In the game of digital transformation, Mastercard was the card that best moved its chips in the Latin American board. With a clever strategy, he managed to outdo Visa and the rest of his competitors by several lockers.
The plan drawn up by the company of the two circles started more than a year ago. First, it demanded that the banks in the region update their cards to contactless, a technology that speeds up purchases and improves security because:
- The customer supports the card on the reader to pay, without having to deliver it to a third party.
- The plastic has a chip with encrypted data that allows not to "clone" the card.
- The operation does not require the presentation of the DNI. Neither the issuance of the coupon nor the signature of the client in operations of up to $ 1,000.
- The cards can be "virtualized" in an electronic wallet, allowing to pay when posing the cell phone over the terminal.
Within the banking sector, iProUP slipped the importance of this move: "Mastercard last year lowered a mandate to the entire region to migrate plastics to contactless, Visa has 'fallen asleep', it did it this year."
Secondly, Mastercard became a strong ally of the fintech, a sector that grows more than 100% annually in Argentina, a country in which it is a partner of the number one company in the sector: Mercado Pago. But also from Wilobank and Ualá, among others.
His rivals recently appeared on the scene in 2019 along with two digital banks: Visa with Brubank, former Citi Juan Bruchou; and American Express with Rebanking, of the Transatlantic Group.
This scheme was not applied only in albicelestes lands, but it was repeated in other Latin American countries. Another important partner is Nubank, a Brazilian fintech that aspires to be the next unicorn of these latitudes and was recently chosen by the prestigious magazine Fast Company as the most innovative company in the region.
"He introduced his card to alleviate the high levels of interest, which reach 400% in other Brazilian banks, and simplified the buying process, using a very simple, virtual and app-based system, which is now the sixth largest issuer of plastics. in Brazil, "remarks the publication.
Thus, the signing of the two circles strengthens its plan to become the payment processor chosen not only by young people, who seek fintech more agility and cost savings, but also by those who are not taken into account by banking traditional.
In the last hours, Carlo Enrico, president of Mastercard for Latin America and the Caribbean, and Marcos Galperín, CEO of Mercado Libre, came together to give the last stitches to an agreement that aims to make Mercado Pago the most innovative virtual wallet. of the region, thanks to the technology provided by the American firm.
The managers shook their hands. On the board they had already stacked most of their chips on the three major markets in Latin America, which also have the three most active fintech ecosystems: Argentina, Mexico and Brazil.
Advance ten lockers
Mastercard and Mercado Libre have been partners for three years, during which time the unicorn has launched a prepaid card, a credit card with Banco Patagonia and is preparing to renew them to contactless.
As advanced iProUP, the US company presented an aggressive campaign with discounts of up to 50% to promote this means of payment and take advantage of the "siesta" of its competitors. Especially Visa, which will begin to migrate towards this innovation in Argentina in the second quarter.
"The Contactless Week is part of a global strategy, in the case of Mercado Libre, we include a prepaid card for those who are not currently banked, but we also want them to have the advantage of having the latest technology," explains iProUP Kiki del Valle, in charge of digital alliances for Latin America of Mastercard.
"We have seen how successful it has been in several territories: in Australia, for example, more than 90% of transactions are already made under this system," he adds.
In addition, the firm establishes in all markets that already operate with this technology that purchases under US $ 50 (in Argentina a limit of $ 1,000 was set), it is not necessary to present an identity document.
In this way, the formula "contactless + Mercado Pago" results in the "virtualization" of the cards. That is, encrypt the data of the physical plastic to be part of the app that allows the purchase of products and services (virtual wallet).
"Our idea is to tell how we work together to transform the transaction process within the Mercado Pago platform," remarks Del Valle.
By virtue of this, Mastercard agreed with Mercado Libre the provision of technology in order to authenticate (log in) the users of Mercado Pago to guarantee the security of operations and to provide them with greater speed.
