Mobile Payment Market Heats Up with Addition of MasterPass

It may seem counter-intuitive, but MasterCard and Visa are in the midst of a technology war that may some day eliminate plastic credit cards.

At the recent Mobile World Congress, MasterCard introduced a mobile payments system called MasterPass, while Visa announced mobile payment partnerships with Samsung and Roam, a maker of point-of-sale systems. Both MasterCard and Visa, as well as others including Square, PayPal and Affirm, newly launched by PayPal co-founder Max Levchin, are going after the same golden ring: the emerging mobile payments market.

MasterCard’s MasterPass is a good example of where mobile payments technology is headed.According to Ed McLaughlin, chief emerging payments officer for MasterCard, “MasterPass brings together all of the ways we pay for things, from traditional plastic cards to digital wallets, and gives consumers the ability to make a payment from wherever they are and with one simple experience.” MasterPass will offer checkout services that support anything from tags, mobile devices and QR codes used at point-of-sale to a simplified checkout process for online retailers. It will also provide “digital wallets” that banks, merchants and partners can adapt for their own use, featuring an open system that even MasterCard competitors can use.

MasterPass will be available to consumers through financial institutions by the end of March in Australia and Canada, and later in the spring and summer in the United States and the UK. The service will be rolled out globally during the course of the year. Online gifts company PrezzyBox will be the first to go live with the MasterPass wallet service.

Meanwhile, Visa and Samsung are partnering on a system that will allow users of Samsung phones equipped with NFC (Near Field Communication) technology to pay by simply waving the phone at a special reader. “Contactless payment,” as it is known, is already possible with select credit cards, but Visa’s “payWave” will bring the technology to handsets.

Still, the challenge for both MasterCard and Visa is to get banks and merchants to use it. For that to happen, there needs to be consumer demand, and not everyone is convinced consumers are clamoring for mobile payments. PayPal president David Marcus, admittedly a competitor, said, “I think NFC is just a technology in search of a problem to fix that does not exist because it is really easy to pay in the store.”

The fact is that adoption of mobile payment systems has been slow in coming. NFC-based mobile payment services, including Google Wallet and Isis, a joint venture of AT&T, T-Mobile and Verizon, have had limited tests by retailers. But increased usage could be on the horizon. “Just as it took a long time for consumers to warm up to the idea of paying bills through a Web site, there will be a slow progression toward getting people to take their wallet into the cloud,” writes Roger Cheng of CNET. “For the first time, the act of paying could potentially become both easier and more secure.”