PXP Financial, the global acquiring, payment, fraud, and data analysis service provider, has received accreditation from Mastercard to become a Token Service Provider.

Accreditation was supported by the Mastercard Digital Enablement Service (MDES), a single integrated platform enabling the digitation of supported Mastercard card types. MDES provides PXP Financial with a Secure Card on File tokenisation programme, a better user experience and higher approval rates for merchants leveraging Mastercard tokens.

Leveraging Mastercard’s Secure Card on File technology means PXP Financial can provide an additional layer of security for its customers accepting online and in-app purchases.

With experts estimating that there is a new case of identity theft every 22 seconds, and anticipating this ratio to worsen this year, the MDES helps to protect cardholders from becoming victims as it converts their most sensitive information into non-sensitive digital tokens.

Digital tokens are used for secure e-commerce and in-app transactions, rather than using the customer’s primary account number (PAN) which remains in a token vault. Digital tokens then safely travel through the e-commerce website or app, without exposing any payment card details. Device-specific tokens add an additional layer of security.

Combatting a rise in fraud

Kamran Hedjri, CEO and founder of PXP Financial, commented: “Ensuring cardholders can enjoy peace of mind is paramount in today’s global marketplace. We know merchants are under pressure to combat the rise in fraud while providing smooth and convenient payment experiences that help to drive sales and foster customer loyalty.

“At PXP Financial, we take our responsibility to merchants navigating this landscape incredibly seriously, keeping our client base across the world at the cutting edge of payments innovation while maintaining a laser focus on security. Our move towards the use of scheme tokens is representative of this commitment.

“Mastercard offers a highly secure, globally scalable solution, with significant speed to market, along with an industry-leading reputation for excellence in payments that will support our merchants to build the trust that is so vital today. We are delighted to announce our accreditation.”

As well as reducing risk, digital tokenisation offers a variety of benefits including assisting in remaining compliant with PCI DSS, increased approval rates, and enabling faster, more efficient transactions. While it bears similarities to encryption, digital tokenisation differs greatly; for example, with digital tokenisation, the sensitive data never leaves the original organisation it was shared with.

Earlier this week, payment giants Visa and Mastercard agreed to lower fees charged to merchants for credit card transactions in the US, following a lawsuit spanning almost two decades.

In a move that could collectively save merchants as much as $30billion, Visa and Mastercard have agreed to reduce so-called ‘interchange’ fees by 0.04 percentage points for a minimum of three years, and to cap them at the same level seen at the end of 2023 for five years – subject to approval by the US District Court for the Eastern District of New York.

Interchange rates, set by the two payment giants, generally sit between two to four per cent of each transaction total. According to Rob Beard, chief legal officer and head of global policy at Mastercard, the agreement delivers “certainty and value to business owners, including flexibility in how they manage acceptance of card programmes”.

Currently, merchants in the US can add surcharges to transactions for consumers using American Express cards – but not on Mastercard and Visa cards. But if the settlement is approved, merchants will be able to change the rates they charge for all cards, instead of basing it on the credit card network alone.

However, the majority of interchange fees actually go to the issuer banks, to cover the card services they provide, such as customer support, fraud prevention and to cover other associated handling costs. While it remains unclear which party will take the brunt of the cut, early suggestions look as though the banks will take the biggest hit. Questions could arise over how much of an impact these cuts could have on issuing banks across the US.

In response, Kim Lawrence, president of the North America region at Visa, explained: “Importantly, we are making these concessions while also maintaining the safety, security, innovation, protections, rewards and access to credit that are so important to millions of Americans and to our economy.”

A win for merchants, but a loss for cardholders?

Matt Schulz, chief credit analyst at LendingTree, an online lending marketplace, explains that, while US merchants will enjoy savings, this may not be the case for their customers, who may even become privy to higher fees.

“This settlement is potentially a big deal for merchants’ bottom line, but the financial impact on their customers is unclear. There’s no guarantee that even a dime of these savings gets passed on to consumers.

