8 Ways Visa and Mastercard Are Reshaping Their Markets

July 22, 2016 9:47 AM

Visa and Mastercard both face the prospect of becoming "dumb pipes" as other companies innovate on top of their networks. To combat this trend, both are taking steps to be major players in the digital economy.

Visa Makes Peace with PayPal

The card networks have been at war with PayPal since the alternative payment company launched in 1998, and Visa finally seems to have found a way to coexist with its digital rival in a deal that required heavy concessions from PayPal on how it deals with card transactions.

An employee holds an Apple Inc. iPhone with the web-page of mock bank, offering the option to pay for goods via ZAPP, a newly created money transfer and payment system, in this arranged photograph taken at the company's offices in London, U.K., on Thursday, Jan. 16, 2014. Zapp, a unit of Vocalink Ltd., has created a system that will customers of major banking institutions to see their balance and pay for goods in real-time. Photographer: Chris Ratcliffe/Bloomberg

Chris Ratcliffe/Bloomberg

Mastercard Bets Big on Vocalink

Mastercard is also making peace with a digital upstart, the U.K.'s VocaLink, which is behind the Zapp online payment tool. The $920 million investment gives Mastercard access to technologies that can help it compete against Visa in areas that are still new to both networks.

A customer uses a Lloyds Bank Visa Inc. debit card to make a contactless payment on a Verifone Systems Inc. payment device in London, U.K., on Friday, May 22, 2015. Credit and debit cards that can be used by tapping the reader are gaining users, and mobile apps are set to further boost the popularity of contactless paying. Photographer: Simon Dawson/Bloomberg

Simon Dawson/Bloomberg

Visa Reunites with Visa Europe

Visa's reunification with Visa Europe gives the card network a chance to reenter hubs of fintech innovation such as London while also exporting the tech resources it has developed in the U.S.

Master Card credit cards are arranged for a photograph in New York, Friday, February 9, 2007. Photographer: Daniel Acker/Bloomberg News.

DANIEL ACKER/BLOOMBERG NEWS

Mastercard's Master Plan for Asia

Mastercard, meanwhile, has its sights set on business opportunities in Asia. Its strategy of offering customized services to merchants and issuers pairs with a regional focus on countries such as China, Myanmar and India.

Residents play volleyball in front of a Rio2016 merchandising mega store the 2016 Olympic Games at Copacabana Beach in Rio de Janeiro, Brazil, on Wednesday, July 13, 2016. A study from Oxford University's business school found that the Rio 2016 games will cost $4.6 billion, or an overrun of 51 percent for a country that is facing a second year of economic contraction. Photographer: Dado Galdieri/Bloomberg

Dado Galdieri/Bloomberg

Visa's Olympic Event

Visa has spent years using its sponsorship of the Olympic Games as an opportunity to test and promote new technology, and Rio is no exception. The card network is distributing payment-enabled NFC rings to athletes to let them make purchases without a wallet or phone.

GENTL AND HYERS

Masterpass Makeover

Mastercard is reinventing its Masterpass platform to make it a friendlier option for banks and merchants. The new version ties directly to banks' digital wallets and enables contactless payments on Android handsets.

Visa Inc. credit and debit cards are arranged for a photograph in Washington, D.C., U.S., on Wednesday, Jan. 29, 2014. Visa Inc. is expected to release earnings data on Jan. 30. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

Redefining EMV

Starting with Visa, the four major U.S. card networks have all developed technology that can speed up the process of making an EMV payment at the point of sale. The goal is to counter the anti-EMV sentiment that comes from consumers and merchants who don't have the patience for the new process.

A worker demonstrated facial recognition security features on the MasterCard Inc. stand at the Mobile World Congress in this arranged photograph in Barcelona, Spain, on Wednesday, Feb. 24, 2016. Mobile World Congress, an annual phone-industry event organized by GSMA Ltd., runs from Feb. 22 to Feb. 25. Photographer: Pau Barrena/Bloomberg

Pau Barrena/Bloomberg

Selfie Security

Mastercard's new approach to 3D Secure taps into a habit consumers love: Taking their own pictures. The new option, enabled at the discretion of Mastercard issuers, allows selfies to improve security at certain merchant sites.

Mobile payments

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