Talk of contactless and mobile payments has been around for years, but only lately been taking off in a big way in some developed markets, such as Hong Kong and Singapore.
In this month’s Q&A, Techgoondu asks Ann Cairns, MasterCard’s president for international markets, what the game changer has been.
Perhaps more importantly, for consumers, just how much can they trust their phones as electronic wallets in future? Can a wristband authenticate a user and through his cardiac rhythm in future?
Q: What has been the trigger for the recent take-up of mobile and contactless payment and what needs to be done to encourage the growth?
A: Consumers today are shopping and paying in whatever way best fits their needs and lifestyles, from every device they have, with a simple tap, click or touch at the register, in the aisle, at home and on the go with their phone.
And the game changer for mobile payments has been the growing popularity of smartphones globally. Asia is at the heart of it all, with Singapore being the most digitally evolved economy in the world – followed closely by Hong Kong, according to MasterCard research.
Furthermore, China and emerging economies Malaysia and Thailand are the top three fastest progressing digital economies, due to the rapid adoption of the Internet and smartphones.
Asia is expected to have close to 1.3 billion smartphone users by 2017. And as more and more consumers are turning to their smartphones to make purchases, we will continue to see growth in mobile payments.
The needs of the banked and un-banked segments need to be addressed to maintain a viable ecosystem for all participants in mobile payments. This means providing market-relevant solutions that fit the culture as well as specific and often varying characteristics of a local economy – whether it’s a developed or emerging market.
Q: On mobile payments, how much do users trust their phones as electronic wallets?
A: By 2020, mobile payments will account for more than 75 per cent of the world’s online transactions, and more than 50 per cent of total expenditure. This indicates that users trust their phones – and value the technology’s ability to make payment checkouts faster, less complicated and more secure.
As payment credentials are stored on more and more devices, security is extremely important. In addition to participating in the industry-standard EMV security framework, MasterCard has also heavily invested in “tokenization” technology – the path of replacing the real card details with tokens so that if there is an inadvertent breach, those card details cannot be reused.
With the launch of our digital payments platform MasterPass, we’ve eliminated the need to enter billing and shipping information every time a consumer makes a purchase.
Checkouts are now simplified and they’re protected by MasterCard’s industry-leading security protections, including multi-factor, risk-based authentication.
With the proliferation of smartphones and connected devices, we will see all forms of mobile payments coming into play. But the foundational requirement is to have the acceptance and security infrastructure in place so that payments are secure, accessible, and interoperable.
Q: If phones can be electronic wallets, do you see other wearables, say, a smartwatch or sports band, being used for payment in future?
A: Absolutely – we firmly believe that every connected device has the opportunity to become a commerce device. Wearables are no exception. They have the potential to change how we behave in our daily lives, from parenting and healthcare to retail purchases.
And we’re already starting to see this potential play out. MasterCard is developing wearable device apps like Qkr. Piloted in Australia, Qkr enables consumers to order and pay for goods and services directly from their smart device conveniently and efficiently.
We’ve also partnered with Vincent and LAKS to launch Watch2pay, Britain’s first ever prepaid contactless wristwatch, which enables consumers to make fast, secure payments for up to £15 within seconds with a simple tap of their wrist.
“We understand that security is top of mind for consumers – whether they’re paying in person, online, or by tapping a wearable product.”
However, for wearables to go mainstream, they will have to address a few key issues. First, the design of wearables has to fit into our daily lives. Simplicity is key.
Equally crucial is lasting battery life – no one enjoys sitting around waiting for devices to recharge. Lastly, technology also must add value to a consumer by solving a problem or creating new efficiencies.
Wearables – whether it is a bracelet, watch or keyfob – present this opportunity. They can display bus schedules and give appointment reminders. With paying for products, they can cut down on the time it find change at the bottom of your purse and speed up checkouts with the flick of a wrist.
Innovating to meet the challenges of tomorrow is crucial. This year, we are hosting a global year-long hackathon series, Masters of Code, to take innovation beyond the walls of our company.
The competition kicked off at the start of the year in Sydney followed by Hong Kong and Singapore, and it will culminate with a grand finale in December in Silicon Valley.
The world’s top developers, designers and entrepreneurs will gather to take on the APIs supplied by MasterCard to create innovative prototypes that drive the next generation of commerce applications. We are opening up our technology to the world to enable any developer to utilise our products and platforms to build the next big thing.
Q: What does it mean for security? Do you see early security flaws like how we’ve seen in the past with e-banking on the PC?
A: For some wearable products, we are already seeing second and third generation products. They’ve learned from other technologies and are not only transforming consumers’ shopping experience but are also incorporating cutting-edge security measures.
For contactless transactions – where consumers can pay with a card, smartphone, or wearable device – your transaction is protected by three layers of security to ensure secure contactless payments: tokenization, industry-standard EMV technology, and biometric passwords.
We’re also conducting trials of a wristband which authenticates a cardholder through their unique cardiac rhythm.
Looking at the larger issue of security, late last year, we outlined our vision for taking online payments beyond passwords to both increase simplicity and enhance security.
The new protocol, could be adopted in 2015 and will gradually replace the current 3D Secure protocol, in addition to evolving our SecureCode program; and piloting commercial tests for facial and voice recognition apps to authenticate cardholders.
We understand that security is top of mind for consumers – whether they’re paying in person, online, or by tapping a wearable product.
That’s why we consider the issues facing each point of purchase – mobile, in person, online – as well as the larger payments ecosystem as whole.
(NOTE: The responses have been edited for brevity and house style)
