‘In my world, it’s called theft’: How Ajay Banga wants to change inclusion

Count the CEO of Mastercard among those who think in-kind donations and financial aid systems are corrupt.

“We are in the business of killing cash. And so, who is the single biggest generator of cash in an economy? It’s the government paying its citizens and giving social benefits,” he said. “During the distribution of those social benefits globally, 30 to 40 percent of what’s distributed does not reach the citizen. In the NGO world that’s called leakage, in my words it’s called theft.”

Banga wants business leaders to take economic development more seriously; to stop looking at financial inclusion through their short-term returns lens, rethink how they see capital and open up to the “enormous” money-making potential of bringing people out of poverty, he said Wednesday on the main stage at the Bloomberg Global Business Forum in New York.

“I’m through with ticking the boxes in the corporate sphere,” Banga said. “That’s not what brings change… the more we talk about the long-term and we say ‘Ajay, I’m not making more money at this and I’m doing for the long-term,’ nothing is going to change.”

Mastercard is currently working with Western Union to create a digital infrastructure model for refugee camps focused on mobile money, digital vouchers and cards, with Kenya as their test bed. The point is to remove the intermediaries and losses associated with in-kind donations, brings funds directly to beneficiaries and give people some control over their financial health.

The work is still in an exploratory phase, but the plan is to use Mastercard’s digital voucher program to provide chip cards to refugees and host community members. The cards would be loaded with points they can spend on everyday purchases and are designed to work on or offline so participating agencies such as the International Rescue Committee can monitor different programs.

“We’re using technology and getting them to record their payments on an electronic mail, so that they can go to a bank and say, ‘You can see I have this much revenue everyday,’ and the bank can make a better decision on lending,” he said of the company’s efforts in Kenya. “By their using it, I make money from their transaction. The bank makes money. The [small businesses] are happy. That, to me, is a business opportunity that is connected to our core competencies.”

First step for business leaders: know the difference between “so-called poverty alleviation” and taking people from poverty to prosperity. The former is only the first step toward prosperity and legitimizes the idea that there isn’t enough of a business incentive in this work, he said.

But there isn’t any trust on this topic between governments and private companies, and that’s a huge problem, he added.

Banga said his company spends a lot of time in developing countries trying to convince governments and other groups about the importance of applying technology to drive inclusive growth or give people identities (because if someone doesn’t have a formal identity it’s “kind of like being in prison”), he said. Mastercard has committed to pulling 500 million financially excluded people onto the financial grid; he said it’s currently at 330 million.

“The first reaction from government and multilateral institutions is: why is this guy doing it and what’s in it for him?” he said.

A spokeswoman for the International Rescue Committee said the it “welcomes the investment and innovation from the private sector to build up the digital infrastructure that would make the delivery method faster, more versatile and transparent and lead to the delivery of better aid.” “Cash relief” is one of the most efficient and effective forms of aid, she said, specifying that cash can be digital cash as well as hard cash.

But the reality, to Banga, is that when business people see money in it, change tends to actually take place.

“My only anthem is, ‘Look, there’s money in this.’ At the risk of sounding mercenary: when you want change, you want return.”

Image via Bloomberg

Inside Mastercard’s investing approach

Jeff Allen Mastercard venture capital

For Mastercard, investing is less about commercial partnerships and more about relationships.

“A lot of our investments were driven historically because we wanted a preferred commercial arrangement with a partner, like exclusivity for example. We realized that although the commercial relationship is a key part to why we make investments, we can’t let that dictate too much as to why we make an investment,” said Jeff Allen, who runs the company’s strategic investing function, on this week’s Tearsheet podcast.

Edited highlights are below.

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Below are highlights, edited for clarity, from the episode.

Adjusting the investment approach to align incentives
“We need to invest in quality companies first and foremost because if these companies and partners aren’t performing on their own, that commercial relationship is worthless.

We’ve definitely been a lot more disciplined over the last few years in terms of the types of companies we’re looking at and getting our business units involved in understanding why we make investments.”

