MasterCard and Visa possess shiny, relatively new toys in their respective digital wallet services.
MasterPass and Visa Checkout are intended to give consumers a better experience shopping online across numerous devices, particularly on a mobile phone. That, in turn, should help merchants better deal with the dreaded cart abandonment outcome as a result of a complicated checkout process.
But while those services might seem attractive sitting in the sandbox, both companies might have trouble convincing consumers and merchants to come out and play with those toys.
"The issue both Visa and MasterCard have with their efforts is that neither one of them has a direct connection to either side of the purchase," James Wester, research director of global payments for IDC Financial Insights, told Mobile Payments Today. "They have a connection to an issuer and they have a connection to a merchant bank, but there's nothing they can do to directly influence what consumers or merchants do."
Visa marketing muscle
Visa will use a heavy marketing push for Visa Checkout, which the company introduced last month to replace the V.me digital wallet in Australia, Canada and the U.S.
The company showed two 30-second commercials last month during a press event to announce Visa Checkout. A YouTube search revealed some more commercials, including a Visa demo meant to explain to consumers how the digital wallet works.
Visa announced initial Visa Checkout partnerships with Pizza Hut, Staples, United Airlines and U.S. Bank. Newegg added the service last week.
"Commerce is just beginning to move from the physical stores to the PCs, tablets and mobile devices, and it's not going to stop," Visa CEO Charlie Scharf said during the press event. "These devices have replaced cameras, calculators, books and more, and they will drive payments from plastic to digital. Our job is to enable this change in a way that is simple and secure."
As MasterCard and Visa seek to add merchant acceptance for their respective services, Wester believes Visa might have a small advantage thanks to its connection with e-commerce retailers through online payments processor CyberSource. Visa acquired CyberSource in 2010.
"But [Visa] still [doesn't] have that direct connection to consumers, and they have to be very careful about that direct connection because that's what their issuers do," Wester said. "The only thing they can do is use their considerable branding muscle to try and change consumer perception of how to buy online. I'm not certain what other options they have."
Visa might have made a direct connection with consumers with a standalone mobile wallet, but the company will not go in that direction. Scharf dismissed the idea when a reporter asked him about a mobile wallet following the presentation.
"A lot of things get conflated into the wallet mentality," he said. "When you talk to consumers about the core benefit that they're looking for, and frankly most consumers don't understand the concept of a digital wallet, to be honest with you, they always go back to simplicity. We know that's what we do as a company."
MasterPass plan
MasterCard's approach to solving current e-commerce problems for consumers and merchants is similar to Visa. In fact, the companies share almost a comparable line of thinking when it comes to mobile wallets.
"I'm going to kid myself and think I'm going to have millions of people download a MasterPass app," Vib Prasad, head of MasterPass Global, told Mobile Payments Today in a recent interview. "Fundamentally what MasterCard has really been successful at is enabling partners to help embed the MasterCard brand into their own experiences, and we're doing the same thing with digital.
"If it's a mobile banking app, we want to be integrated into it. If it's a merchant's shopping app, we want to be integrated into it. It's less about creating something new."
Banks and merchants in the past year have created new experiences riding the MasterPass rails.
Last month, Standard Bank in South Africa launched a MasterPass-enabled mobile banking app. Poland-based uPaid switched its wallets users to MasterPasss when MasterCard replaced the MasterCard Mobile product that had been active in the country for three years.
MasterCard in July announced it would extend MasterPass' capabilities to in-app payments this month. Retailers can use an API to embed MasterPass as a checkout option within a mobile app, mobile website or desktop app. Starbucks Australia and Shaw Theatres Singapore are among the first merchants to add this feature.
Prasad believes MasterCard has the right service for merchants to solve what he described as a "persistent omnichannel problem" across different devices, and even brick-and-mortar locations.
"The merchants are trying to figure out the omnichannel space for consumers to have better tech experiences," he said. "They are trying to put it all together."
Whether that is enough for merchants to enable MasterPass acceptance remains to be seen. Wester, however, believes merchant are not quite convinced digital wallets solve cart abandonment.
"Until they find [a way to solve cart abandonment], I don't think merchant are going to choose any one solution," he said. "It's going to be very tricky for both Visa and MasterCard to say at this point, 'Look we don't really don't have many people who are active users of our digital wallet. We do, however, know there are billions of cardholders out there.' But merchants are savvy enough to know that doesn't necessarily correlate to a lot of users."
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