Mastercard’s path to creating a digital wallet has been anything but streamlined.
First there was PayPass Wallet Services, its 2012 attempt to create a separate online payments experience by building on Mastercard’s contactless payment brand, but that was scrapped a year later when Masterpass made its debut with grander ambitions.
But Masterpass has failed to become a household name in the same way that rivals like PayPal, Apple, Google and other nonbank operators have with their own digital wallets. And now Walmart and other mega-merchants are coming out with their own payment apps, further encroaching on Mastercard's turf.
The Purchase, N.Y,.-based card network is gathering its resources for a counterattack, with an overhaul that puts bank brands at the forefront of the Masterpass experience. Under the hood, the new Masterpass ties directly to banks' own digital wallets with support for Near Field Communication-based mobile payments via Android devices and the ability to centralize features for supported cards, including balance display and purchase alerts, and support for paying with loyalty points.
Citi, Bank of America, Capital One, Fifth Third Bank and SunTrust are among 16 banks initially adopting the enhanced Masterpass later this month, with a global rollout planned for next year, Mastercard said today.
“Until now we’ve been working on Masterpass primarily as an online payment tool, but now we’re adding contactless payment to the heart of that experience, and doing it in a way that’s fully converged with consumers’ primary connection to their bank,” said James Anderson, group executive for platforms and emerging payments at Mastercard.
For the first time, Mastercard will include payment tokens within Masterpass, Anderson said, while making the suite of services accessible to developers through a set of application programming interfaces and software development kits for easy connections between Mastercard’s data center and individual banks’ wallets.
On the merchant side, Mastercard is introducing a dynamic checkout button to embed on e-commerce sites. This button will display the name and logo of a bank supporting Masterpass at checkout, Anderson said.
The new process somewhat resembles one Visa added to its own digital wallet, Visa Checkout, back in March. In that update, Visa cardholders using Visa Checkout on a mobile device see an image of their own payment card, which they drag across the screen in a swiping motion to authorize payment.
BJ's Wholesale Club is among the merchants supporting contactless payments within Masterpass, Mastercard said, and other merchants are adding features include Firehouse Subs, Masabi, Office Depot and Park Mobile.
“The essential thing we’re doing with Masterpass is creating a strong bridge from the consumer to their bank with an enhanced payment experience that works across all channels, and that should come from the the bank, where people place their highest trust and loyalty,” Anderson said.
The devil will be in the details of whether Mastercard's latest Masterpass update succeeds, said Aaron McPherson, an independent payments analyst.
"Promising to deliver a single payments and checkout experience online, in stores and through mobile is one thing, but those are three very different technologies and really being able to deliver this in a consistent and smooth way will be critical for success here," McPherson said.
There is no time to waste, experts say.
"The payment networks have found themselves increasingly marginalized in e-commerce and mobile commerce by the likes of Braintree, Apple, Google and even Chase [with Chase Pay, its upcoming proprietary closed-loop wallet]," said Tim Sloane, vice president of payments innovations at Mercator Advisory Group. "With this announcement, Mastercard is responding by creating an enhanced payment experience on a tokenized infrastructure," leveraging the advantage of its payments network.
The timing of an upgraded Masterpass is key, Sloane said, noting that the introduction of EMV is driving card fraud online.
"Merchants need a solution that reduces fraud and liability while also reducing shopping cart abandonment, and if Masterpass delivers, merchants will almost certainly [consider] deploying it," Sloane said.
To succeed, Mastercard must ensure that merchants actually see a benefit from lower fraud and stickier connections to consumers during online checkouts, and that mobile app developers increasingly add Masterpass as a payment option, Sloane said.
One of the biggest hurdles Mastercard faces with Masterpass will be getting merchants to support it on their websites and apps, McPherson noted.
"A lot of what PayPal has achieved over the last several years is getting so many merchants on board that it makes for a very challenging task [for Masterpass] to go merchant by merchant and catch up with them," he said.
Much is in flux in mobile wallets as Masterpass retools again, and it will have plenty of competition.
Visa is still building out Visa Checkout, introduced in 2014 as a replacement to its earlier V.me wallet. Visa Checkout stores the details of consumers’ preferred payment cards so they need enter only a username and password to check out on participating websites.
Visa said more than 12 million consumers have enrolled in Visa Checkout, and it has hundreds of thousands of merchant partners including Starbucks, Walgreens, Walmart and several hotels and airlines, and 600 banks in 16 countries support it.
Consumers typically enroll through Visa’s web site, but some banks, such as Bank of America, enable customers’ credit and debit cards to be pre-selected for enrollment in within their online banking site. PNC, Regions, BB&T and BBVA also use this enhanced enrollment process, according to Visa.