Mastercard’s investment philosophy and approach
“There are three pillars as to how we go about investing. Our first approach is as a limited partner in several venture capital funds, both within the U.S. and internationally. The idea there is to leverage the expertise, access, and insights that venture capitalists have and to get access to their portfolio companies for potential co-investment and acquisition opportunities.

Our second approach is through Start Path, which we’ve had for three or four years. Our team kind of bristles when they’re described as an accelerator program. They like to view themselves more accurately as our startup engagement program. The idea for startups that go through the program is not necessarily just that they’ll be co-located in a working space and get access to a bunch a mentors. It’s about the access they get to Mastercard business units and our customers and partners. Because we’re a payment network, we sit in the middle of banks, merchants, corporates and governments. It’s compelling for startups to get access to all this. We invested in Kasisto, a conversational AI platform, through Start Path.

The third pillar is our strategic investment team. This is more later stage, larger check sized investment. Within this space, we’re being more disciplined. We investing in Masabi, a platform for transit agencies to issue mobile tickets. The MTA in New York City is one of their customers, enabling customers LIRR and Metro North riders to buy tickets from a mobile app.”

How investments are managed after writing a check
“I stay deeply personally involved. We didn’t really have that oversight on the overall investment point of view and that was part of the reason I came onboard. Every investment we make requires a business unit sponsor, who raises her hand to be accountable. If that investment doesn’t perform and there needs to be an impairment, that’s going to run through her P&L which will impact performance and compensation. We’ve formalized this process over the past few years and because business unit executives change jobs more frequently that corporate venture capitalists, we want to make sure executives stay committed to their investments.”


How Mastercard is applying lessons from Apple Pay to its plastic cards

Apple may have gotten people used to the idea of authenticating payments and verifying identity with their fingerprint, but that Pay product hasn’t really taken off yet. Now, Mastercard wants to bring that behavioral habit to its cards.

The credit card giant revealed Thursday that it’s testing fingerprint biometrics in cards in South Africa to help it to detect and prevent fraud, with plans to run the same trial in Europe and Asia. A future version of the card will employ contactless technology, according to Mastercard.

“Companies are looking at Apple Pay’s failure to really take off and thinking about how to improve the user experience of both mobile and existing payments systems,” said George Avetisov, CEO of biometric security company HYPR Corp.

The card works with existing chip card terminals at the point of sale. Customers just insert the chip per usual while keeping their finger or thumbprint on the embedded sensor. At least for now, customers have to go to a physical bank branch in order to obtain the card and register their fingerprint to it.

It almost seems like a step back from global mobile payments efforts – but then again, mobile payments haven’t really reached their tipping point in most regions yet, with Asia being the exception.

Mastercard’s main business may be in cards but the company has already made strides in innovating mobile payments, most notably by launching payment technology in October that lets customers verify their identity with fingerprints or selfies when shopping online.

“It’s going to take a long time for biometrics to kill the password, but there will always be some kind of use case for the password as long as it’s around,” Avetisov said. “It’s the same thing here. It’ll take a long time for mobile payments to kill credit cards, and there will be interesting use cases for plastic credit cards.”

It is unrealistic that the biometric cards will come to the U.S., since its issuers have just migrating away from magstripe cards to chip cards requiring signatures from cardholders. The point of the migration was to increase security and reduce card present fraud but many argue the switch from stripe to chip makes little difference unless cardholders can enter their pin to verify a payment, versus providing a signature.

Many merchants and retailers still haven’t implemented a year and a half after the deadline to do so. The delay stems largely from the high costs associated with the migration, and it’s likely there will be similar pushback if they’re required to implement a chip-and-pin process.

“The next logical step in EMV authentication is chip-and-pin, however, most issuers have balked at the increased cost,” said Mike Moeser, director of payments at Javelin Strategy. “Deploying a fingerprint scan on a card would be a significantly more expensive EMV deployment that likely would not be cost justified.”