“Merchants will now be more able to add surcharges to purchases made with credit cards that come with higher swipe fees. That can help them recoup the cost of accepting those cards, but it also risks alienating customers.

“These changes come with some real risk to merchants. For example, a high-end credit card may cost more for a merchant to accept, but the typical user of that high-end card might be an extremely desirable customer with a lot of spending power. This dilemma is going to lead to some very interesting conversations within these companies.

“The measures in this settlement that allow for more surcharging and greater competition could lead to swipe fee reductions well beyond just what is mandated. The ultimate impact of this settlement on credit card rewards and the industry as a whole will depend on how that all plays out.

“Banks have plenty of levers to pull and buttons to push when it comes to recouping revenue in cases such as these. It is reasonable to expect that we might see other types of bank fees rise once the settlement is finalised. Banks don’t tend to take these types of changes lying down.”

Impact on issuing banks

Brad Goodall, CEO and co-founder of Banked, a fintech powering open banking payments, explains how the settlement between Visa and Mastercard could impact issuing banks, and how fintech could resolve future issues: “Mastercard and Visa have committed to maintaining average interchange fees at least seven basis points lower than the current rates over the next five years, providing a period of stability for merchants after a US judge clears the settlement.

“The big questions are; will this introduce surcharging at point of purchase and if so what will that do to consumer experience and cost? Will this open a door for alternative payment methods?

“The deal will also negatively affect issuing banks, which will take a moderate hit to the revenue they collect amidst a tough macroeconomic climate for banks as interest rates remain stubbornly high. Issuing banks are largely responsible for ensuring fraud is monitored and kept out of the system and they use part of this interchange to fight fraud.

“It’s key that fintech steps up to provide reliable and importantly, safe alternative payment methods for both merchants and banks. One promising path for innovation is Pay by Bank, a payment method built on global open banking payments rails, vastly reducing fees and providing near-instant settlement, whilst shoring up revenue for issuing banks.

“The collaboration between banks and fintechs to innovate on account-to-account rails is paramount. This partnership provides a unique opportunity, particularly as issuing banks face mounting pressures from diminishing interchange fees. This pressure incentivises them to envision a future where they can chart their own course towards a new network model. By harnessing core payment services and fraud tools, they can create a novel, real-time payment method that benefits merchants and consumers.”

Bank revenues ‘remain quite steady’ 

Not all agree with the idea that reduced interchange fees will genuinely hurt issuing banks. Dan Carter, senior director and head of global payment strategy at Redbridge Debt & Treasury Advisory, a global financial management partner to corporations, appears to suggest this, as he highlights that consumers shouldn’t fear significant additions to their bills.

“From a consumer perspective, there should be little to no major changes. Interchange rate increases have far outpaced the proposed decreases.

“As of October 2023, high-end rewards cards issued under Visa and Mastercard have reached 2.6 per cent plus $0.10 for interchange alone – up 0.1 per cent from just April 2023. Issuers may complain and may deflect with comments about fraud losses and bad debt write-offs, but their revenues remain quite steady.

“While surcharging, allowable since 2013, is more prevalent post-COVID, merchants who accept American Express are still bound by the terms of their agreements.

“What may be allowed under Visa and Mastercard may be prohibited under American Express, a network known for aggressively pursuing ‘honour all’ and anti-discrimination practices.”

Looking to the future of payments

Kjeld Herreman, head of strategy advisory at RedCompass Labs, a fintech consultant and accelerator, also explains how, even if the settlement comes into play, merchants worldwide could still benefit from other payment solutions; even those based across Europe, where interchange fees sit at around 0.3 to 0.4 per cent.

“Every card transaction that is made costs businesses money, and they usually must wait two to three days after taking payment for any money to reach their account. When it arrives, they’ve lost a chunk to interchange fees. Money that could be used to pay staff, suppliers, rent, and bills goes to the payment processor. Not only is the business worse off in real terms, but waiting for the money to arrive can create pressure with suppliers and staff who need to be paid.

