MasterCard Europe: Payments are to be most inconspicuous
Banks.eu continues a series of interviews with top managers of European financial institutions to tell all the details about the European financial sector. This time we talk to Artem Petsyuha, the director on business development of MasterCard Europe. Artem spoke about the global prospects of payments, as well as about the overall industry security and competition between banks and Fintech start-ups.
- Artem, what are you doing for the MasterCard team? And how does the company see the near future in the field of payments in terms of innovations and e-commerce development?
- I work with innovative payment instruments that include money transfers, digital wallets and mobile NFC-solutions. Some of these technologies are already being implemented, and some of them are the future to which we are going. MasterCard is doing everything to ensure that the payment process is simple convenient, safe and, if possible, unnoticeable for the consumer.
I repeat the quote from Gary Lyons, head of MasterCard Labs: “No one wakes up in the morning with the thought ‘I’m eager to pay for something as soon as possible.’” People do not think this way. They are interested in acquiring certain goods or services. Getting a taxi, I am unlikely to look forward to the moment when I finally have the opportunity to pay. This point should be most inconspicuous, as for me it is much more important to be in the right place at a certain time. As a consumer I should not worry about the technical side of the payment.
Sometimes we pay, being thousands kilometers away from the place where the service is provided or where the ordered goods will be shipped from. And thanks to digital technology, there are fast convenient solutions for such situations; for example, mobile payment tools. We already know how to place a card in a phone in different ways: it can be a bank card in the "cloud," or a card that "lives" in the SIM-card or a chip built in the phone.
For example, Apple works on the script based on the built-in cell phone Secure Element. ApplePay payment solution is connected to the MDES platform, allowing tokenizing the card, which is to write the appropriate token into a mobile phone. When paying with a terminal, the acquiring bank receives the token and sends it to MasterCard. Then the system sends a request to the bank that issued the original card, and the transaction is completed in the usual manner, depending on the response of the issuing bank.
Fortunately this entire process is behind the scenes for the users. This is precisely the technical "stuffing", which is provided by MasterCard. The stories with other innovations that are now developed by MasterCard are quite the same. These are adding the payments function to a variety of objects, building the chip in jewelry and accessories like jewelry, watches, bracelets, and even items of clothing, such as gloves.
MasterCard covers the technical part to enable banks that issue financial products, to provide customers with the opportunity to add the payments function to the usual accessories or devices. For example, in London and St. Petersburg subway MasterCard is accepted for payments through contactless technology. So, if this technology is in some way integrated in the clothes, you can touch, for example, with a glove and money will be written off from your account.
- Recently, the issue of contactless payments security is being actively discussed. People, who want to buy gadgets with the function of contactless payments, are interested to know: what will happen, if this glove is lost?
- There will be something similar to what would happen if you lost your card. You can call the bank and block the account. It means that the risk is limited. With gadgets it is even a little safer because there is no gadget in itself, but it is usually paired with something else. I think that very soon users will be able to define and customize what operations and in what scale can be made. The main device, for example, the phone, which provides for authorization with a number of factors, can be used without a PIN code for all purchases in small amounts, for major acquisitions you may program introducing an additional code or a fingerprint confirmation. Or with such gadgets as a glove, you can pay for a trip on the subway and make purchases of up to 300 rubles for a total amount of not more than two thousand rubles per month. These figures are only an example and may be set at the decision of the owner. It is realistic to prohibit a transaction, when the glove is in a certain distance from the main device. Thus, if the glove is lost, for others it is just a piece of garment. This, of course, is the technology of the near future, but the individual components of this scenario have already been implemented or are being tested.
I would like to note that we analyze different ways of authentication. A fingerprint scanner, which is now built into many smartphones is just the beginning. MasterCard, for example, studies the identification with the cardiac rhythm. While the approval of a purchase with a fingerprint still requires some physical action, the confirmation with cardiac rhythm, which is unique for each person, is an unconscious action, the heart just works, and the device that is constantly with you, understands that it is you.
Once you have removed the device monitoring your cardiac rhythm, and it moves away from you, from your phone, all this combination collapses. Today there is already such a device, it is Nymi bracelet. I think in the near future there will even be a more discreet element, such as garments.
Moreover, when we talk about tokenization, placing tokens in the device, there is a link between a specific device and a specific token. Apart from this device the token does not make sense. It is possible to pay for purchases either with the device itself or via a contactless technology by touching a terminal in a store, of course, previously the personality being verified.
- What does MasterCard think of the arrival of digital currency on the market, in particular, the Bitcoin? There are already banks that issue credit cards in Bitcoins, while global banking giants invest in research and development of this currency and search for ways of its widespread use.
- There are a few points here. The first is a very interesting technology that is behind Bitcoin, the Blockchain. We are studying its limits and possibilities. In different countries, it may be applied in completely different ways. Second: it is important to understand that some states can on the level of governments and regulators limit the application of crypto currency or completely forbid it. Being a global company, MasterCard complies with the legislation of each country in which it operates.
It is still too early to talk about how it all will finish, and what it may result in. Even today, it is clear that Bitcoin is just one example. You can build a closed eco-system based on Blockchain, you can build an eco-system within a certain limited number of players. What we see today is only the first steps of this technology.
However, we have recently announced investing in Digital Currency Group (DCG), which cooperates with more than 50 projects based on using Bitcoins and other crypto currencies. By supporting this project, we will continue to explore and to evaluate new technologies and innovative solutions and develop relationships with various players in the market.
- Traditional banks are against Fintech start-ups. What do you think about them? Is this threat so real for banks as they say?
-We're doing our best to develop start-ups both as ideas and as full services. For their formation and scaling it is necessary that the idea found an appropriate support from the banks, as these two can not exist without each other. Banks can not innovate every day simply because they have to provide for a certain level of stability and reliability, and start-ups can not overnight become major banks or get access to millions of clients. This requires time, money and other resources.
So, we do everything to make start-ups available in terms of the potential implementation of new technologies for bankers. With this aim we launched our accelerator Start Path, in which many start-ups from different countries have already participated, including two Russian projects: Instabank and Rubbles. Today already we see many examples of partnerships between banks and start-ups.
- Online commerce is gaining momentum in the whole world. How can this business be regulated?
- It is quite difficult to definitely say what the regulation will be. It is much more important to understand that changes take place very quickly, and buyers are happy to start using more convenient formats. Today, you can save the banking card data in an application on your smartphone, get a taxi, arrive to your destination and that is it. You can go on with your affairs, and payment will happen automatically. The card should not necessarily be physically present there at the time of payment. The questions here are as follows. What country did the transaction occur in: where there is the server of the bank that handled the payment, or where the bank which issued the card is situated? In a country where the taxi driver is registered as an entrepreneur, or in that which the buyer is a citizen of? These may be four different states.
So, there is no definite answer, and the only thing that can be said is that the boundary between the physical and the digital world started to wear off a long time ago, and is close to disappearing altogether.
Interviewed by Eugenia Komleva, Banks.eu
You can find previous interviews from the series here:
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