Nevertheless the biometric card is a useful innovation for the security and usability of credit cards. Mastercard should expect feedback from the test on how it can work with merchants in using biometrics to defeat counterfeit card fraud at retail locations, Moeser said. It’s also a useful application in areas with poor or no Internet connection and a stronger security measure for high value or no-limit credit cards, Avetisov said.

“People need to understand it’s going to be a very long time before we kill the credit card,” he said.

Paypal adds another mobile wallet to its arsenal

PayPal is bringing mobile payments to Europe with its newest partnership.

The eBay spinoff just announced an agreement that connects PayPal to telecom giant Vodafone’s Wallet app, including capabilities to make contactless payments at over 400,000 retailers in Europe via PayPal.

“Money is going digital, and the smartphone is at the center of this transformation.” said Rob Harper, director of mobile commerce, PayPal UK. “Mobile payments have long been at the heart of what we do. As mobile technology continues to evolve, we will continue to look at new ways to make it easier and faster for our customers to pay.”

The alliance marks the third agreement PayPal has made with a mobile wallet in the past four months. Visa and PayPal got over their beef and agreed to bring PayPal to Visa Checkout in July. PayPal then cut a deal with MasterCard, opening up MC tokenization to PayPal customers.

Now that PayPal has agreements with the two biggest credit cards and a European telecom company, look for more agreements with mobile wallets. But perhaps a Venmo integration to help solve the lingering monitization question is on the horizon.

5 innovative IoT payment products

Ever dream of paying for a burger and fries using a fashionable glove instead of your wallet? Companies, including those without reputations as technology firms, are creating integrated payment devices that change the way we think of the Internet of Things. From purses to rings to refrigerators, customers are now presented with multiple creative products with payment capabilities. By dreaming up creative concepts and partnering with payment providers, companies are pushing the envelope of what you can use as an IoT payment device.

Here are 5 companies making innovative IoT devices with payment capabilities.


The NYC based startup specializes in smart jewelry, combining fashion with IoT technology. While wearing Ringly products, customers enjoy features like smartphone app alerts, calendar notifications, and step tracking for fitness monitoring. Users receive alerts via discrete lights and vibrations on their rings or bracelets. In 2015, Ringly inked a deal with MasterCard, bringing mobile payment capabilities to owners of their fashionable products.

“We created Ringly to keep women connected to the people, messages and notifications that are important to them,” said Christina Mercando d’Avignon, founder and CEO of Ringly.  “Through our partnership with MasterCard, Ringly will not only be able to keep people connected, but will provide another layer to how our customers can use their jewelry while on the go. Our mission is to make women’s lives more manageable through beautiful jewelry and discreet technology.”

Ringly is still testing the mobile payment integration, and plans to release the new capability in the near future.


The iconic fashion shop has shown it’s moved into the 21st century with a variety of IoT fashionable payment devices. Currently featuring 11 unique IoT products, customers can choose from various types of smart accessories with payment capabilities, including keychains, bracelets, and iPhone cases. The range of products, known as TOPSHOP x BPay, is powered by Barclay’s BPay, creating a new type of product for both the bank and fashion retailer.

“This is a really exciting partnership with TOPSHOP and marks the first time that our bPay chip is being incorporated into a product range from a major fashion retailer.” said Tami Hargreaves, Commercial Director, Digital Consumer Payments at Barclaycard. “The collaboration shows how the worlds of fashion and technology can combine to  create a stylish and easy new way for people to pay using contactless, for everyday things – be it a morning coffee, a new lipstick or a bus trip across town.”

TOPSHOP x BPay products are available online and in stores, and TOPSHOP has announced a soon-to-be released IoT integrated jacket.

Adam Selman

Pop star Rihanna’s go-to clothing designer is getting into IoT mobile payments, too. Designer Adam Selman recently agreed to a deal with MasterCard, integrating payment chips into a upcoming fashion line. Although Selman isn’t a tech expert, he’s known in the fashion industry as an innovator and risk taker, required traits to challenge integrating payment chips into high fashion clothing.

