MasterCard is betting that there is a third choice besides plastic cards and mobile wallets. And that choice is one that has sputtered in the past.
The card network is introducing a new connected card that combines its own technology with that of Dynamics, a company in which MasterCard is an investor. The concept has been around for years, and Dynamics has had mixed results in bringing it to market, but MasterCard is rethinking the cards' role in the context of the mobile revolution.
Previously, Dynamics has marketed its cards, which have built-in screens and a rewritable magnetic stripe, as a way to access multiple accounts from one card or to lock a card with a PIN typed into the card itself. MasterCard's vision is far bigger. It is combining Dynamics' technology to with its own applications to allow direct access to the MasterCard acceptance infrastructure for any MasterCard issuer.
"This is like having a computer in a card," said Pete Kaulbach, senior business leader for product development for MasterCard. "There's a bunch of things you can interact with."
However, the basic technology in the card is largely the same as what Dynamics has pitched in the past; what's changed is the context. Companies like Coin and Stratos have attracted significant attention with the idea of a single card that can store multiple accounts and be switched off when not in use. But those direct-to-consumer products are expensive, and they lack a bank's endorsement.
MasterCard will offer Dynamics' cards through banks, and market them as a first step toward replacing the traditional magnetic-stripe card entirely.
"We want to have options for consumers, you can go from static cards to something a little more sophisticated like contactless, or functional cards," Kaulbach said. "Then you start thinking about e-commerce and mobile transactions."
Kaulbach said the cards are more expensive than ordinary credit and debit cards, though the technology has been deployed at no extra cost to consumers in other regions. MasterCard has offered cards with digital functions in Europe as early as 2010, and is marketing computerized cards in the U.S. now to take advantage of the growth in mobile commerce, which has created consumer appetite for a less static payments experience in all venues, Kaulbach said.
The cards are not a "connected device"all of the technology resides on the card and does not require a data connectionand are also EMV, mag stripe or contactless compliant. The new card does not currently have MasterCard issuers on board, though Kaulbach said there is interest among the financial services community.
Some companies are ignoring the "bridge" step of a high-tech card and leaping straight to mobile. Discover, for example, last week introduced a feature called Freeze It, which enables consumers to lock and unlock their cards through an app.
Dynamics has wowed issuers in the past, but has had less success with bringing products to market. Notably, Dynamics launched its product with Citi on board as a test partner, but that project stalled in pilot and never materialized in the market. Later deployments at UMB and CIBC fared better.
And newer cards such as Coin have also faced issues, such as in getting cards shipped to its earliest backers. Stratos is currently addressing how the business model of its rewritable mag-stripe card will adapt to the introduction of EMV-chip cards.
But the U.S. EMV migration could be a benefit to companies like Stratos, Coin and Dynamics, according to Zil Bareisis, a senior analyst at Celent.
"Despite the advances of mobile payments, plastic cards are not disappearing any time soon," Bareisis said. "EMV migration requires considerable investment from all parties, so banks naturally looking for new revenue-generating opportunities, which these next generation cards can provide."