Working with 27,000 banks, 36m different payment points and aiming to connect with the world’s 1.9bn smartphones, MasterCard’s head of international markets Ann Cairns insists the company is a technology player first and foremost.
Cairns was on a visit to Dublin recently where MasterCard maintains its global technology lab after acquiring Irish payments software firm Orbiscom in 2009 for an estimated US$100m.
“We’re a B2B and B2C business and we sell through banks to the public, merchants, airlines, you name it. It’s not just a credit card, we are the infrastructure behind prepaid and debit cards. Everything is now moving to mobile, so really, the card is starting to dematerialise.”
That said, Cairns maintains some very cool things are still possible on payment cards, pointing to the issuing of 10m biometric cards in South Africa that make use of fingerprint and voice recognition to cut down on fraud.
“The South African government is going to save US$350m over the life time of the project.”
She also cited Soweto, South Africa, where there were no ATM machines. By deploying Blue Label low-cost point-of-sale machines whereby people could use government-issued prepaid cards to buy groceries, the banked population of the country shot up to 70pc.
“Contrast that with some European economies where the banked population is 80pc, it is quite an achievement,” said Cairns. “When you think about this, commerce can happen on anything that you can place a chip. The latest point of sale in some stores is starting to be an iPad.
“As we move towards things like NFC (near field communication), because you have two computers talking to each other in a physical environment, the entire shopping experience is changing and people just ‘tap and go’ in 40 countries around the world.”
The focus of R&D efforts by companies like MasterCard, she explained, is to remove the frictions from commerce but at the same time heighten security across MasterCard’s global network that spans 210 countries.
The future of money
Despite all the technological progress in recent years from e-commerce to NFC-enabled smartphones, Cairns is adamant there is still a long way to go.
“There are 2.5bn people on the planet who have yet to open a bank account and 85pc of all transactions are still in cash form. We’re currently only dealing with 15pc of the traffic so there is a huge whitespace in terms of converting cash to digital.”
There’s a very good reason for this. “Cash is not free. The cost of cash to reconcile can often cost 1.5pc of a country’s GDP.”
When you consider that 1.5pc of Ireland’s €210bn GDP adds up to about €3.5bn a year in costs, that’s a lot of wastage if cash and cheques are still the order of the day for most businesses.
Cairns recommends the Irish government step in to help Ireland grapple with a high dependence on cash and cheques.
“What works is government stepping in. How is the Irish Government managing its own procurement? It should be going electronic, especially when it comes to things like paying benefits and cutting down on fraud. It’s the responsibility of a government to show the way forward.”
She points to the recent events in Egypt, where the political crisis led to banks closing. “There was a mechanism in place to ensure that government employees got paid on prepaid cards and that helped to keep money circulating in the economy.”
Recently returned from Silicon Valley in California, Cairns said female entrepreneurs are beginning to lead the charge in terms of digital payments. She said that while 30pc of entrepreneurs in Silicon Valley are women, more than 50pc of executives at rising e-payments player Square are female.
Global innovation ethos
Cairns pointed out that MasterCard’s global lab in Leopardstown, Dublin, is headed by Gary Lyons, the company’s head of global innovation.
“We’re focused on a lot of interesting problems that affect small businesses across the world and effectively simplifying commerce. Just getting paid is the biggest problem facing businesses and we’re working on tools that allow firms to deploy card acceptance by simply bringing up a website.”
MasterCard’s methodology, she said, is to focus on big countries in deploying technology. “In Nigeria, they are rolling out an ID card for a population of 120m people. They are layering that with a payment technology and our pilot will focus on 13m people.
“If you do something, do it at scale. We’re in the internet age and it’s possible to reach hundreds of millions of people.”
MasterCard is also working on technologies that will ensure that card fraud that is so prevalent today won’t translate into the mobile commerce world.
As well as working on biometrics and GPS solutions, MasterCard has forged a partnership with Syniverse Technologies, a telecoms service provider that has access to two-thirds of smartphones on the planet.
“We talk to the innovators and they talk to us. For example, technologies have been invented in Ireland that enable virtual credit cards, whose numbers dissolve after usage.
“Our MasterPass wallet infrastructure enables consumers to manage their card payments with one button rather than typing in 16-digit numbers every time they want to pay for something. We have currently rolled that out to 70pc of our big traffic countries.”
Cairns re-emphasised the importance of government in enabling non-cash economies. “When you have public-private partnerships in place you can work in unison and then a whole country can move in a new direction.
“Originally, banks tried to do this all by themselves and even Vodafone tried it in Kenya and ended up building bricks-and-mortar stations for cash-in and cash-out.”
The future mechanism is mobile, she said, pointing to work in North Africa that MasterCard is doing with Etisalat to roll out point-to-point payments across Egypt.
“With so many people in the world it is vital that we come up with solutions that connect banks to people in an easier way. Every country has a slightly different solution.
“But until people start adopting electronic means of pushing money about it is going to cost the economy. There are 12.5m people in the UK today who have downloaded banking apps and there are 5.7m transactions a day on UK smartphones."
Cairns said the enabling and democratising effect of putting electronic payment technology in the hands of people via biometric cards or mobile, especially women, is critical in order to raise economic tides everywhere.
“Think about the shopping experience. Eighty per cent of shopping in the world today is still done by women. Women are key to consumer confidence. Consumer expenditure fuels an economy.”