It's a problem as old as the internet: What is the easiest way to get consumers to pay online? So far the only thing everyone agrees on is that 16-digit account numbers aren't the answer.
That said, earlier efforts like V.me and PayPass Wallet — and even internet currencies like Beenz and Flooz — are already outdated. What Mastercard and Visa are now attempting with EMVCo's Secure Remote Commerce (SRC) Framework could meet the same fate, but it could also finally crack the code.
A longstanding problem with the card networks current digital wallets, Masterpass and Visa Checkout, is that their branding fails to communicate their support of other networks' cards. Visa Checkout supports Mastercard and Masterpass supports Visa, but what consumer would ever think to test that?
"In the traditional environment you walk into a store, take out a card and pay at the terminal; it's ubiquitous," said Jess Turner, executive vice president of digital payments and labs of North America at Mastercard. "The digital world is not all of the way there yet."
Using SRC, a standard designed to encourage similar processes for card not present payments, Masterpass and Visa Checkout could potentially merge into a single online payment system, which has been referred to a single payment "button." The networks discussed this concept at an industry conference in Las Vegas, saying it would simplify online payments for consumers, issuers and merchants.
It's too soon to tell whether an SRC button would replace Visa Checkout and Masterpass as brands. It's also unclear why consumers would choose another new payment option over the many options available today — such as PayPal.
According to Mastercard, the plan may develop into an option that runs alongside Masterpass and Visa Checkout rather than trying to shoehorn all payments through a single wallet.
"Mastercard believes that one common checkout experience is what works best, but having competing checkout options for consumers and merchants are a good thing," Turner said.
Mastercard has not entered into a formal collaboration with Visa, Turner said, adding the branding and logistics of the single-user experience has to be developed over time and Mastercard will continue to develop differentiated digital payment technology and services.
The point of this week's announcement is to achieve a "token only" payments world, in which online payments have a consistency similar to card payments, Turner said.
Still, there's a chance that something new could improve the user experience of online and mobile payments, Turner said.
"If you try to buy something on a mobile phone now, you key in the number, which isn't perfect," Turner said, adding that has led to different approaches to achieving low navigation digital payments. "Some merchants are moving to 'card on file' storage, but not every merchant does card on file."
The SRC standards should permit choices, such as whether to support card on file, or other methods of reducing navigation for online purchase, without that resulting in consumer experiences that differ from one merchant to another, according to Turner.
One thing that is clear is there is a huge untapped market for online payments, even given the ubiquity of the modern internet.
Mastercard has reported more than 85 million "enabled" users for Masterpass, though that doesn't necessarily equate to usage. And Visa has reported an enrollment of about 33 million consumers for Visa Checkout. By comparison, PayPal has 227 million active users.
Ultimately, Visa and Mastercard want standardized and tokenized online payments that work similar to the ease and ubiquity of plastic cards, but in doing so they risk confusing a market they have spent considerable effort to build.
"Quite literally hundreds of millions of marketing dollars have been invested into Visa Checkout and Masterpass over the years to raise merchant and consumer awareness," said Jordan McKee, a principal analyst at 451 Research. "Any decision to walk away from these investments will not be taken lightly."
Masterpass and Visa Checkout have had relatively low usage, creating an impetus for change. According to 451 Research's Voice of the Connected User Landscape Representative Survey, only 3% of U.S. consumers used Visa Checkout in the past 90 days, and only 1% have used Masterpass. "The networks still have a long way to go to increase consumer and merchant adoption of their wallets," McKee said.
Nearly two thirds of consumers used PayPal to make online or mobile payments at least once in the past year, compared to 22% for Visa Checkout and 8% for Masterpass, according to Dow Jones, citing Bernstein Research.
"Neither Masterpass nor Visa Checkout have achieved a competitive position against PayPal or Amazon, and with the increasing importance of e- and m-commerce, it’s important that the networks find a way to be competitive," said Thad Peterson, a senior analyst at Aite Group. "Working with a uniform approach they have a much better opportunity to create a payment tool that cardholders and their issuers will find valuable. Customers like simple, and this potentially is a move in the right direction for the networks."
But could that include PayPal as a collaborator instead of a rival? Both Mastercard and Visa have data cooperation agreements with PayPal that ended years of ranker, particularly on Visa's part. The deals, which date to the summer of 2016, involve PayPal promising equal visibility to the card networks and ACH as funding options, among other incentives. Amex this week also expressed its interest in a single online payment system. PayPal did not return requests for comment by deadline.
In a statement, Amex said it supports the exploration of a common user interface for SRC: "We believe providing a consistent experience for consumers and merchants, whether they are purchasing or selling through a mobile app, desktop browser or other internet-connected device, is integral to the future growth of digital commerce."
In an emailed statement, Visa said the transition to the SRC standard will be complete by the end of 2018. Visa has started rolling out parts of the program, including streamlined verification, and any potential button branding changes or other pieces should evolve once EMVCo has finished defining brand standards, Visa said. It said it is collaborating with financial institutions, acquirers and gateway commerce platforms, merchants and new participants to execute a migration plan for existing Visa Checkout users and a pull-through plan to build new acceptance. In its email, Visa expressed hope the effort will draw more participants.
Simplifying checkout and encouraging a more usable and consistent online shopping and payment experience for different merchants and payment companies would fix a problem that's plaguing online commerce.
The network SRC announcements "serve as acknowledgments that that current checkout approach in digital commerce is broken," McKee said. "Shoppers are confronted with inconsistent and laborious checkout experiences that led to cart abandonment and lost sales."
Cart abandonment in e-commerce is extraordinarily high. Barilliance, an e-commerce consultant and services provider, pegs it as high as 75% and says the problem is getting worse. An easier experience could help improve those numbers.
Both Checkout and Masterpass have a long history. Visa Checkout dates in some form as far back as 2010 through a feature called Rightcliq. Rightcliq had a browser plugin to automatically populate checkout information, as well as a social component. Visa discontinued Rightcliq in 2011, shortly before launching another product, called V.me. V.me was a P2P app that planned to launch other payment services, such as e-commerce. V.me gave way in 2014 to Visa Checkout, with updates aimed at "easier usage."
Masterpass launched in 2013 with a group of banks and merchants, building on the earlier PayPass Wallet Service.
The networks have attracted merchants and partners to their online payment systems, creating a ready made market for consumers. Visa Checkout last year added Walmart and other retailers, and collaborated with BlueSnap to gain access to additional online merchants. Masterpass has recently made inroads into the petroleum segment and quick service. And Visa Checkout and Masterpass have also collaborated previously on security.
Better checkout would further improve Mastercard and Visa's profile against brands that have become synonymous with easy checkout. Amazon' s one-click checkout has helped boost Prime membership to nearly 100 million and Uber's "invisible" payment system has increased users' expectations for an easier, more common experience in the card-not-present environment.
Mastercard has invested in its "digital by default" strategy, highlighting Masterpass' relationship with popular brands and dedicating a 3% year over year increase in expenditure dedicated to advertising and marketing digital by default. Visa has also invested heavily in digital strategies over the years.