“Usually technology’s role in fashion is behind the scenes. What sets the MasterCard program apart is that it features the technology, while still remaining invisible, yet interactive and totally functional with the wearer.” said Selman. “It’s exciting to be part of a project that is creating something new and fresh. At the end of the day, that’s what fashion is all about.”

Customers will be able to purchase from multiple products designed by Selman featuring mobile payment capabilities, including a dress, sunglasses, gloves, and a clutch purse.


Moving away from wearable IoT payment devices, Samsung has created the most technologically advanced fridge available for retail purchase. Already established in IoT products, Samsung has released a smart fridge, known as the Family Hub. Users access the Family Hub smart features through a 21″ touchscreen that accompanies the fridge, and includes app integrations like music streaming through Pandora, recipe books through Allrecipies, and the ability to look into your fridge via cameras through Samsung’s View Inside. Notably for payments is the integration of MasterCard Groceries, allowing users to purchase groceries for delivery while standing in front of a smart fridge.

Samsung is no stranger to the mobile payments world. The company recently rolled out its Samsung Pay feature for smartphones. The integration of payments into a fridge is just one of the ways Samsung is gaining market share of mobile payments. The Family Hub is available now and costs around $6,000.

SAIC Motor

How can we not talk about the white whale of IoT mobile payments: the car? After detailing mobile payments in cars a little while back, the first internet car is about to debut. The China based SAIC Motor is releasing the Rowe RX5, with multiple online features including online navigation, communication, and music capabilities. SAIC also features YunOS, Alibaba’s 3rd party online payment solution.

The partnership with SAIC is another play by Alibaba to expand its financial services offering, ANT Financial, Alibaba’s affiliate that runs Alipay. Combined with the new AXA partnership, which will focus on distributing insurance policies through Alibaba’s online platforms, Alibaba’s showing its seriousness to expand its financial services capabilities. The RX5 is currently available for pre-order, with an intended release date of August 2016.

Photo credit: ETC-USC via Visual Hunt / CC BY

Mastercard unveils omnichannel digital payments, eyes global rollout

Masterpass by Mastercard

On Thursday, Mastercard announced an omnichannel, digital payment service called Masterpass.

With Masterpass, a customer can check out online or via merchant apps by simply clicking a Masterpass button and authenticating to complete the transaction. In-store, a customer can tap to pay at contactless-enabled merchants.

Masterpass is currently available at hundreds of thousands of merchants online or in-app. According to Mastercard, the technology will also be available at more than five million merchant locations in 77 countries that accept contactless payments. Contactless capability will first be available to Android device owners in the U.S.

Merchants expected to deploy Masterpass in the coming months include JetBlue, Saks.com, Lord and Taylor.com, Subway’s app and The Cheesecake Factory’s app.

White label solution

Masterpass will also be available to Mastercard’s issuing partners to deliver a bank-branded digital payment solution. Over 80 million accounts will be automatically enabled through issuing partners as the service rolls out globally.

Initial partners supporting Masterpass include Ally Bank, Bank of America, Citi, Capital One, Federal Credit Union, and others. Rollout of Masterpass-enabled solutions from issuers in the U.S. will begin later this month, with global rollout expected to complete by the end of 2017.

“The ‘new normal’ for customer engagement means giving customers the ability to buy something wherever and whenever they choose.” said Paul Moreton, vice president, digital product management at Capital One, in a press release.  “The Masterpass digital payment service will allow us to provide our customers with another convenient and easy way to pay,” he said.

The state of mobile payments

Digital wallet transactions are expected to grow to $668 billion by 2019, according to WorldPay’s 2015 global payments report. According to the report, digital wallet transactions should overtake credit cards by 2019.

A market leader has yet to be crowned in the digital payments market. Many heavyweights, including Apple, Samsung, Google, Alibaba, Visa and Chase are competing for customers. Among the barriers digital payments face to winning the market are reach and scale, security concerns, and ease of use.

