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Understanding Mastercard’s Approach to Real-Time Payments
Consumers, Businesses and financial institutions alike are turning towards faster payment options in large numbers, embracing the improved speed, data sharing, and messaging capabilities afforded by these new payment methods.
As is the case with any emerging technology, companies are
still trying to determine the best use cases to harness faster payments’
potential. One company at the forefront of this is Mastercard.
To learn how Mastercard is leveraging faster payment
capabilities, PaymentsJournal sat down with Andrea Gilman, SVP of Product
Development at Mastercard, and Sarah Grotta, director of Debit and Alternative
Products Advisory Service at Mercator Advisory Group.
During the discussion, Gilman and Grotta discussed the state
of real-time payments, promising applications of this payment capability, and
how Mastercard is approaching innovations.
The key trends and
drivers of real-time payments
Due to the proliferation of technology, modern life has
become increasingly mobile, instant, and connected, said Gilman. This in turn is
shaping consumer preferences and expectations, causing people to want a
frictionless user experience. Real-time payments has the potential to deliver
just that.
We
are in an age accelerated by real-time expectations, which is driving worldwide
reform. Against this backdrop, real-time payments have been gaining
traction around the globe—countries representing 87% of the world’s GDP are already
launching real-time payments systems.
Real-time payments have also been gaining momentum in the U.S. since launching in 2017. Many banks are connected or are in the process of connecting to the RTP network, TCH’s real-time payments rails. Grotta mentioned that the FedNow announcement has solidified real-time payments permanence in the market. As such, many smaller financial institutions are starting to implement strategies to offer real-time payment solutions in order to keep their customers happy.
With more banks becoming connected to faster payment rails,
they are now considering applications of the technology. And now that there is
an interest in exploring real-time payment solutions, Gilman noted that there’s
a lot of great opportunities for real-time payments to bring value to the
marketplace.
Grotta noted that financial institutions are also shifting focus and are developing real-time payments applications beyond the typical person-to-person use cases where they initially focused. They are finding use cases where real-time or faster disbursement transaction are really desirable. As a result, there’s been an increase in B2B and B2C applications, from use cases involving payroll to insurance payouts.
The real
opportunities for real-time payments: Information with the payment
While real-time suggests absolute immediacy, its greater advantage
may be the power of the enhanced data that can travel together with the
transaction.
This can lead to greater security, scalability, efficiency, and a common global
language – this is in addition to 24/7/365 accessibility. Many of the opportunities are related to
passing rich information with the payment and messaging capabilities.
Passing rich information means
being able to pass digital invoice information during the request for payment
and also when the payment is made. This will solve a lot of pain points
associated with reconciliation, a major problem in the business space. There’s
a lot of opportunity around businesses that collect cash and checks. For
example, delivery drivers often have to wait around to collect a payment,
thereby wasting valuable time. It also creates a security concern, as drivers
often find themselves physically holding significant amounts of cash.
Consumers would benefit from the
improved data capabilities as well. For example, when a consumer pays a bill
via a real-time payment rail, they receive a real-time alert that the bill was
received, a feature that is particularly helpful if the consumer is paying the
bill at last minute.
With such robust capabilities, we can expect to see a new era of
innovations to emerge, impacting multiple use cases and flows including P2P,
C2B, B2C and B2B.
Mastercard’s strategy in the real-time payments ecosystem: Adding value
and providing choice
At a general level, Gilman mentioned Mastercard is looking to leverage real-time payments to solve the inefficiencies across several use cases. B2B payments provides the largest opportunity and where the most value can be added to the industry overall.
Another important principle
guiding Mastercard’s approach is payment optionality. Mastercard wants people
to be able to pay on which ever rail they choose. “We believe that people
should be able to decide how they want to pay,” said Gilman.
These two principles underpin
Mastercard’s three tiered approach to taking products to market. The first
tier, which Gilman described as Mastercard’s core, refers to the infrastructure
layer. This includes Mastercard’s Vocalink and Nets, two companies that provide
payment rails in the United States and abroad.
The second tier refers to the “application or product layer that rides on top of the rails,” said Gilman. These products include applications such as Payment on Delivery and the Bill Pay solutions. Both products are designed on platforms enabling multi-rail capabilities.
The final tier—services—aims to provide consulting, data analytics, and fraud services to enhance account based capabilities to meet the rapidly changing ecosystem. Gilman provided an example of the fraud services that Vocalink shares with The Clearing House network.
Real-time payments spurs new innovations: Payment on Delivery
Mastercard has been actively
innovating in the real-time payment space. Mastercard partnered with ecosystem
partners such as PNC Bank to pilot Payment on Delivery, a solution that allows
businesses to pay suppliers in real-time when receiving goods or services. The
solution was first rolled out in the alcohol industry, but Mastercard plans on
expanding into other industries.
By digitizing B2B payments,
Payment on Delivery solves pain points related to reconciliation, information,
and data.
So far, Gilman reported that the
solution has been met well by the industry: “We’re hearing really positive
feedback and we’re very encouraged.”
“We believe that these new
capabilities will allow corporates, banks, ERPS, and all the players to achieve
a form of competitive differentiation,” said Gilman.
And with more banks becoming hooked into the faster payment
rails Mastercard anticipates a new era of innovation within the payments space.
The post Understanding Mastercard’s Approach to Real-Time Payments appeared first on PaymentsJournal.
