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What innovations Visa and Mastercard are preparing to present in 2021?
Both Visa and Mastercard this year are ready to offer their clients new payment services, both online and offline. Both PSs believe in the potential of the market for cashless payments, and plan to increase the share of such transactions. PaySpace Magazine has analyzed the plans of Visa and Mastercard and will tell you what the payment landscape will be like in 2021.
Moreover, Visa is going to create additional prerequisites for abandoning magnetic stripe cards. The PS will reduce the interchanging for transactions with such "plastic" so that it would be unprofitable for banks to service old-style cards.
This year we will slightly reduce the interchange. We decided not to go down the path of reducing interchanging for some merchants. And to stimulate technologies that need to develop (mobile payments and contactless).
Another incentive to switch to contactless cards is to pay without entering a PIN. This year, both payment systems will increase the maximum purchase amount without confirmation (up to UAH 500 - Mastercard and up to UAH 1000 - Visa). Payment systems representatives argue that the limit can be raised due to the low risk of contactless payments.
In addition to cards, an increase in contactless payments from smartphones and various gadgets is expected in 2021. Already today, mobile wallets Apple Pay, Google Pay and Garmin Pay are presented. You can link cards of more than 20 banks to them thanks to the Mastercard MDES and Visa Token Service tokenization platforms. They provide encryption and security of plastic card data. It is expected that over time, almost all banks will offer their customers mobile payments.
With regard to payments from wearable devices, the opinions of payment systems were divided. Mastercard predicts that by the end of next year, about 60% of such gadgets will be issued with a payment function. And we are ready to support the development of the trend in the market.
Our plans for the year include bringing these technologies. We will be launching new solutions with famous and lesser known brands. So, we have a chain of Swatch branded stores. We sincerely believe that we will also start providing this service in the near future (Swatch Pay - ed.).
On the contrary, Visa considers the phone to be the best form factor for mobile payments. After all, the creation of solvent rings and bracelets is associated with complex certification processes. Therefore, the implementation of such products depends on the business cases of banks, their willingness to invest in the product. So, the Visa ring, which was presented for Eurovision 2017, has so far been offered to its premium customers only by bank.
Only 38% of small and medium-sized businesses accept non-cash payments. This is a very low figure (in Europe 62% - ed.). Therefore, SMEs are one of the strategic directions for us for 2021.
Let's consider the most discussed cases.
As part of the test, merchants will be able to accept payments from a smartphone without entering a PIN. After all, while the standard that will ensure the safe entry of the code on the screen of the seller's smartphone is still at the stage of implementation (PIN-on-glass).
When asked what will happen to mPOS, which were supposed to compete with traditional terminals, but did not conquer the market, Visa replied that this is an outdated case that will be ousted from the market by software solutions.
This solution can be used even if the seller does not have a smartphone or does not support NFC. It is enough to print and place a code with encrypted payment data on the counter. Or generate a payment code on the screen of the gadget. A buyer can scan such a QR with his gadget.
A similar solution was launched in 2018 by Mastercard (Masterpass QR), which worked at the Atlas Weekend festival and is planned to be launched on the Stolichny market.
Visa also works with QR - this year the solution should appear on utility bills. Last year, this functionality was launched at gas stations. But in general, the company believes more in contactless technologies.
Today it is difficult to say whether the QR code will fly or not. There are markets where it worked and where it didn't. From my point of view, despite the fact that we are now investing in QR, perhaps we will also step over this stage and immediately go to SoftPOS.
Visa sees the main obstacle to the development of QR in the fact that people are already accustomed to card payments and it is difficult for them to reorganize to something else. In markets where cash-less is less developed, it is easier to implement this technology.
In addition, to pay using a QR code, the user needs to install a special application and save his card details in it. Unlike contactless payments, the market for QR codes is rather fragmented (one application is not suitable for scanning all QR codes). This complicates the distribution of the solution.
Mastercard is going to launch the Mastercard ID check program on the market. It implies the use of biometric identification as the main user ID tool in both Web and Mobile channels. In addition to fingerprints, facial scans and retinal scans, Mastercard will use behavioral biometrics. Several years ago, PS acquired NuData, a company that uses a complex dataset for client authentication. In addition to traditional geolocation and device type, the service takes into account passive biometrics in its ID-model - the unique nature of the client's interaction with his gadget (how we hold the gadget, how fast we type text, etc.).