If a customer isn’t sure her preferred payment option is accepted in a particular store, she can easily opt to use other forms of payment. If a digital payment interface isn’t easier than swiping a card or taking out a wallet, adoption would could be slower.

Loyalty programs are seen as crucial to successful adoption of digital payment solutions. Not surprisingly, one of the most successful digital payment solution is the Starbucks app, which allows customers to pay for their Frappuccinos and also receive rewards.

Mastercard’s push into digital payments comes as 5 of the largest US banks have all announced that they’re introducing their own forms of digital payments. Through the clearXchange network, banks like Chase and Bank America will offer their account holders the ability to send money to other account holders, even if they bank at other institutions.

High Five! The top 5 fintech stories we’re following today

5 trends we're tracking in finance

[alert type=yellow ]Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s newsletters .[/alert]

1. What’s the fuss about LendingClub?

The largest U.S. marketplace lender is in a whole lot of trouble. It’s unclear whether LendingClub’s current financial troubles are a result of the shady dealings of its (now ex-) CEO Renaud Laplanche or whether it’s a broader company issue. Either way, it’s a big deal. Here’s why.

2. How DailyWorth turned a newsletter into a roboadvisor for women

It’s a good time to be a woman investor. At DailyWorth, founder and CEO Amanda Steinberg is using the data amassed from her 7 year relationship with her 1 million newsletter subscribers to develop a roboadvisor to help women become smarter investors. DailyWorth’s wraparound roboadvisor service, which provides financial education, guidance, encouragement, and even some humor, is just one in a series of new fintech initiatives to empower women. To get your full girl power fix, read on about SHE: The ETF that trades on Female Empowerment, and Ellevest, Sallie Krawcheck’s new digital investment platform that wants to change how women manage their investment strategies.

3. Big banks stake fintech claims with patent application surge

Big banks are getting into the fintech frenzy by … filing patent applications.  The prominent financial institutions are firing off patent applications on technology that has already been integrated into existing products, speculative products, and up and coming key technologies. Just how many patents are we talking about? Since 2013, big banks have filed a whopping 2,679 patents (at least!) in hot areas such as blockchain, analytics and cybersecurity, a surge of 83% from the prior three years. These patents, when granted, would allow big banks to protect their innovation investments. However, this tactic comes with a price. Many of the technologies that big banks are trying to patent are network-effect technology; the more walls big banks erect, the less these technologies are able to grow.

4. How Charles Schwab fought back against roboadvisors

In June 2014, roboadvisors and the startups launching them were looming large on the investment horizon. Instead of hiding its head in the sand, Charles Schwab decided to embrace this new technology by creating its own roboadvisor service, Schwab Intelligence Portfolios, within the year. Here’s how Schwab did it. By using questionnaires to gauge clients’ investment goals, risk comfort, and a number of other factors, Schwab Intelligence Portfolios matches clients with investment portfolios tailored to their individual investment profile. However, according to Michael Kitces, Schwab may have to make some adjustments to the service fairly soon, in order to comply with the upcoming DoL fiduciary rule.

5. Why it’ll be Visa and MasterCard – not tech start-ups – that truly disrupt banking

Credit cards hardly seem disruptive – maybe because they’ve been around since the Roaring Twenties. Nevertheless, Alexander Vityaz argues (persuasively, we think) that credit card companies are already leading a quiet revolution in the finance industry. Thanks to their global, digitalized presence, Visa and MasterCard are slowly transforming into banking corporations, leaving banks acting like subsidiaries of the credit card companies. At the end of this process, Vityaz sees banks becoming faceless utility providers, much like your electric or gas company.

Photo credit: Loozrboy via Visual hunt / CC BY-SA

New technology turns smart cars into payment devices

payment technology turns the car into a credit card

Payment technologies in cars have gained a lot of momentum in the past few months. From the recent successes of Uber, GetTaxi, and Lyft, to the prospective idea of a fleet of driverless Tesla-Uber vehicles, financial technology companies have been able to enter into the taxi world through providing payment services. However, the establishment of strategic partnerships in the last year has given insight into a new, and bigger, concept: Turning the personal automobile into a credit card.