View all episodes
By The PaymentsJournal PodcastConsumers, Businesses and financial institutions alike are turning towards faster payment options in large numbers, embracing the improved speed, data sharing, and messaging capabilities afforded by these new payment methods.
As is the case with any emerging technology, companies are
still trying to determine the best use cases to harness faster payments’
potential. One company at the forefront of this is Mastercard.
To learn how Mastercard is leveraging faster payment
capabilities, PaymentsJournal sat down with Andrea Gilman, SVP of Product
Development at Mastercard, and Sarah Grotta, director of Debit and Alternative
Products Advisory Service at Mercator Advisory Group.
During the discussion, Gilman and Grotta discussed the state
of real-time payments, promising applications of this payment capability, and
how Mastercard is approaching innovations.
The key trends and
drivers of real-time payments
Due to the proliferation of technology, modern life has
become increasingly mobile, instant, and connected, said Gilman. This in turn is
shaping consumer preferences and expectations, causing people to want a
frictionless user experience. Real-time payments has the potential to deliver
just that.
We
are in an age accelerated by real-time expectations, which is driving worldwide
reform. Against this backdrop, real-time payments have been gaining
traction around the globe—countries representing 87% of the world’s GDP are already
launching real-time payments systems.
Real-time payments have also been gaining momentum in the U.S. since launching in 2017. Many banks are connected or are in the process of connecting to the RTP network, TCH’s real-time payments rails. Grotta mentioned that the FedNow announcement has solidified real-time payments permanence in the market. As such, many smaller financial institutions are starting to implement strategies to offer real-time payment solutions in order to keep their customers happy.
With more banks becoming connected to faster payment rails,
they are now considering applications of the technology. And now that there is
an interest in exploring real-time payment solutions, Gilman noted that there’s
a lot of great opportunities for real-time payments to bring value to the
marketplace.
Grotta noted that financial institutions are also shifting focus and are developing real-time payments applications beyond the typical person-to-person use cases where they initially focused. They are finding use cases where real-time or faster disbursement transaction are really desirable. As a result, there’s been an increase in B2B and B2C applications, from use cases involving payroll to insurance payouts.
The real
opportunities for real-time payments: Information with the payment
While real-time suggests absolute immediacy, its greater advantage
may be the power of the enhanced data that can travel together with the
transaction.
This can lead to greater security, scalability, efficiency, and a common global
language – this is in addition to 24/7/365 accessibility. Many of the opportunities are related to
passing rich information with the payment and messaging capabilities.
Passing rich information means
being able to pass digital invoice information during the request for payment
and also when the payment is made. This will solve a lot of pain points
associated with reconciliation, a major problem in the business space. There’s
a lot of opportunity around businesses that collect cash and checks. For
example, delivery drivers often have to wait around to collect a payment,
thereby wasting valuable time. It also creates a security concern, as drivers
often find themselves physically holding significant amounts of cash.
Consumers would benefit from the
improved data capabilities as well. For example, when a consumer pays a bill
via a real-time payment rail, they receive a real-time alert that the bill was
received, a feature that is particularly helpful if the consumer is paying the
bill at last minute.
With such robust capabilities, we can expect to see a new era of
innovations to emerge, impacting multiple use cases and flows including P2P,
C2B, B2C and B2B.
Mastercard’s strategy in the real-time payments ecosystem: Adding value
and providing choice
At a general level, Gilman mentioned Mastercard is looking to leverage real-time payments to solve the inefficiencies across several use cases. B2B payments provides the largest opportunity and where the most value can be added to the industry overall.
Another important principle
guiding Mastercard’s approach is payment optionality. Mastercard wants people
to be able to pay on which ever rail they choose. “We believe that people
should be able to decide how they want to pay,” said Gilman.
These two principles underpin
Mastercard’s three tiered approach to taking products to market. The first
tier, which Gilman described as Mastercard’s core, refers to the infrastructure
layer. This includes Mastercard’s Vocalink and Nets, two companies that provide
payment rails in the United States and abroad.
The second tier refers to the “application or product layer that rides on top of the rails,” said Gilman. These products include applications such as Payment on Delivery and the Bill Pay solutions. Both products are designed on platforms enabling multi-rail capabilities.
The final tier—services—aims to provide consulting, data analytics, and fraud services to enhance account based capabilities to meet the rapidly changing ecosystem. Gilman provided an example of the fraud services that Vocalink shares with The Clearing House network.
Real-time payments spurs new innovations: Payment on Delivery
Mastercard has been actively
innovating in the real-time payment space. Mastercard partnered with ecosystem
partners such as PNC Bank to pilot Payment on Delivery, a solution that allows
businesses to pay suppliers in real-time when receiving goods or services. The
solution was first rolled out in the alcohol industry, but Mastercard plans on
expanding into other industries.
By digitizing B2B payments,
Payment on Delivery solves pain points related to reconciliation, information,
and data.
So far, Gilman reported that the
solution has been met well by the industry: “We’re hearing really positive
feedback and we’re very encouraged.”
“We believe that these new
capabilities will allow corporates, banks, ERPS, and all the players to achieve
a form of competitive differentiation,” said Gilman.
And with more banks becoming hooked into the faster payment
rails Mastercard anticipates a new era of innovation within the payments space.
The post Understanding Mastercard’s Approach to Real-Time Payments appeared first on PaymentsJournal.