“P2B real-time payments are a solution for merchants everywhere who are tired of paying interchange fees and waiting days for their money to arrive. The faster the payment, the faster the business is paid, the faster it can reinvest, and the faster it grows.

“The EU is attempting to tackle this issue to reduce the power of large foreign businesses. The European Payments Initiative is building a card-like scheme on top of real-time payment rails, as well as adapting interchange and chargeback processes. It is also mandating that all banks must be ready to send and receive real-time payments by the end of 2025, levelling the playing field between PSPs and card networks.”

Mastercard has introduced Smart Subscriptions, a solution powered by open banking for managing subscriptions within consumer banking apps.

It offers spend analysis, categorisation, and personalised offers, building on Mastercard’s Subscriptions Control solution, introduced in 2023. It also enables consumers to cancel, pause and resume their subscriptions.

According to a Mastercard survey, seventy-three percent of consumers expressed interest in a tool that would assist them in identifying, tracking, canceling, or renewing subscriptions, while sixty percent of consumers trust their bank to provide such a tool.

Single API

Smart Subscriptions connects multiple accounts into one central hub using Mastercard’s open banking technology, provided by its US open banking arm Finicity. The uniquely configured white-labeled solution, which is payment- and network-agnostic, enables any bank to implement it with a single, low-lift API.

“No matter how many services you pay for, managing those recurring subscriptions should be simple and seamless,” said Raj Seshadri, president of Data & Services at Mastercard. “Smart Subscriptions acts on that insight, meeting the standards for effortless engagement that both banks and consumers demand, and when those standards are met, the true metric of success is loyalty.”

With sight into individual subscription activities, including detailed payment history, upcoming bills, and subscription cancellation, Smart Subscriptions enables greater transparency to where the consumer’s money is going and provides more tools to manage those transactions. Furthermore, with personalised insights and tailored merchant offers, consumers can connect more deeply with their financial institution and save money at merchants they frequent, right within their banking app.

Mastercard’s Smart Subscriptions, presently undergoing testing in the US, tailors for the need for thorough subscription management and customised offers while meeting the growing demand for enhanced banking experiences. Mastercard’s Smart Subscriptions team expects to expand into additional markets later this year.

Nexi, the European paytech firm, has partnered with Mastercard to enhance its open banking account-based payments. Through the partnership, Mastercard Open Banking will facilitate e-commerce payments across Nexi’s gateways serving merchants across Europe.

Mastercard and Nexi are joining forces to build an integrated digital payment ecosystem by advancing Mastercard Open Banking-powered solutions that offer secure, seamless payment experiences with more choices for consumers when shopping online.

Bart Willaert, EVP of international open banking at Mastercard, explained how the partnership could improve payment experiences across Europe: “We are excited to lead the development of an account-based payment method that will make online purchases more seamless and secure as well as expand payment choice in partnership with Nexi.

“We have been powering and protecting our global payments network and the broader digital ecosystem for more than five decades, and now Mastercard’s innovative open banking technology will offer consumers and businesses across Europe access to more innovative payment experiences.”

Unlike more traditional payment options, open banking enables consumers with a bank account to initiate swift digital payments to a merchant’s account. Payments are initiated directly through existing authentication protocols with a consumer’s bank, including biometrics, to retrieve the necessary information to execute a payment, making the experience easy and efficient.

Enhancing number of payment options

Omar Haque, head of e-commerce at Nexi, also added: “We are thrilled to announce our strategic collaboration with Mastercard, through which we will harness the power of its open banking solutions in Europe to scale and enhance our capabilities, and boost customer convenience in payments.

“By partnering with Mastercard and capitalising on its leadership and expertise in open banking, as well as its trusted payments infrastructure, we further enhance our ability to facilitate the transition to a digital-first payments landscape in Europe.”

Benefits for merchants include real-time payment authorisation and settlement, enabling quick access to funds and improved management of cash flow and revenue streams. By leveraging innovative technologies and payment methods, merchants can better align with heightened customer expectations for fast and frictionless payment experiences in the digital landscape.

