Payments

MasterCard’s PayPass: Has it Really Made a Dent in the Contactless Payments Market?

Candela LabsSr. Marketing Manager (Digital Marketing & Branding)

MasterCard PayPass is one of the leading “contactless” payment platforms in the industry. Having been introduced in 2003, the platform has enabled people to just ‘Tap & Go’ with their PayPass cards while making a purchase. Recently, with NFC technology now on many mobile phones, it has allowed people to download MasterCard PayPass onto their cell phones and use it wherever MasterCard PayPass is accepted.

MasterCard’s Contactless Payments Journey

MasterCard first introduced PayPass in September 2003. The service was introduced after conducting a nine-month trial that involved over 16,000 cardholders and 60 retail locations. The trial, conducted primarily in Orlando, Florida, bore positive results.. The technology used to carry out the trial was RFID based. MasterCard noted a 23% increase in transactions volumes during the trial period versus the same period in 2002. MasterCard’s PayPass service continued to gain traction, and In 2011, MasterCard reported 92 Million PayPass cards and devices issued worldwide with over 310,000 merchant acceptance points.

A PayPass Wallet Service known as MasterPass was launched in May 2012. The wallet service was launched to close the gap between online and offline shopping. The name MasterPass was adopted early 2013.

Here is a video from MasterCard on PassPass wallet service:

Source: MasterCardWorldwide

PayPass, expansion and its user adoption

According to MasterCard, PayPass has been mostly successful in Africa, Asia and the Middle East with a 28% expansion rate in 2012. PayPass service saw success outside the USA, but was successful in the states, largely due to low NFC terminal penetration and a large population of non-NFC enabled smartphones (especially Apple’s iPhone). As of February 2013, over 700,000 merchants in 51 countries are accepting PayPass. MasterCard credits the growth of its PayPass service to the growth of m-Commerce.

MasterCard’s PayPass service is also seeing expansion due to global tie-ups in countries like New Zealand, Kenya, Australia, Singapore and UAE. Below are a few noteworthy recent developments in countries where PayPass has a presence:

  •         New Zealand – All new consumer debit and credit cards are PayPass enabled. Major retailers like BP, Kmart, Repco, etc., have introduced contactless payments solutions due to consumer led demand.
  •         Kenya – MasterCard and Equity Bank of Kenya signed an agreement early 2013. According to this agreement Equity Bank of Kenya will issue 5 million PayPass enabled cards in the next 18 months.
  •         Australia – One of MasterCard’s new releases claims “more than one in ten card transactions under $100 are now being made with PayPass.”
  •         UAE – In 2012, Network International and MasterCard reached collaboration. As per this collaboration Network International will install PayPass enabled terminals at more than 1000 stores.

Details of PayPass

PayPass is a payment technology that involves a small microchip and a radio antenna being embedded in a PayPass-enabled device to transmit payment details. The data is transferred through wireless technology to a high-speed PayPass reader at a checkout station. The reader then verifies the transaction with the customer’s bank through MasterCard’s reliable network and the transaction goes through.

Mastercard was not the first one in the contactless payments space. Mobil launched Speedpass, a contactless payment card, in 1997. It was the first of its kind released, though there had been other attempts before at the technology through different capacities.

To use PayPass, a user has to tap at one of the terminals of PayPass-accepting merchants at checkout. The reader at checkout needs to be a PayPass-enabled card, phone, FOB, mobile payment tag or any other PayPass enabled payment device.

MasterCard claims that PayPass is accepted globally at all categories of merchants including retail stores, pharmacies, fast food restaurants, transit points of entry, convenience and grocery stores. Even in the category of cabs and vending machines, some of the entities are PayPass enabled.

Competition

Similar contactless platform include Visa’s payWave, introduced in September 2007. As of 2012, payWave has issued over 9 million payWave cards in US alone. Some of the entities that accept payWave include WaMu, Chase, Wells Fargo and BP. payWave utilizes RFID technology to make payments. Transactions which are under $25 at participating merchants do not require a signature, whereas it’s $50 for users of PayPass.

The table below gives a comparison on features of PayPass vs. payWave:

Visa payWave

MasterCard PayPass

Fees

% of the transaction

% of the transaction

Withdrawals at PoS

No

No

Debit Card

Yes

No

PIN required

for transactions greater than a set amount

for transactions greater than a set amount

Linked to personal bank account

No

No

NFC Chip

Yes

Yes

Smartchip

No

No

There is a little difference between the two as you can see in the table. Most of the PayWave terminals also accept Paypass contactless cards and vice-versa. Big wallet service providers like Google Wallet & ISIS have their specific preferences when it comes to tying up with contactless service providers. Google Wallet has partnered with PayPass for PoS transactions. On the other hand, ISIS has tie ups with Verifone and Equinox for offering contactless payment solutions.

Vaseem Khan

Candela LabsSr. Marketing Manager (Digital Marketing & Branding)

Vaseem Khan is a founding member and a primary author at MEDICI. He is a Payments enthusiast and an avid reader. He loves being involved on initiatives related to Technology, Startups & Payments. He has been associated with companies like Gallup as a Management Consultant and Oracle as an Account Manager.

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