We are actively discussing this decision with players. We hope that we will be able to provide a new tool for protecting the digital business of banks and other partners.
Visa also insists that the 3D Secure standard is outdated and requires a new approach. The company is talking about a gradual transition to 3D Secure 2.0, which implies the refusal of authorization of all transactions, instead of which selective identification of suspicious customers will be used, including using biometrics.
The standard is due to come into force in 2020. It will only be necessary to verify those transactions that, according to various criteria (amount, location, etc.), are knocked out of the normal consumer pattern.
This makes the cost of one transaction cheaper - the bank no longer needs to spend money on SMS with a one-time password. And it speeds up the payment process - every transaction does not need to be confirmed with a password.
So, the innovations of both payment systems are aimed at improving the safety and convenience of non-cash payments. Ideally, such transactions should become virtually invisible to the customer. In 2019, both COPs will take another step towards this goal.
PAYSPACE MAGAZINE HELP
Today Mastercard is the leader in the payment card market in terms of the volume and number of transactions. More than 70% of cards on the market have been issued under the brand of this PS. Visa, in turn, serves less than 30%.
Visa believes that it will soon be able to catch up, but this is not a fundamental KPI for the company.
For me, the most important thing is that clients want to use Visa cards. I think that as soon as we build muscle in terms of benefits, loyalty and work with fintech and innovative technologies, this share will grow automatically. For us, increasing the share is not a panacea. This will be an indirect effect.
Both Visa and Mastercard this year are ready to offer their clients new payment services, both online and offline. Both PSs believe in the potential of the market for cashless payments, and plan to increase the share of such transactions. PaySpace Magazine has analyzed the plans of Visa and Mastercard and will tell you what the payment landscape will be like in 2021.
Contactless payments
Contactless infrastructure is actively developing - 70% of terminals already support NFC, and by the end of the year the figure will be close to 100%. Now there are 4 million contactless cards on the market. In the coming years, this "plastic" will become even more. From April 2019, all new Visa cards will switch to contactless. And from April 2021 - and "plastic" Mastercard.Moreover, Visa is going to create additional prerequisites for abandoning magnetic stripe cards. The PS will reduce the interchanging for transactions with such "plastic" so that it would be unprofitable for banks to service old-style cards.
This year we will slightly reduce the interchange. We decided not to go down the path of reducing interchanging for some merchants. And to stimulate technologies that need to develop (mobile payments and contactless).
Another incentive to switch to contactless cards is to pay without entering a PIN. This year, both payment systems will increase the maximum purchase amount without confirmation (up to UAH 500 - Mastercard and up to UAH 1000 - Visa). Payment systems representatives argue that the limit can be raised due to the low risk of contactless payments.
In addition to cards, an increase in contactless payments from smartphones and various gadgets is expected in 2021. Already today, mobile wallets Apple Pay, Google Pay and Garmin Pay are presented. You can link cards of more than 20 banks to them thanks to the Mastercard MDES and Visa Token Service tokenization platforms. They provide encryption and security of plastic card data. It is expected that over time, almost all banks will offer their customers mobile payments.
With regard to payments from wearable devices, the opinions of payment systems were divided. Mastercard predicts that by the end of next year, about 60% of such gadgets will be issued with a payment function. And we are ready to support the development of the trend in the market.
Our plans for the year include bringing these technologies. We will be launching new solutions with famous and lesser known brands. So, we have a chain of Swatch branded stores. We sincerely believe that we will also start providing this service in the near future (Swatch Pay - ed.).
On the contrary, Visa considers the phone to be the best form factor for mobile payments. After all, the creation of solvent rings and bracelets is associated with complex certification processes. Therefore, the implementation of such products depends on the business cases of banks, their willingness to invest in the product. So, the Visa ring, which was presented for Eurovision 2017, has so far been offered to its premium customers only by bank.
