As merchants and issuers weigh their digital payments options, traditional incumbents and new entrants alike are finding their offerings being scrutinized over how much they offer — and whether they even fit with the company's existing payments strategy.
With MasterCard's recently unveiled MasterPass wallet, card issuers and merchants say the control of brand identity and transaction data that the service provides makes it stand out among products like Visa's V.me and Google Wallet, both of which have also made moves to signal their friendliness to banks and merchants.
"What MasterCard is offering can be branded for the issuer, meaning it is not the V.me wallet or the MasterPass wallet," said Jon Groch, the senior vice president and director of bankcard strategy and innovation at Fifth Third Bank.
Fifth Third is one of 27 financial institutions signed on to offer consumers MasterPass, which is designed to support both online and mobile point of sale payments. The fact that the majority of cards that Fifth Third issues are on the MasterCard network made MasterPass's co-branded approach that much more important to the bank. Asking its customers to enroll a MasterCard-branded card with Visa's wallet "could confuse customers somewhat," Groch said.
"The way I would envision it is similar to what you have on your physical piece of plastic. You have a card that says Fifth Third on the front of it, but then on the bottom right-hand corner, it has the MasterCard logo," he continued. "Consumers will know very easily to use this wallet anywhere they see the MasterPass logo."
MasterCard's merchant partners include a combination of online-only and multichannel retailers, many of whom accept a variety of digital payments methods. Cat5 Commerce is an e-commerce merchant that beta tested MasterPass on its RunningShoes.com and HikingBoots.com online stores, sites that also accept Google Wallet and PayPal. Cat5 Chief Operating Officer Andrew Hoefener said the way MasterPass transactions are processed is appealing to midsize merchants.
"Unlike some of the competitive wallets, orders flow through our system like every other order. There's no special site you have to log in to," he said. "They flow through our back-end system like every other credit card payment."
Having a consistent view of transaction data across both digital and traditional card payments is also a feature in Visa's wallet and one reason why PNC Bank chose to become the first of more than 60 card issuers to offer V.me. When a consumer spends with V.me, the bank sees "the same information [it gets from normal card transactions] but it's a different way of shopping," Mike Ley, PNC's vice president of e-business and payments, said in an October interview.
St. Petersburg, Fla.-based credit union service organization PSCU is piloting MasterPass with one if its member-owners, Lake Trust Credit Union and has previously helped other credit unions implement Google Wallet, which provides both online and in-person mobile payments using Near Field Communication.
"For right now, being able to do the one-click checkout with the digital wallet is good," said Denise Stevens, PSCU vice president of new product development. "Google Wallet is good, too. But we have to see more terminals enabled with NFC and we have to see more phones enabled with NFC."
Stevens said credit unions are implementing mobile payments as part of a broader strategy to develop a new channel that encompasses all facets of the experience that consumers have at a branch or on a desktop-based website.
When it comes to digital wallets like MasterPass, many issuers are electing to take a two-phase approach to implementation by first integrating the digital wallet for online purchases and waiting for critical mass to grow before implementing the mobile pay component.
"I think merchant adoption into NFC and/or a payment technology that will allow devices to talk to terminals like NFC does will kind of be the light bulb where things start to come together," she said.
Fifth Third is in the preliminary stages of planning its MasterPass implementation, but Groch said the decision has been made to start out by focusing on e-commerce payments.
"Initially, it will be digital and then eventually, the same wallet will be converged with the physical world and you can use it at the point of sale," he said. "It's an evolutionary type of thing that over time, this wallet will grow into that essentially."
MasterCard's approach with MasterPass is consistent with previous comments from the network's executives. Speaking at a mobile payments conference in October, Mung Ki Woo, MasterCard's group executive for mobile, said the card brand's position in the value chain is as a B2B company.
"We are providing products and services to our partners who will provide services to merchants and consumers," he said.
"With mobile, we're going to stay exactly in the same place," he continued. "There is absolutely no plan to go direct to consumers."
Visa has taken an opposite approach with a direct-to-consumer strategy to V.me. But during a Feb. 7 earnings conference call with analysts, Visa CEO Charlie Scharf said the card brand's efforts support both consumers and issuers.
"V.me is not meant to be direct-to-consumer to go around our issuers. It's actually just the opposite," he said. "It's meant to support them with an electronic wallet that will enable them to continue to grow commerce."
The MasterPass wallet announced on Feb. 26 is billed as an all-encompassing, cloud-based service that enables multichannel payments across desktop and mobile e-commerce, as well as mobile payments at the point of sale at merchant locations. The addition of point-of-sale payments capabilities is the primary addition to what was previously known as PayPass Wallet Services, which marked MasterCard's first foray into digital wallets when it was announced in May 2012.
In that vein, MasterPass is more akin to Google Wallet than V.me, which is focused primarily on online payments and has so far, only announced merchant partnerships with e-commerce retailers. While MasterCard is covering its mobile pay bases by enabling both NFC and bar code scanning for POS transactions, it still must find a way to encourage issuer, merchant and consumer adoption of the technology.
MasterPass will get its feet wet first in Canada and Australia—countries with consolidated banking markets and a reputation for being early adopters of technology—before later expanding into the U.S. and other countries.