MasterCard and the payment key fob

Mobile payment companies have entered the personal automotive market in two distinct ways. The first is turning the key fob into an Internet of Things (IoT) item. By embedding physical objects with network connectivity in order to exchange data, normal objects are transformed into payment devices. MasterCard, using its Digital Enablement Service, has partnered with General Motors to release an IoT key fob in 2016. In this alliance, MasterCard has partnered with a multitude of companies in various sectors, including fashion (Adam Selman), wearables (Ringly and Nymi), auto (GM) and tech (Qualcomm, NXP, and TrackR). Through this partnership, MasterCard has broadened its Digital Enablement Service product line, allowing customers to pick a more specific wearable that fits their needs and desires.

MasterCard’s partnership with GM is an excellent way to capitalize on current products and technologies. However, it’s more focused on providing customers with “another” way to use payment services on the go, not turning the car into a credit card. With that in mind, we move to the second way mobile payment companies are entering into the automotive world: Turning the car itself into an IoT object.

Turning the car into a payment device

Visa unveiled a new partnership with Honda and ParkWhiz at the Mobile World Congress in Barcelona earlier this year. Visa is providing accessibility to its Token and Checkout services to Honda, integrating one-touch payments into the car dashboard/head unit.

While both the Visa dash unit and MasterCard key fob allow payments on the go, that’s where the comparisons end. Honda has developed two apps, allowing consumers to purchase gas, convenience items, and public parking time while remaining seated in their car. Due to the full-dash integration, the apps/Visa have seamless access to the consumer’s car. When low on fuel, the car provides an alert and GPS guidance to the closest gas station, the precise amount of fuel needed to fill the tank, and automatically pre-pays the exact fuel cost at the pump.  Instead of waving an IoT device at a hotspot on the pump, the whole transaction takes place on the car dashboard, turning the vehicle itself into a mobile payment platform. The three companies are aiming to start product testing later this year.

Apple’s a dark horse

There is another company that may be attempting to accomplish the goal of turning the car into an IoT object: Apple. There have been countless reports about Apple’s “Project Titan,” including hiring employees from Tesla, strange noises coming from Apple’s Sunnyvale complex, and even a “secret car lab” in Germany. Although there is no confirmation that the project even exists, it can be assumed that Apple will integrate its Apple Pay system into the car’s dashboard.  Unlike Honda, Apple would be able to work straight with app developers in order to maximize the potential of an IoT car. With Apple’s already established mobile payment system, the transition into the car dashboard seems like a smooth and easy concept.

Although nothing tangible has been released for public use, the concept of an integrated payment system in the dashboard of the car is enticing for both consumers and business alike. Once the integration into the car dashboard has been smoothed out, the opportunities for strategic partnerships are vast. Companies will have to make strategic alliances similar to Visa and Honda, leading to opportunities for financial technology companies to link as many services together and to become assets to car manufacturers.

Sky’s the limit

Other than the gas and parking examples, which companies are already working on, other use cases include:

  • Purchasing food from a restaurant while driving there, and the kitchen being informed of when to cook the food in accordance with traffic and arrival time
  • Purchasing groceries while driving to the supermarket, while the supermarket knows when you will be arriving to allow curbside delivery
  • Emergency mechanical situations, where the car guides the driver to the nearest mechanic, with the part needed to be fixed already waiting and paid for before the car arrives

Although these examples seem incredible, some people may not be comfortable with having a fully integrated IoT car. For those who don’t embrace this concept, they can still use products like MasterCard’s key fob to pay on the go. However, an IoT car may be essential for many purchasers in coming years. This level of connectivity may be a deal-breaker for millennials, the next generation of car buyers. Especially with connected cars, the integration of in-dash payment processing may be a requirement for car companies to maintain market share. The next “most popular car” may be the one that best turns the car into an IoT object, providing the best services for on-the-go payments. However, if companies continue to team up and innovate together, we may see some truly remarkable features in the next generation of IoT automobiles.