The news follows shortly after Nexi partnered with the open e-commerce platform Woo to enable Woo merchants to offer customers a wider range of payment options.

Payments giant Mastercard has launched its new ‘Open Banking for Account Opening’ programme for select US debit and prepaid products, hoping to streamline and secure account opening.

The move will see Mastercard provide a foundational set of open banking products as a new core benefit to Mastercard consumers, small business debit issuers, as well as consumer prepaid issuers in the US. Mastercard’s new programme looks to improve the digital account opening process by verifying account ownership, lowering account abandonment, reducing non-sufficient fund (NSF) returns, and minimising manual entry of payment credentials.

In a recent study, Insider Intelligence found that Gen Z mobile banking adoption continues to rise by 12.4 per cent year-on-rise, leading to predictions that it will rise from 20.7 million in 2020 to 47.8 million by 2026.

Recognising the demands of an increasingly digital world, Mastercard aims to provide participating US issuers who opt into the program free access to Mastercard’s ‘Account Owner Verification’, ‘Account Detail Verification’ and ‘Account Balance Check’ solutions when used to support digital account opening of a Mastercard branded consumer and small business debit and general-purpose reloadable consumer prepaid product.

‘Another entry point to the digital economy’

Mastercard open banking draws on the safe exchange of consumer-permission data, leveraging industry standards and machine learning to support a seamless and secure digital account opening experience. With ‘Open Banking for Account Opening’, Mastercard issuers can lower abandonment and inactive through rapid account funding, verify account ownership more accurately and reduce costly NSF returns with real-time balance checks.

Silvana Hernandez, executive vice president, product and engineering, North America, at Mastercard, commented: “Today’s digital consumer is increasingly opening bank accounts online, gravitating towards the convenience and efficiency of the experience versus more traditional manual methods. The open banking for Account Opening programme provides another entry point to the digital economy through valuable and secure experiences that lean into the power of consumer-permission data.”

Mastercard open banking is enabling customers and partners to offer a more modern and secure digital account opening experience, leveraging solutions that span the entire enterprise. Mastercard is also hoping to strengthen the ecosystem for all participants, making relevant use cases safer, simpler and more accessible through open banking.

Atome, the digital financial services platform for Southeast Asia, is partnering with payments giant Mastercard, helping Atome cardholders in the Philippines convert rewards points into gaming credits via the ‘Mastercard Gamer Xchange’ (MGX).

MGX, a new turnkey solution, facilitates a convenient exchange to help consumers convert their Atome reward points into gaming credits across nearly 4,000 of the world’s most popular gaming titles.

The Philippines currently ranks as the world’s number one gaming country, with over 95 per cent of internet users in the country between the ages of 16 to 64 playing online games; according to a 2023 Global Digital Report by Meltwater and We Are Social.

Magic Tang, head of cards business at Atome, discussed the partnership: “We’ve seen a very strong take-up for the Atome Card, especially among digital-native Gen Z and millennial users in the Philippines, with one of the top use cases for the Atome Card being online purchases.

“We see a strong synergy in this partnership with Mastercard’s MGX platform as it provides Atome Card holders and gamers access to a wide range of gaming credit options.”

Atome recently launched an upgraded version of the Atome card, enabling Filipino consumers the ability to shop and buy now, pay later wherever a Mastercard card is accepted, in-store, online and even overseas. New features include the ability to choose ‘Pay in three’ or ‘Pay in six’ month options.

Connecting ‘consumers to their passions’

Kaveri Khullar, senior vice president of consumer marketing and sponsorships at Mastercard, also added: “MGX bridges the world of rewards to the thriving global gaming community, offering an innovative and seamless redemption solution in a new category.

“From eSports viewers to console and smartphone gaming enthusiasts across a range of demographics, it opens new connections to the world’s fastest-expanding entertainment market.

“As the Philippines gaming market anticipates further growth in the next few years, this partnership with Atome is a fantastic example of how innovative payment experiences are evolving to connect consumers to their passions.”

