The mobile payment revolution is coming. Within the next five years, there is a very good chance you will be paying for goods and services with your cell phone.
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The topic has gotten quite a bit of coverage as of late, of course, with several top manufacturers and banks talking up eWallet services. Google has included NFC support in its Nexus S smartphone and, more importantly, in Android 2.3; Research In Motion has committed to including the technology in its future smartphones; Samsung has included NFC in its wildly popular next-generation Galaxy S handset; and U.S. carriers are beginning to forge alliances to implement mobile payment systems.
But Google, RIM, and mobile providers are all newcomers to the payment processing game — how do the traditional creditors feel about this revolution? BGR had a chance to sit down with MasterCard’s vice president of mobile solutions, James Anderson, and talk about what’s next for both creditors and consumers following what could shape up to be the death of plastic.
MasterCard is no stranger to touchless payments. The company has been utilizing the technology in one way or another with its PayPass system since early 2001. MasterCard is also a member of the Near Field Communications Forum — a group dedicated to standardizing the NFC protocol — and has been experimenting with the medium since early 2005. With a global payment network, the company wants to make sure it continues to go where technology is headed, and according to Anderson, all indications are pointing toward mobile devices.
“We’re excited to see companies like VeriFone recognize the importance of NFC,” said Anderson. VeriFone, which supplies point-of-sale terminals the world over, recently announced it would be including NFC hardware on all new POS terminals sold beginning later this year. “Adding NFC does not require a lot of up-charge,” said the VP, referring to the additional manufacturing and hardware costs that are typically passed on to vendors.
We asked Anderson about the payment landscape, and how the adoption of NFC could change the profitability model. Currently consumers, vendors, and the payment network in use all share the conveniences, profits, and burdens of standard credit card transactions. With NFC, two new players are being introduced into that same equation — the mobile carriers and phone manufacturers.
“We’re going to go wherever the consumers’ attention is, and right now it’s on mobile phones,” Anderson said. “We can not be stagnant; we’re going to embrace mobile.”
We then pressed the VP about external threats to the overall business. For example: what’s to prevent a company like Apple, that is already setup to take payments for pretty much anything with its App Store, from slapping NFC in the iPhone 5 and saying payments will be processed through the App Store? Users with an Apple ID can link their accounts to any major credit card they want, not just a MasterCard.
“The solution to mobile payments is really two pronged,” said Anderson. “Having a device that can make payments is only half of the equation. You need for that device’s payments to be accepted wherever you are.” Anderson went on to note that MasterCard has experience at implementing payments, via its worldwide network of vendors, on a global scale. “When you’re at home, it has to work. When you’re on vacation, it has to work there too.”
The VP also told us why his company feels it has an advantage. “The ‘go right’ is easy,” Anderson explained. “When a payment goes through smoothly, that’s the easy part. The ‘go wrong’ is hard. When someone charges something to your account that you did not authorize, that is hard.”
“We’re ready to deal with this,” he reiterates. “It’s what we do today.”
Anderson and MasterCard envisions a world where touchless payments are made with global interoperability, but there are also some perks to paying with a mobile device. “Couponing is one thing people always point to,” he explains.
The idea behind mobile coupons is fairly simple. Your phone knows where you are (thanks to GPS), what you have purchased (thanks to mobile payments), and how frequently you purchase certain things. For example: you’re in a local pharmacy looking to purchase a bottle of aspirin. Your phone knows that approximately every thirty days, you buy shampoo. It also knows that the shampoo you usually buy is on sale today at this pharmacy and it has been roughly 28-days since your last shampoo purchase. A coupon is delivered to your device.
But security is a huge factor as well, of course. With all of this sensitive information being transmitted in new ways, security is of the utmost importance. “This information is extremely sensitive,” says Anderson. “It must be treated with the respect it deserves when we get to that point.” It is in this area especially where the expertise and experience of seasoned companies like MasterCard could give them an upper hand — especially considering how important security is to consumers where mobile transactions are involved.
Mobile payment solutions that utilize NFC will be part of our reality in the very near future. Exactly what that reality will look like, we can’t exactly say. Will credit cards become as rare as $2 bills? Will paper money have the same utility as a penny? We don’t know what mobile payments are going to look like following mass adoption, but if James Anderson and his company have anything to say about it, the future will definitely involve a MasterCard logo.
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