MasterCard has invested heavily in near-field communication technology for point-of-sale payments and in PayPass wallet services to address the ecommerce experience over the past couple of years. The company recently reorganized and created a new group focused on convergence.

“We have almost taken a step back and said that we need to think about this at a level of the future user experience for payments,” said James Anderson, group head of convergend product development for emerging payments at MasterCard, Purchase, NY. “And it looks a lot more like a world of converged user experiences or multiple devices being used to conduct commerce, including payments, and we need to solve at that level and not at the specific program level.

“You have a POS use case, you have got a pure remote use case and you have this in-store remote use case,” he said. “It is pretty clear that people are going to be using different devices to make those payments.

“But we can’t make the consumer figure out a different way of paying every time. We can’t make them solve the usability problems themselves, we have to solve it for them.”

MasterCard’s first efforts on ramping up its converged payments will be introduced at the upcoming Mobile World Congress in Barcelona.

In advance of that event, Mr. Anderson spoke with Mobile Commerce Daily about how he sees the mobile payments space evolving and the challenges faced by some competitors.

Looking ahead, will the current fragmentation that exists in the mobile payments space continue or will there be some consolidation?
What is going to happen is there is going to be a separation of roles.

What has happened so far is that everybody has tried to solve end-to-end because the pieces of the puzzles and the layers have not been clear. So you have ended up with a lot of little vertical stovepipes where somebody is taking responsibility end-to-end.

That is OK while innovation is happening, but typically when people get line of sight to the answer, they decide which role they are going to play and then they invest heavily against that role. And that typically creates a much more scalable structure.

What is going to happen is that there will be entities who want to own the consumer shopping experience. The most likely entity who wants to own that is the merchants. So I see the world of merchant apps proliferating because I think it’s a powerful way to enhance the shopping experience.

But right now what all those merchants are doing is embedding payment and almost sort of hard coding payment into it. The problem with that if you extrapolate a little bit, is that it ends up with everybody having cards stored in hundreds of apps and I do not think that is a great user experience.

What is more likely is that there then becomes a separation where payment becomes a service to those applications, and one invokes the payment function form within that application but the payment function is actually managed by a payment specialist. In that case it is our opinion that the banks are  in  a great position to do that.

Will NFC’s promise as a crucial part of the mobile payments equation bear out?
I am vice chairman of the NFC Forum, so of course I am a believer in that type of technology.

NFC we think is the best technology for delivering the POS use case, where you are interacting with a terminal. We spent a lot of time looking at a lot of different technologies four or five years ago when we choose to invest in NFC. And we went back and took a look again recently and the reasons we identified were still valid.

But there are other use cases, such as classic ecommerce on a phone where clearly nfc is irrelevant.

If you look at the in-store remote use case, NFC can actually play a role but it is not the card emulation role that we have spent a lot of time on but it is actually about tag reading. The same way you can scan a QR code you can tap an NFC tag to take you to a shopping basket URL.

We think the technology should be aligned with the business problem. The business problem for POS payments is speed and convenience, and we still think NFC is the better technology for that use case, but now we have definitely see this convergence happen where the mobile phone as an Internet device is an obvious reality, and we need to have convenient payment in that use case as well.

Do mobile payments apps offering lower or zero interchange fees have the potential to disrupt the space?
Payments is a big business so there are a lot of different ways of looking at the  business and trying to be successful. But there are some basic fundamental problems you have to solve in any payment business. We solved them in the card-based payments 40 years ago.

You need to go get consumers and you need to go get merchants. And consumers have to have a value proposition for using a product and merchants have to have a value proposition for accepting a product. Those are fundamental, those are intrinsic to having a payments business.

So anybody who wants to come in and disrupt a business has to answer the fundamental question of how you are simultaneously going to get consumers to adopt the product and merchants to accept the product on a relevant time frame so that you can be successful. And you have to disrupt consumer behavior where they are used to paying with one method where they see one benefit, such as points or miles, and go to another method.

It can be done. We are not saying it can not be done, but those people have to answer the questions of how you are going to do that.

We have 1.9 billion card holders and 33 million plus merchants, so we do not have to answer that question. We have a different question, which is how do we transition those people – the consumers and the merchants – from an existing approach to a new approach.

But the disruptors have a harder question to answer because there are not too  many people who have been successful in making a large scale payment play happen. Including very well-funded people who had lots of money and a good amount of time.

What role and how big a role does mobile play in a world of converged payments?
Its role is pretty critical. If you look at where the consumers are spending their money and their time, it is all on mobile devices versus fixed devices. The laptop business is declining and the mobile and smartphone business continue to grow very strongly.

I think mobile is the locus of this whole strategy. We have to accommodate the use cases for laptops and PCs but our design is all around mobile, and the use cases we talk about are all around mobile.

Through the mobile platform we have the opportunity to have a trusted device at the edge of the network and that is pretty powerful in terms of payments because of the opportunity to know what device you are working with and to know what person you are working with, which have sort of eluded us in the PC world.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York