get MasterCard's new MasterPass wallet before the U.S. does.

Canada and the UK are the other two countries MasterCard put at the top of the list for its digital wallet. Canada is particularly important for MasterCard, where it is trying to capture market share in a country that has long been controlled by Visa.

By coming to Canada first with its MasterPass wallet, "MasterCard could be trying to position itself as an innovator in Canada," says Deborah Baxley, principal at Capgemini in New York.

A few years ago, Canadian financial institutions were allowed to issue only one brand, and most issued Visa. Even though the rule was overturned in 2008, it has taken financial institutions a while to catch up.

MasterCard will have company up north in Canada. Last fall, uGenius Technology, Stripe and Square all moved into the country. Because of the similarities in the habits of Canadian and U.S. consumers, Canada is a logical next step for many companies looking to expand internationally.

Plus because the country has recently adopted the EMV chip-card standard, Canada is a good testing ground for payment technology that will soon be launched in the U.S. after it migrates.

Because Canada has only four major banks and two credit unions, MasterCard could bring MasterPass mobile payments to consumers fairly quickly, says Jeff Green, director of emerging technologies advisory service at Mercator Advisory Group.

And according to MasterCard's 2012 "mobile preparedness" study Canada was No. 2, only outdone by Singapore in terms of most prepared to offer payments technology to willing consumers.

"Canada is a pretty obvious choice because they're pretty far along with EMV," Green says. "Financial institutions can easily add MasterPass to their mobile banking initiatives now."

Australia has a similar consolidated banking landscape, with four main banks and a small segment of community-type banks, although the Outback ranked 12th in MasterCard's study.

Brian Gendron, a MasterCard spokesman, says the company selected Canada and Australia for MasterPass because those were the countries that first piloted PayPass Wallet, upon which MasterPass was built.

MasterPass, like Visa Inc.'s V.me digital wallet, will support online payments without the need to type a credit or debit card number each time. Also like V.me, MasterPass will accept all card brands.

MasterPass wallets will be technologically agnostic, enabling payment via NFC, quick-response (QR) codes and other mobile payment methods. The MasterCard digital wallet can also be branded by specific banks and third parties.

According to a Feb. 4 MasterCard press release, more than one out of ten card transactions under $100 is being made with PayPass in Australia.

"Both Canada and Australia have much bigger adoption of contactless cards" than the U.S. does, Baxley says.

Earlier this month, MasterCard announced it would be rolling out a mobile wallet test to 60 customers of Coles supermarkets in Australia. The test, announced by the supermarket chain, marked one of MasterCard's first ventures into the mobile wallet sector after making an investment in Chicago-based mobile wallet and transactions platform provider C-Sam at the end of 2012.