Navigating choice in the new payments ecosystem

The pan­dem­ic com­pressed rates of dig­i­tal adop­tion, includ­ing con­tact­less pay­ments, from years into months. Between the first quar­ter of 2020 and the same peri­od in 2021, more than 100 mar­kets saw con­tact­less as a share of total in-per­son trans­ac­tions grow by at least 50%, accord­ing to Mas­ter­card. In the first quar­ter of 2021 alone, the com­pa­ny saw one bil­lion more con­tact­less trans­ac­tions, com­pared to the same peri­od of 2020. Par­tic­u­lar momen­tum was evi­dent in the US and Brazil where, com­bined, con­tact­less pen­e­tra­tion near­ly tre­bled year on year.

The grow­ing appetite for using dig­i­tal pay­ments in a range of sce­nar­ios, whether buy­ing gro­ceries, shop­ping online, pay­ing a bill or send­ing mon­ey to friends and fam­i­ly around the world is fuelled by recog­ni­tion of their ben­e­fits. Accord­ing to a recent Mas­ter­card study, 53% of respon­dents would try a new pay­ment method to save time. Three quar­ters of respon­dents to the same study, includ­ing 81% of mil­len­ni­als and 80% of Gen­er­a­tion X, were open to using dig­i­tal pay­ment meth­ods to help them save mon­ey.

Yet while peo­ple con­tin­ue to demand more choice, often favour­ing dif­fer­ent pay­ment meth­ods for dif­fer­ent kinds of trans­ac­tions, too many options can begin to have more of a paralysing effect, espe­cial­ly with­out edu­ca­tion. The pro­lif­er­a­tion of choice, if unac­com­pa­nied by the nec­es­sary knowl­edge, is as much a chal­lenge as it is an oppor­tu­ni­ty.

“We get bom­bard­ed with choice and it’s not clear why we might want to use one method over anoth­er,” says Paul Stod­dart, pres­i­dent of new pay­ment plat­forms at Mas­ter­card. “It’s often not clear to con­sumers how pay­ment meth­ods dif­fer, such as when mon­ey will leave their account and be received, or the fees asso­ci­at­ed with send­ing and receiv­ing pay­ments at home and abroad. Choice is good so long as the impli­ca­tions are clear­ly avail­able and under­stood by all involved.”

A range of emerg­ing tech­nolo­gies are help­ing to enable a more pas­sive, intu­itive choice for peo­ple while still retain­ing full con­trol and flex­i­bil­i­ty. By assess­ing huge vol­umes of infor­ma­tion quick­ly and accu­rate­ly, AI-pow­ered sys­tems, for instance, can sug­gest a pre­ferred pay­ment option or move mon­ey between a person’s accounts to max­imise sav­ings and rewards. And in the area of con­nec­tiv­i­ty, the tech­nolo­gies that sup­port the inter­net of things can make pay­ments invis­i­ble with­in a consumer’s set para­me­ters, such as a smart fridge that orders milk when it runs low.

Voice and oth­er bio­met­rics allow faster, more secure authen­ti­ca­tion, while nat­ur­al lan­guage pro­cess­ing via voice or using chat­bots is becom­ing a pri­ma­ry mode for peo­ple to pay using a mobile device or no device at all. Real-time pay­ments facil­i­tate faster, smarter and arguably more secure pay­ments, pro­vid­ing peo­ple with instant access to their funds and enable just-in-time pay­ments, such as pay­ment on deliv­ery. Mastercard’s research found that 93% of con­sumers will con­sid­er using at least one emerg­ing pay­ment type in the next year.

Open bank­ing, mean­while, is trans­form­ing the entire dig­i­tal ecosys­tem, fuelling com­pe­ti­tion and inno­va­tion in finan­cial ser­vices to empow­er con­sumers to use their own data for their ben­e­fit. In Europe and places such as India and the US, open bank­ing is enabling more seam­less pay­ments. More broad­ly around the world, account infor­ma­tion ser­vices can help peo­ple man­age all their mon­ey in one secure place, prove their eli­gi­bil­i­ty for afford­able cred­it, and even improve their over­all finan­cial well­be­ing.

