The tide is turning on the time-honored process of presenting a payment card at the point of sale. MasterCard predicts that 38% of EU payment transactions by 2020 will be digital, meaning they originated on a tokenized device such as a mobile phone or wearable rather than the presentment of a payment card. MasterCard’s MDES platform also supports tokenization of accounts for ecommerce merchants and a streamlining of the process to clear transactions through member banks.
This brave new world has the potential to expand the payments market, reduce fraud and improve the consumer experience. It also sets the stage for further payments innovation and a big expansion of digital wallets and payment methods, since the costs and barriers to entry for new players is much lower than in the traditional point-of-sale ecosystem.
Issuers, however, will have to come up with creative branding responses. When a consumer no longer carries an issuer-branded plastic card and instead uses a digital device or wallet where payment preferences are stored, it will be much more difficult to break through the branding clutter or influence consumer payment choice at the point of sale.