Innovation-Unit Overhauls: Visa and MasterCard Retool to Stay Competitive

For at least the past six months to a year, the big card networks, Visa Inc. and MasterCard Worldwide, have been reorganizing their innovation teams–much of it behind the scenes–as they try to avoid missing out on the opportunity offered by mobile payment.

That opportunity has so far eluded them, and contactless cards–perhaps their last major payment innovation–are stagnating, especially in the U.S.

Of course, the big card schemes are making investments, conducting trials, drafting specifications and pitching “solutions” to their customers, the banks, to promote remote payment, mobile-money transfers and Near Field Communication.

But observers see very little happening on the ground so far, except, as one observer wryly noted, the success the card schemes seem to have had in putting apps on phones to help U.S. consumers find the nearest ATM. “(That) is kind of funny because these guys are trying to replace paper cash,” he said.

To be sure, Visa and MasterCard can’t make NFC phones appear out of thin air or deploy contactless point-of-sale terminals across major retailer chains (more than they’ve already done so by subsidy), or roll out remote payment or mobile transfers. They can only propose standard and secure products and services to banks, along with help in bringing them to market.

But the mass of banks are not buying it yet.

“I talk to a lot of banks, and the case has not been clearly made (by the card networks),” Red Gillen, senior analyst in the banking group of U.S.-based research and consulting firm Celent, recently told me. Visa, as “king of the payment hill,” has a responsibility to fill in the blanks for banks on how they could make revenue from mobile, he said.

Mobile Threats
Meanwhile, threats to the banks’ payments business are growing as the iPhone and its ilk–and more recently contactless peripherals for mobile phones–give third-party payments players an opening to tap the mobile channel.

Those threats have increased in urgency over the past few months as details dribble out about plans by the giant U.S. mobile operators to possibly launch mobile-payment services or even their own payment scheme.

Sources said Visa began making changes in its product development team about six months ago or so, though the concerns about the effectiveness of the innovation unit go back further.

In large part, the concerns led to Visa going outside the organization and to the mobile industry for its new head of mobile. The card organization announced the appointment last month of Bill Gajda, who is chief commercial officer of the GSM Association, where he has overseen mobile-money transfer and NFC Pay-Buy Mobile initiatives for the large mobile operator trade group.

UPDATE: Visa said he would report directly to Elizabeth Buse, who is currently global head of product at Visa, bypassing Tim Attinger, who is global head of product innovation. Attinger had already been relieved of his title as head of product development last year. So, it looks like Attinger is out at Visa. Pam Zuercher also left her post last year as head of mobile, for a position involving sales. But Buse will be named group president for the Asia-Pacific and CEMEA (Central and Eastern Europe, Middle East and Africa) regions, NFC Times has learned, meaning Visa will appoint a new global head of product.

Kranzley To Leave MasterCard
Over at MasterCard, there is definitely a changing of the guard in the innovation unit.

The card network a little more than a year appointed Joshua Peirez as its first group executive for innovative platforms. The 30-something lawyer by training has been expanding MasterCard’s MoneySend funds-transfer program and its inControl transaction-control system and playing up their mobile possibilities.

Peirez took MoneySend global this year, with transfers available via MasterCard or Maestro cards or accounts–if banks roll the program out. MasterCard hopes to develop MoneySend as a network-based service enabling consumers to transfer funds P2P or to send cross-border remittances.

Mobile P2P, however, has failed to take off for any provider in developed countries. And remittances pose particular challenges for card networks since recipients usually live in poor countries with limited access to payment cards or banks.

Like Visa’s contactless application, payWave, MasterCard PayPass is growing only slowly. And its early promoter, Art Kranzley, MasterCard’s chief emerging technology officer and the so-called father of PayPass, is stepping down this spring, MasterCard confirmed to NFC Times. Kranzley is retiring after 22 years with the card company, said MasterCard.

Kranzley was instrumental in the launch of PayPass five years ago in the United States and, therefore, was key in the roll out of contactless bank cards around the world. He also had a strong hand in launching MoneySend.

Kranzley’s departure follows the retirement of Toni Merschen last year, MasterCard’s long-time head of chip programs, based in Waterloo, Belgium. Simon Pugh, MasterCard’s chief of mobile, left quietly at the end of 2009.

As the Visa and MasterCard innovation units try to resurrect the sense of anticipation many banks once felt for contactless, they are looking to mobile phones. According to Peirez, through a spokeswoman, MasterCard continues to work on NFC, along with related technologies, such as contactless microSD cards. There were no specifics, however.

Tiny Payment Cards
Visa, on the other hand, made clear its high hopes for contactless microSD cards, announcing Feb. 15 at the Mobile World Congress in Barcelona plans to launch a microSD packing payWave.

As NFC Times reported yesterday, makers of the new kind of contactless cards–which can bring the connectivity and user interface of the mobile phone to contactless payment without the wait for real NFC–are readying their wares.

One of those card suppliers, U.S.-based DeviceFidelity, is under contract with Visa to develop a payWave contactless microSD. Visa will begin field trials with banks in the second quarter.

The exclusive agreement looks like a mini-coup for Visa, since it locks in a leading developer of the technology in DeviceFidelity, and keeps that company’s cards away from those that would introduce contactless-mobile payment under another brand.