In fact, both firms are working on the tokenization of the cards. That is, to encrypt the 16 digits of the plastic to only serve in that operation, and under other constraints.
Thus, it deployed the MDES system (Mastercard Digital Enablement Service), which is already being adopted by the banks in the region.
"If someone steals the token, it will not serve you outside the Mercado Libre platform, as well as other aspects that we have insured, that is the power of our technology," explains the executive of the two circles' firm.
In addition, it states that the card's data "is stored on the Mercado Libre site, so the consumer-if it replaces or expires the plastic-should not save those credentials again, since that change happens digitally".
As for the time when Mastercard will "kick" the board of the digital payments (by allowing to pay with the cell phone, smart watches and other devices, as already happens in other markets) the executive was very clear.
"We have solutions of this kind that are infiltrating the region, we have Mastercard programs in Mexico, Argentina and Brazil, where we already have Mercado Libre cards," Del Valle completes.
For the time being, this service will be available before the end of the year, as inferred from the clear commitment of both companies to "tokenize" the transaction process.
If so, Mercado Pago and MasterCard will be the first to operate under this modality in the country.
It will be a great milestone for the unicorn, to "prime" as well as other great players, such as Google Pay, Alipay and Apple Pay. And also at the service of his public enemy number one: Amazon Pay.
The agreement also includes another functionality that will increase the security and ease of use of the Mercado Pago wallet. And it has a name: Mastercard ID Check.
"This is an active authentication, which is what requires the user to perform an action, such as a biometric reader, a password or enter the code of an SMS," the directive is explained.
And complete: "But there is also the passive, which identifies patterns of consumer behavior when making digital purchases: how it is holding your phone, how many mistakes made in the checkout page, etc. Thus, we minimize friction."
Back to the starting line
In this game of innovation of mobile payments, Visa and other credit cards have passed several shifts and watch how Mastercard makes the most of each move.
The "number one in the world" announced the availability of VisaNet, its processing network that can handle more than 65,000 transactions per second.
Until recently, this service was offered by Prisma, a firm composed of 14 of the main Argentine banks and that was forced to sell 51% to the US Advent group for US $ 725 million, within the framework of the divestment process ordered by the Commission. National Defense of Competition.
Visa is also working on the tokenization of its cards, which will allow the implementation of charges from cell phones, cars and smart watches. The firm assured iProUP that even appliances can be used to pay for purchases in a non-face-to-face manner.
For example, an intelligent refrigerator can combine the VisaNet platform and the app of a supermarket so that the user asks for those foods as soon as they detect missing ones, they pay them through the screen of the appliance and they receive them in their home.
Prisma, on the other hand, has historically had the license to issue Visa plastics and recently obtained the authorization for those of Mastercard.
This year he began to work on the migration to contactless and on the adaptation of the terminals of the stores to accept these transactions. And launched a strong "education" campaign to customers to promote this technology.
"The strategy so far is single-brand (Visa only) After the first quarter we will do it with all of them," said Agustin Parodi, manager of Acquisition Products of Prisma's Means of Payment division, to iProUP.
While the firm manages both cards, this priority could respond to the need to focus efforts on Visa, which is several boxes behind MasterCard in this race.
Prisma has TodoPago, its own wallet, with which it could also aim to virtualize the cards in the cell phone in replacement of the plastics, in those devices that have NFC technology.
Although it is quite lagging in the payment market with QR code with respect to Mercado Pago, which accounts for more than 260,000 active users and registered operations for $ 3 million in 2018.
In addition, Mastercard assured iProUP that it is working with the Argentine government so that its plastics can be used as a replacement for the SUBE or other transport cards of the Interior. In this way, also took advantage against their rivals in this field.
All in all, MasterCard and Mercado Libre seem to have the controlled item to stay with both the physical payments business and the online ones. Meanwhile, the competition analyzes how to advance the various squares that take you away in the game of digital transformation.
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