MasterCard announced the launch of MasterCard Digital Enablement Express (Express) today. Express is a set of commercial terms laid down by MasterCard for issuers, token requesters and others to access their MasterCard Digital Enable Service (MDES) platform quickly and seamlessly. Express will expedite the process of digitization and tokenization of payments made through MasterCard accounts. Google (Android Pay) and Samsung Pay will be joining the Express program by MasterCard. Big banks like Capital One, Fifth Third Bank and KeyBank will also extend support for Express. We had an opportunity to discuss this launch with Sherri Haymond, Group Head, Digital Channel Engagement, MasterCard. Here’s an almost verbatim transcription of the interview conducted only hours before:
LTP: What’s the difference between MasterCard Digital Enablement Service (MDES) and MasterCard Digital Enablement Express?
Sherri Haymond: MDES is a platform via which we provide tokenization, digitization and credential management services. MDES is the platform and Express is a standard default set of commercial terms that token issuers and token requesters can take advantage of to allow quick and seamless access to the platform. Rather than having to negotiate contracts with one another, they can each sign up to our default set of commercial rules and standards; it is very similar to the way that we have a default set of commercial terms that govern the way that issuers and acquirers interact in the traditional network. What this program is doing that it is giving quick access to the digital part of of our network. It is extending our network digitally with an easy and programmatic approach.
LTP: So, how was it done before? What’s different now?
SH: Earlier, as you know, we were very fortunate to launch MDES with Apple, who is a very important partner of ours. What Apple did was that it went to market by negotiating individual bilateral agreements with banks, which is fine and we are going to continue to support that approach with Apple. But what we noticed was that it did take a long time for Apple to then launch it in a second market. It took about a year for Apple to get everyone on the same page for launching Apple Pay the UK with tokenization. But again, we are going to continue to support Apple in wherever they want to go. It is crystal clear that we are still friends with Apple and we are still supporting the Apple model of bilateral engagement.
So let me get a step back. Now, you can get access to MDES in two ways. The first way is the way Apple first got access which was by creating bilaterals agreements; or now we have this new and faster way that is a standard set of terms that issuers and token requesters can take advantage of to get easy and streamlined access to the platform.
LTP: Essentially you are making it easier for banks to be able to work with these newer digital modes of payments, take the benefits of the MDES platform and potentially reduce the paperwork and operational overhead to use tokenization on MDES.
SH: Yes. That’s exactly right. But on the flip side, it is also very beneficial to the token requesters, many of whom are not going to be exactly like Apple, Google and Samsung. For example, as the world becomes more connected and as every device potentially becomes a payment device, we need to offer an easier approach to using MDES. We aren’t obviously going to let two guys in the garage use MDES: One of the important things that Express does is that it puts very stringent requirements around eligibility to join the program. But that said, a lot of these environments are going to be quite different. For example, there’s going to be wearables and all different sort of things that I haven’t even thought of yet. Half my job is putting together the framework and working to extend our platform and the other half is managing relationships with all kinds of non-traditional players who want to do business with us in one way or another or a bank. And so a lot of the companies that we talk to have voiced a lot of concerns that although they were interested in adding payments as a feature to whatever it is they already offer, they were not interested in negotiating serious agreements with banks. This would have taken up a lot of resources for them. All they wanted to do was improve and offer a really cool, simple and secure way for consumers to pay using that device. So, that’s what these programs are - not only helping services like Google or Samsung but also going out and helping device manufacturers who will be a part of the Internet of things to enter the space in a quick, easy and painless way.
LTP: Would MDES platform be available in your open development program? Is it already available or do you see it as the next step?
SH: We are working on a simpler and even more streamlined way to give more kinds of token requesters access to our MDES services. That said, we have to be mindful. It could be a part of our open innovation program one day, and more details will be forthcoming later, but we will have certain expectations from companies using Express - there will be minimum capital and/or insurance requirements. If the token requester doesn’t meet the minimum capital requirement, we require them to get an insurance of upto an amount of what we project their potential liability could be under the program. This is just because we have a responsibility to the issuer and the ecosystem. We also have security requirements and other requirements added to this. We want to strike the balance between fostering innovation and recognizing that we have a duty towards this space.
LTP: In terms of banks, you already mentioned that big banks like Capital One and Fifth Third Bank have already partnered with Express. But what about the smaller and regional banks? One of the biggest challenges in digital payments has been getting these Tier 2 and Tier 3 banks be a part of such programs. Do you think MDES and Express makes it easier for small banks to participate or it is meant for the big players?
SH: Yes, that would be a huge part of our motivation. We want the issuers of all sizes to gain equal access to our platform. Another great thing about the platform is that the issuers only need to have onboarded their BINs one time. So once they onboard their BINs and the portfolios they want to be able to offer the digital payments through Express, they will upload the list with the help of their account manager one time. Those same credentials with be then available to all of the digital environment that will come on as Express upgrades in the future. We have also gone so far and standardized a minimum set of requirements, for example, of data elements that token requesters broadcast to the issuers in order to help the issuer in identification and verification. Basically, we standardize the format. Through this, we specifically try to help smaller banks on board more quickly and without much work.
LTP: The official press release has a comment that “MasterCard does not facilitate pass through fees between financial institutions and token requesters under the Express program.” Can you elaborate more on this?
SH: Part of what we wanted to create through Express is to create an environment where mobile payments can scale quickly. If you want the advantages of participating in Express, one of the things that we are saying is that we will not facilitate the passing of fees between the issuers and token requesters. If the token requester wants to participate in Express, one of the things that MasterCard will not do is take money from issuer and give it to the token requester. Google and Samsung said they would happily process under these terms.
LTP: OK, so MasterCard will not get in middle of the financial relationship between the issuer and token requester. What you are doing here is specifying the standards and operating rules, which is a classic Visa or MasterCard thing to do. So, are you trying to provide the issuers and token requesters a template to ease agreements between different parties?
SH: No. It is not exactly a template. We are not just providing a template agreement for issuers and token requesters to go make agreement with each other because that’s not how we do in our traditional network. We do honor those bilateral agreements in the traditional network world and we will honor them here as well in Express. But Express is a set of rules that each party signs up to be governed by. So they are not signing a direct agreement with each other. But there also could be bilateral agreements in addition to this. Let’s say one of our big banks A wants to have a separate limitation of liability with token requester B. That’s fine.They can have a separate agreement and may be in exchange, bank A will promise to devote certain marketing money to promote token requester B’s offerings.
LTP: Thank you Sherri for the time and for sharing details on the MDES Express program. Looks like you have a fun role at MasterCard with all the exciting use cases and new partnerships that are possible with this program.
SH: Yes, I enjoy my job, just as everyone else here at MasterCard!