Acceptance of payments for SMEs
Only a third of merchants accept cards for payment. Therefore, for now, this is an open market for both banking terminals and niche payment solutions. Both payment systems are already preparing their alternative solutions for SMEs.Only 38% of small and medium-sized businesses accept non-cash payments. This is a very low figure (in Europe 62% - ed.). Therefore, SMEs are one of the strategic directions for us for 2021.
Let's consider the most discussed cases.
- Accepting contactless payments from a smartphone
As part of the test, merchants will be able to accept payments from a smartphone without entering a PIN. After all, while the standard that will ensure the safe entry of the code on the screen of the seller's smartphone is still at the stage of implementation (PIN-on-glass).
When asked what will happen to mPOS, which were supposed to compete with traditional terminals, but did not conquer the market, Visa replied that this is an outdated case that will be ousted from the market by software solutions.
- QR codes
This solution can be used even if the seller does not have a smartphone or does not support NFC. It is enough to print and place a code with encrypted payment data on the counter. Or generate a payment code on the screen of the gadget. A buyer can scan such a QR with his gadget.
A similar solution was launched in 2018 by Mastercard (Masterpass QR), which worked at the Atlas Weekend festival and is planned to be launched on the Stolichny market.
Visa also works with QR - this year the solution should appear on utility bills. Last year, this functionality was launched at gas stations. But in general, the company believes more in contactless technologies.
Today it is difficult to say whether the QR code will fly or not. There are markets where it worked and where it didn't. From my point of view, despite the fact that we are now investing in QR, perhaps we will also step over this stage and immediately go to SoftPOS.
Visa sees the main obstacle to the development of QR in the fact that people are already accustomed to card payments and it is difficult for them to reorganize to something else. In markets where cash-less is less developed, it is easier to implement this technology.
In addition, to pay using a QR code, the user needs to install a special application and save his card details in it. Unlike contactless payments, the market for QR codes is rather fragmented (one application is not suitable for scanning all QR codes). This complicates the distribution of the solution.
Online payments
Technologies in the field of online payments do not stand still. The once innovative and reliable system for confirming Internet payments with a one-time code from SMS (3D Secure) is becoming obsolete. It will be replaced by the 3D Secure 2.0 standard. Both payment systems are already preparing to introduce such functionality.Mastercard is going to launch the Mastercard ID check program on the market. It implies the use of biometric identification as the main user ID tool in both Web and Mobile channels. In addition to fingerprints, facial scans and retinal scans, Mastercard will use behavioral biometrics. Several years ago, PS acquired NuData, a company that uses a complex dataset for client authentication. In addition to traditional geolocation and device type, the service takes into account passive biometrics in its ID-model - the unique nature of the client's interaction with his gadget (how we hold the gadget, how fast we type text, etc.).
We are actively discussing this decision with players. We hope that we will be able to provide a new tool for protecting the digital business of banks and other partners.
Visa also insists that the 3D Secure standard is outdated and requires a new approach. The company is talking about a gradual transition to 3D Secure 2.0, which implies the refusal of authorization of all transactions, instead of which selective identification of suspicious customers will be used, including using biometrics.
The standard is due to come into force in 2020. It will only be necessary to verify those transactions that, according to various criteria (amount, location, etc.), are knocked out of the normal consumer pattern.
This makes the cost of one transaction cheaper - the bank no longer needs to spend money on SMS with a one-time password. And it speeds up the payment process - every transaction does not need to be confirmed with a password.
So, the innovations of both payment systems are aimed at improving the safety and convenience of non-cash payments. Ideally, such transactions should become virtually invisible to the customer. In 2019, both COPs will take another step towards this goal.
PAYSPACE MAGAZINE HELP
Today Mastercard is the leader in the payment card market in terms of the volume and number of transactions. More than 70% of cards on the market have been issued under the brand of this PS. Visa, in turn, serves less than 30%.
Visa believes that it will soon be able to catch up, but this is not a fundamental KPI for the company.
For me, the most important thing is that clients want to use Visa cards. I think that as soon as we build muscle in terms of benefits, loyalty and work with fintech and innovative technologies, this share will grow automatically. For us, increasing the share is not a panacea. This will be an indirect effect.