Paytech, NovoPayment has received a Mastercard certification, as part of the Mastercard Network Enablement Partner programme, to switch and process Mastercard transactions in Mexico.

The Network Enablement Partner (NEP) programme is a Mastercard initiative that enables service providers — the vendors of Mastercard-licensed issuers and acquirers who typically have a fully indirect relationship with Mastercard — to play a pivotal role in expediting product innovation. They can reduce time to market and enhance overall performance and operational efficiency for their customers.

The direct partnership with Mastercard opens the door for service providers to collaborate on initiatives that drive value, innovation and seamless experiences in the evolving payment ecosystem.

Prior to Mexico, NovoPayment has received certifications in Chile, Colombia, Ecuador, Peru and Venezuela as card issuer processors.

“Our team has a long, successful track record of supporting clients across Latin America. We’ve worked in Mexico since 2009 and have a deep understanding of the market,” said Angelique Strauss, chief growth officer of NovoPayment. “With this certification to process Mastercard transactions in Mexico, NovoPayment continues to execute on our multi-rail payments strategy to support our clients’ ongoing demands, in addition to offering greater choice and flexibility.”

Through the NEP programme, direct access to Mastercard also enables NovoPayment to increase speed to market through the ability to test its products and solutions upfront, ensuring alignment with Mastercard standards.

Speaking exclusively to The Fintech Times, Strauss added: “As a provider of mission-critical financial infrastructure, we play a key role in helping clients across the Americas push into the new payments paradigm.  Given the success of our partnership with Mastercard in  Chile, Colombia, Ecuador, Peru, and Venezuela, extending the advantages of the Mastercard certification to our partners in Mexico was a logical step for us.”

Other notable firms that are a part of the Mastercard NEP programme include Marqeta and Nymcard.

While many countries across the globe have set targets to eventually remove petrol cars from the streets and replace them with electric vehicles, a vast number of pain points still exist in this space that have to be solved before these targets become a genuine possibility. 

In an effort to help charge point operators (CPOs) provide more user-friendly payment solutions for their customers, payment giant Mastercard is joining forces with Last Mile Solutions, an electric vehicle (EV) charging and smart energy management platform provider.

Through the partnership, Mastercard will introduce a new solution that enables CPOs to integrate existing EV charging stations with a variety of payment terminal brands, without requiring extensive integration efforts. Mastercard hopes the payment gateway solution will unify the user experience and simplify payment terminal integration, onboarding and transaction processing.

George Simon, executive vice president of market development Europe at Mastercard: “The transition to the mass adoption of electric mobility is key to building a more sustainable world. Achieving this requires partnerships like these to make the transition as seamless as possible, not only for consumers but also for infrastructure operators.”

Through this collaboration, Mastercard and Last Mile Solutions are also fostering the uptake of electric vehicles throughout Europe by eliminating existing barriers and simplifying the charging process for drivers with interoperable and universal payment solutions.

The solution will be rolled out across Europe starting in early 2024 to enable CPOs to comply with the EU AFIR regulation that will come into force in April 2024.

Eric van Voorden, chief executive officer at Last Mile Solutions, also added: “In the dynamic world of payment systems and electric vehicle charging, this strategic partnership between Mastercard and Last Mile Solutions will accelerate a seamless electric vehicle adoption.

“Our leadership in the market is anchored by providing an effortless payment terminal solution for charging stations for retrofit and newly built charging stations. This collaboration is designed to support CPOs to seamlessly facilitate integration and comply with AFIR.”

Overall fraud rates in North America in 2023 increased by 70 per cent, according to a recent Featurespace report. As fraud continues to rise across the globe, many are left scratching their heads when considering how best to approach consumer protections. 

In an effort to fight back against fraudsters, payments giant Mastercard is now adopting generative AI techniques to enhance the protections that keep consumers, and the entire payments network, safe.

Mastercard’s Decision Intelligence (DI), a real-time decisioning solution, already helps banks score and safely approve 143 billion transactions a year. New generative AI technology will scan an unprecedented one trillion data points to predict whether a transaction is likely to be genuine or not, building Mastercard’s existing ability to analyse account, purchase, merchant and device information in real time.