Photo credit: steakpinball via Visual Hunt / CC BY

Why banks like BMO are testing Pay by Selfie technology

BMO introduces pay by selfie technology to its clients

As the US enters an era where the responsibility for credit card fraud is shifting to stores and merchants, banks are looking for new ways to verify user identities when you’re using one of their credit cards. The concern about security is well-founded: In 2014 alone, over 1 billion personal records were illegally accessed, and that number will certainly rise as hackers employ increasingly sophisticated schemes to get at customer and card data. Last year, in 2015, Vtech, the US prison system, and the FBI were all hacked.

To reduce the possibility of fraud, Canadian bank BMO announced earlier this week that it’s rolling out a new technology called Pay-by-Selfie. Developed by MasterCard, the technology places a biometric security layer on top of general credit card usage. When a card holder swipes his card during a transaction, he also takes a picture of himself. The photo is then compared to an original photo the card holder took of himself when first signing up for the service. If it matches, boom — the transaction goes through.

Steve Pedersen, head of North American corporate card products for BMO Financial Group, explained in a statement, “Mitigating the risk of fraud is always our top priority, and the inclusion of this technology is going to make payment authentication easier, and will strengthen the security of the entire payments ecosystem.”

BMO is first introducing Pay-by-Selfie to its own employees so it can work out any kinks in the system before rolling it out to the bank’s clients. In August of 2015, First Tech Federal Credit Union was the first financial institution to trial MasterCard’s new technology. BMO and other FIs are increasingly experimenting with new technologies. New EMV standards are spurring a technology upgrade cycle on the cards themselves as well as across the payments ecosystem. Merchants and card providers who don’t follow the new regulations may see their write-offs for fraudulent transactions increase dramatically over the next couple of years.

Technology like Pay-by-Selfie isn’t just about security — it’s also about upgrading banking technology to a point where it’s on par with other apps customers are using. Part of the magic of on-demand driving apps like Uber and Gett is that they have made the entire taxi payment process invisible to the user. Both firms allow you to take a snapshot of your credit card, so there’s no need to clumsily input credit card and identity details using a mobile device. Banks understand that they’re not only competing with one another in this environment, but they’re competing to have their apps on their customers’ home screens.

“As an industry we have to go this way. Our customers are expecting it of us and it’s important for us as an industry to show the innovation,” BMO’s Pedersen told CNBC in an interview.

Pay-by-Selfie was developed by MasterCard in its in-house technology lab, MasterCard Labs. The credit card firm has prioritized driving innovation in payments as it wants to play a major role globally in moving the world from cash to credit. The Pay-by-Selfie service is part of a larger biometric push called MasterCard Identity Check, which offers retailers a range of verification services including single-use passcodes sent to customers via SMS.

According to Finextra, MasterCard’s 6 month pilot program with ABN Amro customers ended with more than three quarters of participants saying that they wanted to continue using a fingerprint and/or facial recognition to complete payments. Approximately 90 percent of the 750 participants in the trial said they wanted to replace their passwords with biometric identification.

MasterCard isn’t the only firm focused on using facial recognition to verify transactions. Online retail giant Amazon recently filed a patent on a process that would “allow shoppers to make purchases by taking photos and/or videos of themselves rather than keying in their account password.” Amazon isn’t the only online retailer thinking along these lines, either. Chinese Internet giant Alibaba is also developing a payment system based on facial recognition.

“[Using] online payments to buy things is always a big headache,” Alibaba founder, Jack Ma told a conference in 2015. “You forget your password, you worry about security. Today we’ll show you a new technology, how in the future people will buy things online.”

