Mastercard is seeing strong expansion in electronic payments in Canada. Iain McLean, senior VP of market development at Mastercard Canada, gives Robin Arnfield a review of the highlights of 2017, and discusses the new developments in the pipeline for 2018
In the year to 31 December 2017, Mastercard posted a 13% year-on-year increase in US gross dollar volume (GDV) on Mastercard-branded cards in Canada. This was twice the US GDV growth rate of 6% that Mastercard reported in Canada in 2016; these figures excluded volume generated by Maestro and Cirrus cards.
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Mobile/Contactless
McLean says Mastercard Canada has enjoyed significant growth in contactless credit card transactions.
“We’re seeing continual displacement of cash by cards, and also seeing double-digit growth in the number of Canadian merchants accepting cards,” he says. “Compared to other markets, we’re seeing good uptake of mobile payments in Canada, because of the high numbers of contactless readers.”
To accelerate adoption of mobile point-of-sale (mPOS) payments, Mastercard Canada works with vendors such as Mobeewave, Dream Payments, and Square alongside its Canadian acquirers, McLean tells CI.
“This year will see further activity in mPOS in the Canadian market,” he says. “We’re also active in the transit field in Canada. During 2018, a number of Canadian public transit systems will move from closed loop to open loop. For every Canadian transit scheme, open loop is a big focus.”
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By GlobalDataIn April 2017, Quebec-based co-operative financial institution Desjardins launched Canada’s first pilot of contactless Visa and Mastercard credit card payments on public transit buses. The pilot, operated in conjunction with Société de Transport de Laval, involved deploying contactless card readers on buses in the Quebec city of Laval.
“Three other verticals we’re working in are B2B payments, card payments for property rentals, and P2P payments,” McLean says.
“During 2017, Canadian banks started to adopt the Mastercard Send platform to better enable their customers to send money to people abroad.”
“While unable to share specific numbers, we can say that Canada has never been in a better position than it is now to support mobile payments growth,” a Mastercard Canada spokesperson tells CI. “It has the right infrastructure, the latest technologies, and a consumer base that is looking for what’s next when it comes to the retail experience.”
Highlights
In 2017, highlights included the Canadian implementation of Mastercard’s global agreement with PayPal, a partnership with Canadian prepaid card issuer Stack, and the March 2017 acquisition of Vancouver-based NuData Security.
In June 2017, Mastercard Canada opened a Labs as a Service (LaaS) division at its headquarters in Toronto. The division provides innovation consulting services and helps Mastercard’s Canadian clients to expand their businesses. It combines two areas of Mastercard: the Labs R&D arm and the Advisors professional service arm.
In 2017, Mastercard rolled out its Masterpass digital wallet at Costco.ca and other online Canadian merchants such as Air Canada.
Nudata
Vancouver-based NuData provides biometric behavioural authentication to help businesses prevent online and mobile fraud. It analyses transaction session and biometric indicators include behavioural attributes such as typing cadence, the angle a device is held, and how the user navigates across a website or mobile application.
“NuData is designed to prevent account takeover and eliminate false positives,” says McLean.
NuData’s NuDetect system differentiates authentic users from potential fraudsters based on their online, mobile app, and smartphone interactions, flagging those representing the highest risk. The technology assesses, scores and learns from each online or mobile transaction to enable merchants and issuers to make near-real-time authorisation decisions.
3D secure
“3D Secure is a big focus for Mastercard Canada,” says McLean. “We’ve been working closely with our acquiring bank partners on 3D Secure to introduce risk-based authentication of payment cards based on what is known about cardholders.
“During 2018, 3D Secure will be targeted at mobile users, and so-called ‘selfie payments’ involving facial recognition will become available in Canada this year.”
Mastercard Canada will also introduce end-to-end tokenisation for merchants and cardholders based on its Mastercard Digital Enablement Service (MDES) platform.
“This means that the PAN will never be exposed to the merchant,” McLean says. “Another benefit of our tokenisation platform will be that card numbers held on file will
automatically be updated on expiry through a lifecycle management feature.
McLean adds: “MDES enables a connected device –smartphone, tablet, etc. – to be a safe and secure payment form factor, just like a physical card. MDES is the foundation for secure digital transactions using a Mastercard account for Masterpass, Android Pay, Apple Pay and Samsung Pay. With the acquisition of NuData, Mastercard is building on its layered approach to keep transactions secure in a digitally connected world.”
PayPal
Under Mastercard’s October 2017 deal with PayPal, Mastercard will be presented as a clear, equal payment option within the PayPal Wallet. Users can select Mastercard as their default payment option to facilitate checkout.
In addition, leveraging Mastercard’s tokenisation services, PayPal will have the opportunity to expand its presence at the point of sale, the firms say. The collaboration
will enable consumers to use their tokenised Mastercard in their PayPal Wallet to make in-store purchases at contactless card-accepting locations. Also, PayPal will allow consumers to cash out funds held in their PayPal accounts to
a Mastercard debit card.