Hav­ing evolved from a sin­gle rail pay­ment proces­sor focused on cards, to mul­ti­ple rails, such as bank account-based pay­ments and blockchain, Mas­ter­card is now lead­ing the indus­try. It enables con­sumers to pay with what­ev­er method they desire, through whichev­er device they wish to pay on — even allow them to pay now or lat­er — while pro­vid­ing flex­i­bil­i­ty and con­trol. The com­pa­ny already has inno­va­tion hubs in Ire­land ded­i­cat­ed to research and devel­op­ment of new pay­ment solu­tions, and anoth­er focused on inno­vat­ing for finan­cial inclu­sion in Kenya. It is cur­rent­ly devel­op­ing even more.

“Our goal is to pro­vide any and all of the pay­ment meth­ods that might be avail­able to a con­sumer or busi­ness in a giv­en mar­ket,” says Stod­dart. “Our goal is to ensure our cus­tomers, such as banks and pay­ment ser­vice providers, can pro­vide all the pay­ment ser­vices they might need through a sin­gle access point and rela­tion­ship. The ease of man­ag­ing a rela­tion­ship with just one par­ty is a ben­e­fit, but they also save on the cost of hav­ing to sup­port mul­ti­ple tech­ni­cal rela­tion­ships with vary­ing degrees of con­trac­tu­al lia­bil­i­ties or oblig­a­tions.

“With­in the prod­uct tech­nol­o­gy lay­er, we have increased and expand­ed our range of card pay­ment ser­vices, includ­ing more dig­i­tal card solu­tions. We’ve increased our capa­bil­i­ties beyond cards to include bank account-to-account pay­ments, which often includes instant or real-time pay­ments, and dig­i­tal (includ­ing mobile) wal­lets. And we’re start­ing to sup­port select cryp­tocur­ren­cies direct­ly on our net­work — those that meet our high stan­dards for con­sumer pro­tec­tions and com­pli­ance — to increase pay­ment choice avail­abil­i­ty.”

The pay­ments ecosys­tem will con­tin­ue to evolve at a rapid speed, even when the accel­er­at­ing force of the Covid-19 pan­dem­ic has end­ed. To ensure con­sumer expec­ta­tions are met reli­ably and secure­ly, part­ner­ships will be cru­cial. While new­er, non-tra­di­tion­al providers, includ­ing fin­techs and ‘Big Techs’, are increas­ing­ly trust­ed to pro­vide a greater user expe­ri­ence, banks are still the most trust­ed to hold people’s mon­ey and data. To pro­vide the inno­v­a­tive, inclu­sive and trust­ed pay­ment expe­ri­ences peo­ple expect, providers should lever­age each other’s strengths. Com­pe­ti­tion breeds inno­va­tion, but col­lab­o­ra­tion is in con­sumers’ best inter­ests.

Mas­ter­card is part­ner­ing with its cus­tomers, indus­try lead­ers and reg­u­la­tors to accel­er­ate the future of pay­ments to ben­e­fit all par­tic­i­pants in the pay­ments val­ue chain. The com­pa­ny con­nects con­sumers, busi­ness­es, gov­ern­ments and finan­cial insti­tu­tions to a pow­er­ful dig­i­tal econ­o­my that empow­ers peo­ple with flex­i­bil­i­ty and con­trol, how­ev­er they inter­act.

“There are cycli­cal and sea­son­al trends that con­tin­ue to dri­ve growth with­in the pay­ments ecosys­tem, and the intro­duc­tion of new tech­nolo­gies to serve dif­fer­ent use cas­es and needs will fuel fur­ther growth,” says Stod­dart. “Mas­ter­card is unique because we are able to con­tribute across the full breadth of the ecosys­tem, pro­vid­ing pay­ment infra­struc­tures, appli­ca­tions and ser­vices that use asso­ci­at­ed data to devel­op fur­ther rich­ness in our solu­tion.

“We have long been at the fore­front of pay­ment inno­va­tion and con­tin­ue to lead our indus­try into its next gen­er­a­tion, rid­ing the waves of change. From cards to bank account-based pay­ments, dig­i­tal wal­lets and now blockchain, we are con­verg­ing our pay­ment capa­bil­i­ties to pro­vide the seam­less expe­ri­ences peo­ple expect. We’re work­ing to ensure the future is inclu­sive and sus­tain­able, inno­vat­ing with our part­ners to build trust and inclu­sion for every­one, every­where.”

To learn more, vis­it mastercard.com/startwithpeople

Pro­mot­ed by Mas­ter­card