The next-generation technology, ‘Decision Intelligence Pro’, works by assessing the relationships between multiple entities surrounding a transaction to determine its risk. In less than 50 milliseconds, this technology improves the overall DI score, sharpening the data provided to banks.

Mastercard explained that initial modelling shows AI enhancements boost fraud detection rates on average by 20 per cent and as high as 300 per cent in some instances.

‘Instilling trust into every interaction’

Ajay Bhalla, president of cyber and intelligence at Mastercard, commented on the use of AI to tackle fraud: “With generative AI we are transforming the speed and accuracy of our anti-fraud solutions, deflecting the efforts of criminals, and protecting banks and their customers. Supercharging our algorithm will improve our ability to anticipate the next potential fraudulent event, instilling trust into every interaction.

“The precision of the solution – achieved by scanning potential points of sale in real-time – has been shown in our own analysis to not only increase accuracy but also reduce the number of false positives by more than 85 per cent.”

The enhancement of DI looks to improve banks’ abilities to protect cardholders from fraudulent transactions and mitigate false positives: legitimate transactions which are incorrectly flagged as fraudulent ones.

Global payments leader Mastercard has released the third report in its ‘Get Britain Growing’ policy programme – as it hopes to boost the UK fintech landscape, and encourage firms and policymakers to address environmental concerns. 

The latest paper focuses on how the UK can enable growth by supporting digital payments innovation as the foundation of the next generation of UK fintechs, in particular by creating the right ecosystem to boost fintech innovation in the ESG space and supporting the transition to net zero.

At the outset of the report, Mastercard urges policymakers to back the UK paytech sector and support innovation to enable growth by:

1. Championing and adopting digital payment technologies and innovation that address exclusion, whether that’s prepaid cards, account-to-account payments or new fintech solutions that help vulnerable and excluded individuals get access to financial services and build their financial capabilities and resilience.
2. Backing digital payments technology that’s helping to power micro and small businesses, by helping them to release cash flow, improve their productivity or increase their trade across borders, enabling them to grow and thrive.
3. Backing digital payments technology and innovation that enables the future competitiveness of the UK’s
   fintech sector and helps support consumers and small businesses in their transition to net zero.
4. Adopting a bolder approach to building world-class talent – to help tackle the skills gaps and improve upskilling.

Ken Moore, chief innovation officer at Mastercard, explains: “The value of the UK’s fintech sector is clear, which leaves policymakers and industry to ask: what’s needed to ensure the UK retains its position as a global fintech hub and harnesses the technologies that will form the foundation of the next economy? The answer lies in a clear, forward-thinking national fintech strategy.”

Striving towards net zero

The importance of enabling positive climate actions and moving towards net zero in the UK cannot be understated.

Ellen Jackowski, chief sustainability officer at Mastercard, explained how it is supporting the drive towards net zero: “If the UK is committed to creating sustainable economic growth, including higher wages and better opportunities, then the transition to net zero emissions must be a central pillar of those plans; and how we support consumers and businesses with a move to sustainable consumption must be a key part of that.

“We need to equip consumers with the knowledge and data to make more informed purchasing decisions, and to understand the impacts of their purchasing decisions.

“Mastercard is also working with social-purpose fintechs like ekko, which in 2021 launched a first-of-its-kind proposition by combining fintech, marketplace, open banking and retail into one transformative app that makes it effortless to make a tangible difference on climate change, without the consumer needing to do anything different.

“Every five transactions a customer makes using the ekko debit card will pay for one plastic bottle being collected before it enters our oceans, and every 50 transactions will pay for the planting of a tree on behalf of the customer.

“Customers can track how many bottles they’ve collected and even monitor their personalised carbon footprint using their carbon meter in the ekko app. The app also gives customers access to a curated list of sustainable partners offering climate-friendly goods and services as part of the wider ‘enviroconomy’.”