“The expansion in the partnership between PayPal and Mastercard creates opportunities for both companies,” McLean explains. “It will now be easier for customers to use Mastercard within the PayPal digital environment.
“We’re working with PayPal Canada to roll out the PayPal mobile app at the point of sale across our Canadian contactless reader estate.”
Small businesses
In February 2017, Mastercard signed an agreement with the Canadian Federation of Independent Businesses (CFIB) to help expand card acceptance among small
businesses.
The deal involved Mastercard holding seminars with the CFIB to educate small merchants on the benefits of card acceptance and the need to deploy effective security to prevent card fraud. “The CFIB helps us to reach the small business segment,” says
McLean.
The CFIB agreement also involved Mastercard offering the association’s members a better deal on credit card interchange. “Recognising the combined buying power
of CFIB’s 109,000 members who generate over C$3bn ($2.3bn) annually in Mastercard sales, Mastercard has agreed to match its top-tier rates for CFIB members,” the CFIB says on its website. “This is a 12.5% saving over Mastercard’s electronic rate for core cards, and 22% on some premium cards.”
Pre-tax charge
Mastercard’s Canadian business was impacted in 2017 by a pre-tax charge of $15m ($10m after tax) in provision for litigation settlements expense relating to a 2011 class action lawsuit by Canadian merchants.
Mastercard and Visa Canada each agreed in June 2017 to pay C$19.5m pre-tax and
to modify their No Surcharge Rule to allow Canadian merchants to impose checkout fees on credit cards, subject to conditions designed to protect cardholders.
Mastercard stated that the conditions include a surcharge cap, a requirement for merchants to disclose their surcharging practices, and provisions to ensure a level playing field with cardholders of competing payment networks. “This agreement includes important safeguards around the disclosure and level of surcharge to protect consumers,” it noted.
“All business and rule practice changes will occur after court approval of the settlement, most likely in late 2018,” a Mastercard Canada spokesperson tells CI.
The CFIB applauded Mastercard and Visa’s decision. “For several years, CFIB called on the credit card industry to allow merchants to surcharge some or certain types of credit cards, such as premium cards, in order to provide merchants additional powers to address their rising costs,” it said in a statement.
“The ability to add a small surcharge to accept a credit card payment – particularly for higher-cost premium credit cards – is an important power to have, but it’s not expected to be widely used by smaller merchants,” said CFIB president Dan Kelly.
While expecting limited use, CFIB believes that the ability to surcharge will be helpful in safeguarding against future increases in credit card fees, as merchants could decide to take collective action in the face of larger fee increases.
McLean says Mastercard has seen little adoption of surcharging by Canadian merchants since the June 2017 agreement.
Under the Canadian Code of Conduct for the Credit and Debit Card Industry, merchants are allowed to discount for lower-cost payment methods such as debit cards or cash. “We don’t see discounting being widely adopted in the Canadian market,” adds McLean.
Fintech partnerships
In February 2018, Mastercard announced a global partnership with Toronto-based Dream Payments, which provides a cloud-based payment platform for merchants and banks.
The two companies will work together to speed up payments of insurance claims to any payment card or account. Northbridge Financial will be the first Canadian insurance provider to use the Mastercard Send platform through the Dream Payments Hub to send claims to policyholders’ debit cards.
Mastercard says two Canadian fintech startups are participating in its Start Path program which is designed to encourage the development of fintechs. The Canadian participants are Mobeewave and Sensibill.
Mobeewave’s technology enables small and micro-merchants to accept payment on a smartphone from customers’ contactless cards or mobile wallets without the need for external hardware. Sensibill’s platform captures and categorises purchase receipts and integrates them with the customer’s digital banking app.
Prepaid cards
Mastercard Canada sees prepaid cards as a major opportunity for growth. It partnered with federally charted trust company Peoples Trust, prepaid card programme manager Payment Source, and Canada Post in February 2017 to launch the Cash Passport prepaid Mastercard.
Using Payment Source’s LoadHub network at Canadian post offices, consumers can load up to seven different currencies onto their Cash Passport card.
In September 2017, Mastercard Canada announced a partnership with Canadian prepaid card issuer and program manager Stack. The Toronto-based business offers a prepaid Mastercard along with a mobile app, and what it claims is instant access to multi-currency and cryptocurrency mobile wallets. Stack members are able to make POS purchases by tapping their smartphones linked to a Stack digital money account.
“Stack is targeting millennials who are looking for new types of banking offering,” says McLean. “It’s been in beta phase, and will ramp up in 2018.”
The gig economy is another important focus for Mastercard Canada, McLean notes. “In Canada, we’re working with a prepaid issuer and programme manager called PayFare,” he says. “It is early days for that programme.”