Although, as DeviceFidelity’s CEO Deepak Jain, told me, if U.S. mobile operators were to launch their own payment service using contactless microSDs, they would need cards with a certified application onboard. And Visa is expected to be the first to have them with his payWave-enabled In2Pay cards.

“Both financial institutions and wireless carriers can deploy it freely with peace of mind,” he said.

It seems unlikely the mobile operators would work with Visa if they launched mobile payment, however. The telcos would probably seek more freedom to develop their own payment services, earning revenue from merchant fees and other services.

So for the revamped innovation teams at Visa and MasterCard, there will likely be no peace of mind until their brands greet mobile-packing consumers on handset screens at the point of sale.

Dan Balaban is editor of NFC Times.

HEADLINE NEWS

Case Study: Transit Agency in Portugal Combined NFC with BLE for Mobile Ticketing; Faced Challenges

NFC TIMES Exclusive Insight – The agency that runs ticketing for 19 public bus, tram and train operators serving Porto, Portugal’s second largest city, says it has had success–and faced several challenges–with the rollout of its Anda mobile-ticketing app.

OMNY Hits New Usage Milestone as Open-Loop Payments Rollout Continues

NFC TIMES Exclusive Insight – New York’s Metropolitan Transportation Authority, or MTA, says it continues to see steady growth of its open-loop fare payments service, OMNY, announcing 50 million taps by customers using NFC wallets and bank cards to ride the massive New York City Subway and the city’s buses.

In-Depth: Contactless Open-Loop Pilot in Spain First Project from Vendor Partnership

Mar 11 2021

NFC TIMES Exclusive Insight – Bilbobus, which operates bus service for the city of Bilbao, in northern Spain’s Basque region, says it launched its recent trial of con

Moscow Metro Plans Rollout of ‘Face Pay’ Technology for Fare Collection

NFC TIMES Exclusive Insight – The Moscow Metro plans to roll out facial-recognition technology at every station by the end of 2021 to enable customers to pay fares, officials say. The project, while delayed, would be the largest of its kind globally.

Stockholm Transit Agency Launches Open-Loop Fare Payments for Multimodal Rides

NFC TIMES Exclusive Insight – Stockholm Public Transport, or SL, the city-owned company that oversees major public transport in the city, is the latest agency in Europe to launch open-loop fare collection, offering multimodal rides with a tap of a contactless EMV bank card or NFC device.

Case Study: Amsterdam Transit Operator Seeks to Go Nearly 100% Digital for Ticketing to Cut Costs and Enhance Service

NFC TIMES Exclusive Insight – GVB, Amsterdam’s largest public transit operator, says it seeks to replace an aging closed-loop fare card system and go to open-loop and other digital tokens with the planned rollout of its new account-based ticketing system.

Google Announces Plans to Enable Public Transit Ticketing in Maps App along with Rollout of Parking Fare Payments

NFC TIMES Exclusive Insight – Google has announced plans to launch public transit ticketing for more than 80 cities globally in coming weeks from its trip-planning Maps app and also to enable users to buy virtual closed-loop fare cards–starting with the Clipper card in the San Francisco Bay Area–directly from the app. That’s in addition to enabling payments for parking in more than 400 U.S. cities.

UPDATED: U.S. Federal Government Awards Grants to Help Transit Agencies Roll Out Contactless Payments and Mobile Ticketing

Feb 18 2021

NFC TIMES Exclusive Insight – U.S. public transit agencies have been keen to remove cash and paper tickets from their buses and trains and to keep more distance between customers and agency staffers because of the Covid-19 pandemic. Now they are getting a new boost from the U.S. federal government in the form of grant funds to enable them to enhance contactless and mobile payments systems, among other measures.

German Transit Agency Plans to Complete Open-Loop Rollout on Buses and Trains This Quarter, Expand to Other Mobility Later

NFC TIMES Exclusive Insight – German transit agency SWB Bus and Bahn plans to fully roll out its contactless EMV fare payments service BONNsmart to its bus and train lines by the end of the first quarter, after launching a pilot last fall, confirmed a spokesman, who added that plans call for eventually expanding the contactless service to payments for parking and such micromobility modes as e-scooters.

Large Private U.S. Bus Company Latest to Adopt Mobile Ticketing in Covid Era

NFC TIMES Exclusive Insight – Academy Bus, a large private commuter and charter bus company serving the U.S. East Coast, has launched its first mobile-ticketing service with the SilverPass app, enabling commuters to purchase digital tickets with credit cards or employer benefit cards.

LA Transit Authority Introduces Virtual TAP Card on Android, Complementing Earlier Launch with Apple

Feb 2 2021

NFC TIMES Exclusive Insight – The Los Angeles County Metropolitan Transportation Authority, or Metro, has followed through with plans to offer Android NFC phone users a way to pay fares with the agency’s TAP closed-loop fare card.

Penetration Rates for Contactless Payments Saw Strong Growth in 2020, including in U.S., Say Networks

NFC TIMES Exclusive Insight – The CEOs of both Visa and Mastercard in their respective earnings calls yesterday confirmed that contactless payments continued to grow as a share of all face-to-face card payments, with consumer fears of handling cash building on already strong growth trends for the technology.