Over 1.5 billion payment cards are in circulation in Europe, contributing value of €2.9 trillion per year, with the majority coming from Visa and MasterCard. Visa, arguably the larger of the two, gained a percentage point of value share last year, slightly eroding the MasterCard share.
Alternative international companies including Discover, American Express, UnionPay and JCB, account for under 2 per cent of the European card base, with declining figures of either domestic bank card schemes or private labels. The latest EU interchange fee caps are 0.2 per cent for debit cards and 0.3 per cent for pay-later cards, which makes it more difficult for card schemes to compete with consistent strength.
Newer competitors in the payment industry, including Apple Pay and PayPal, will be causing concern to the established names like MasterCard and Visa, who need to constantly evolve to make sure they offer enough added value to retain their dominant market share.
MasterCard made a strong statement with a recent industry first, promising to increase and expand the minimum standard for consumer protection against unauthorised transactions worldwide. What’s more, it is offering one single rate. Its single, global Zero Liability promise was developed in line with issuers and regulators and increases the minimum standard for consumer protection against unauthorised transactions, subject to whatever local laws are applicable.
US issuers initially led this idea of “zero liability”, designed to increase loyalty and usage. The positives for the issuer are clear: less liability for the cardholder will ultimately equate to a higher market share.
Yet there remains an underlying issue that may unintentionally proffer more risk than reward: friendly fraud. In the United States, cardholder campaigning continues, despite the threat it poses to the industry. This is largely because the ‘victims’ are merchants who remain fearful of being hit with too many chargebacks and are hesitant in confronting these issues head-on with their customers or banks.
MasterCard’s latest move in Europe looks like a smart decision to help it gain popularity despite increasing competition. So long as it puts equal emphasis on educating merchants on the ways in which they can defend themselves, the idea of “zero liability” doesn’t have to end badly.
The company is also working hard to embrace the future of in-store payments, announcing at the start of January 2016 that it had partnered with consumer e-commerce company Coin, enabling payments via wearable technology such as smartwatches and fitness bands.
A MasterCard survey in Australia in December revealed that nearly two-thirds of the 1,000 respondents preferred near-field communications (NFC) over cash payments. The added value that respondents appreciated was the speed of the transaction, but it was also very important that they had the ability to be reimbursed for unauthorised transactions.
Yet MasterCard is not alone in its attempts to retain a phenomenal market share, as Visa has revealed over 6 million registrants to its growing Visa Checkout service, with sign-ups increasing by more than 92 per cent since the beginning of 2015 as it fights to stay at the head of global ecommerce. MasterCard’s Digital Enablement Service (MDES) will be embedded directly into wearable devices to allow contactless payments in the growing number of NFC payment terminals in the UK.
By offering customers a simpler way to checkout online (using ‘just three easy clicks’), the Checkout payment service has already partnered with organisations including Taco Bell, Best Buy and Barnes & Noble, as well as Australian cinema group Hoyts, and ticketing company Ticketek.
Chargeback levels are at risk of increasing due in part to these more convenient payment platforms. While it can certainly prove a useful recourse for consumers who have been defrauded, fraudulent chargebacks are hitting merchants hard. It’s important not be discouraged from implementing easier and quicker payment schemes, however, especially those that help to mitigate the chargeback risk. Ultimately, merchants and issuers who support specialised fraud prevention strategies and chargeback analysis will save time and money in the long term.
Monica Eaton-Cardone is the co-Founder and CIO of risk mitigation experts Global Risk Technologies
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