Photo credit: d26b73 via Visual Hunt / CC BY

How MasterCard Labs fosters a culture of payments innovation

Mastercard Labs fosters a culture of innovation

Selfies that authorize credit cards, laundromat washing machines that call when they’re free and distributing food assistance in Africa by debit card are all steps on the path toward one common goal, according to MasterCard CEO, Ajay Banga.

“Our vision is a world beyond cash,” Banga explained in a recent interview at the Stanford Graduate School of Business. “85% of the world’s retail transactions are cash and check. Only 15% are electronic.”

To realize that vision, Banga has transformed MasterCard over the last five years by making technology and innovation critical to MasterCard’s identity, and the results are paying off.

Banga, an Indian Sikh who wears a black turban, was previously the Chief Operating Officer at Citibank, a protege of banking mogul Sandy Weill’s, and was being groomed as a potential CEO. But he chose to leave all that behind for a different kind of job:

Citibank had 290,000 — 300,000 employees around when I was leaving. And at a point of time, 200,000 of them used to work for me. And it’s impossible to make change with 200,000 people in your 3, 4, 5 year span. But if you’ve got 5,000, 2,000, 10,000, 15,000 people working for you, you can touch them, feel them, put your arms around them, they know who you are, they can understand you, you can make a difference. You can actually change things in that company. […] [W]hen I joined MasterCard, we had 9% of our population was millennials. It’s now four and a half years later, we closed last year with 34% from millennials. I could never have done that at Citi. I just could not.

Banga has made innovation a priority by forming MasterCard Labs as a center for developing new technologies that reports directly to him. Banga approves the division’s overall budget himself, but doesn’t provide any oversight. “So I told them, here’s the money, you choose the projects. I need commercially viable two products after two years. If I don’t, I’ll fire the whole lot of you and start again.”

At Work at MasterCard’s NYC Technology Hub
At Work at MasterCard’s NYC Technology Hub

One example of using technology to push the boundaries of existing payments is MasterCard’s Identity Check mobile app, which uses selfies as a form of biometric identification. The app addresses the problem that people typically choose weak passwords for authenticating online payments.  As reported in The Verge, users will have to actually blink while taking their pictures to prove that they are not merely presenting a photograph, and MasterCard algorithms can detect the use of video.

Groceries by MasterCard
Groceries by MasterCard

MasterCard is also working with established businesses to develop new products and services. The company partnered with Whirlpool to create an app called Clothespin that helps washing machines and dryers tell customers when machines become available and operate without the use of piles of quarters. Working with Samsung, Groceries by MasterCard is another project of MasterCard Labs that integrates a program within the “family hub” refrigerator. Groceries will learn family shopping habits and “suggest” re-stocking and new products. Over the last five years, the company has worked with partners such as the World Food Program to distribute aid to the poor in developing countries, and recently they’ve given cards to Syrian refugees.

Innovators at MasterCard Labs are also turning to the creative community for a source of ideas outside of the kinds of workshops and hack-a-thons designed to generate ideas from engineers and programmers. This weekend, MasterCard Labs will host its first “Fashion and Design Hack” with students from the New School’s Parsons School of Design. MasterCard executive Sherry Hammond explained to Finextra that the company wants to, “integrate design-led thinking into payments innovation and tap into the creativity and ingenuity of the school’s design students.”

MasterCard Labs executive John Sheldon recently told Fast Company that his division’s job is “looking ahead three to five years, taking risks, failing smart, quick, cheap, and learning something along the way.” MasterCard Labs strives to “be the company’s own disrupter,” hosting 48-hour “Innovation Express” events to create new products such as the pre-payment and ordering app Qkr, which has been taken up everywhere from Yankee Stadium to restaurants all over the US to school lunch programs in Australia. Despite all his team has accomplished, one challenge remains for Sheldon, “I also want to solve for giving the tip to the guy at the garage who brought my car back without a scratch – because it represents the barrier between where we are now and the cashless society we envision.”

MasterCard’s commitment to innovation seems to be paying off for investors, too.  The company’s share price is up over 250% over the last five years.

photos courtesy of MasterCard