How open banking and APIs are changing Mastercard's business strategy

By Alara Basul | 28 November 2017

This interview was originally published on our sister website PaymentEye


 

James Anderson is Executive Vice President of Digital Payment Products at Mastercard. Based in New York, he leads his multi-national team to redefine the way the business examines the emerging payments platforms.

PaymentEye sat down with Anderson at Money20/20 to discuss the future of payments, how commerce is moving beyond mobile and how consumers are pushing for a greater digital experience.

How is Mastercard keeping up with innovation and transformation?

One of the threads that we focus on in our transformation is following our consumers and the trends set by them.

As the digital world is changing at an incredibly quick pace, it’s important that Mastercard develops products and solutions that are relevant. We aim to be consistent in recognising that our ability to drive the market is predicated by the issuers that we work with.

Our issuers are the people who directly engage with the consumers, so we want to be innovative and think about what we do and how it enhances the relationship between them.

We’re also investing heavily in technology as we move towards greater digital products. It’s important that we’re taking our best and most secure technologies with us in this transformation. We’ve done an excellent job with security for our card payments, and as now majority of our transactions are on chip cards, we want to make sure that those same approaches can be embedded into digital.

How are open banking and APIs impacting the business?

One of the platforms I’m responsible for at Mastercard is MDES (Mastercard Digital Enablement Service). We built it with the first use case being Apple Pay, and then subsequent to that we’ve been using it for all of our digital programmes to essentially turn the 16-digit account number on your card into a token.

As digital wallets emerge, we want to ensure these tokens work alongside the wallets, and we decided that these should come from the issuing banks. The issuing banks have the key consumer relationship, so we’ve invested heavily into how banks can be the go to market partners for the consumers.

We also have our open API platform – which is where our stakeholders can come in through a single platform. A use case of our open API platforms is the connected cars, which allow us to put a token and a key to allow a secure transaction.

We found that as consumers increase their card use, they are at greater risk of letting control go of where their card number and account details are, so this is an opportunity to put the security directly in front of the consumer.

Consumers tend to like card payments, but there are always opportunities to improve even the most mature products.

That’s the opportunity we have at Mastercard, because of our scale and global reach, and the issuers we work with around the world, we can continue to make the experience better whilst leveraging the digital experience.

How are you using AI at Mastercard?

We’ve tested a few different concepts with AI.

The space we’re seeing more application for AI ourselves is in the fraud management space. As the fraudsters get smarter, our fraud prevention tools also need to get smarter. We see a lot of opportunity for the fraud side, because there’s just such an easy payback to slightly better improvements to slightly better fraud.

AI is part of the solution because it expands our realm of potential solutions.

We have a program called Start Path which is a virtual startup mentorship program and the great aspect about the program is that it gives us exposure on trends and what problems are worth solving, and AI is one of them.

What are the challenges you face and how do you overcome them as a business?

The most fundamental challenge we see as we go towards digital is delivering great customer experiences at scale. We’ve always been an ecosystem, with an issuer and a value proposition, and those are part of our strength at Mastercard. Each of the entities attached to the network have their own role to play and therefor has their own business proposition.

It’s harder to deliver great to end to end customer experiences in the digital world than it is the digital world. That’s one of our biggest challenges because consumers do really gravitate towards the great digital experiences.

I always tell my team that there’s nothing harder to do than something that looks incredibly easy. The consumer delight in something that’s intuitive is very hard to realise until you see consumers use it.

We built a usability lab in our tech hub in New York, so that we can bring users in and test our products. If you haven’t seen your product ideas in real time action with the consumer, you haven’t fully tested your products. It’s the first few seconds on how they react that’s crucial.

For digital, if it’s not intuitive from the first few seconds, it’s not worth the rest of the testing time. Testing with our consumers is an example of how we can get the consumer insight to enable us to really work with their input and keep up to date in innovation.

What will we be talking about this time next year in the payments industry?

We’re on a long journey, and we’ve got a long way to go. Improved connectivity and tokenisation will definitely be one as were seeing an increase in uses for it such as the connected car and connected home devices.

We’re seeing commerce platforms also moving towards tokenisation. The infrastructure seems to be playing out really well. We want to enable better web experiences, and the more value propositions that we can create around your Mastercard that make your life better is a great outcome for us. We’re seeing meaningful transaction volumes now that are making the investments that the company made three years ago look good! Now we’re really seeing the growth in different and emerging markets.

Wearables will also continue to scale. Right now, we’re mainly using phones that are integrated with payments, but that’s not the only way that consumers do commerce by any means, so we’ve got to spread it out.

The adoption of fintechs emerging with banks will also become common. People always talk about fintech and whether it’s a threat. It may be to some level, but it enables a high degree of innovation. We see so much opportunity to create these new relationships with the creative people who have the idea, the banks who have the accounts, the customer, and us in the middle providing the infrastructure.

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