Mastercard says real-time payments increase risk of fraud
Mastercard is developing a new service for banks that will add card-like consumer protections to transactions sent over the real-time payment system that competes with its network.
The move is in response to a looming shift in payments away from credit and debit cards – which run over networks created by US giants Mastercard and Visa, or eftpos – to an alternative real-time system known as the “new payments platform” (NPP).
The Reserve Bank forced banks to build the NPP to create a sovereign real-time debit system that reduced reliance on the global networks and could also ultimately replace the ageing Bulk Electronic Clearing System (BECS).
But banks are struggling to devote enough resources to the new system. The Australian Financial Review reported this week three of the major banks will miss a key deadline to turn on new functionality known as PayTo to let merchants use NPP to accept payments from bank accounts.
Mastercard said it could help reduce bank capex as payments shifted to the new system and pointed to risks if banks fail to offer a comprehensive consumer protection regime, like the one Mastercard, Visa and banks have created for card payments.
These include “chargeback” to retailers for fraudulent transactions and allowing consumers to be compensated if goods are ordered with a scheme card but not delivered.
“What we have seen around the world is, as account-to-account systems move to real time, money moves faster but so does fraud,” said Richard Wormald, Mastercard’s division president for Australasia.
Consumer protection regime
“We know scams are a major problem in many markets with real-time payments, and we would expect them to become a bigger problem here. We can put in place a consumer protection regime without seeing the cost of fraud and cyber increase, which will provide better protection for merchants or banks.”
The global card schemes have also created detailed processes for managing liability and settlement risk, along with cyber risk and fraud management services – effectively insurance policies to allow consumers to transact with confidence. They vet consumers and merchants as they enter the networks and block transactions from bad actors.
Mastercard said many of these protections could be lost in the shift to direct account-to-account payments over the NPP, and it wants to provide them – for a fee to be paid by banks.
Mastercard will develop a “pay by account” button for merchant websites or mobile apps to allow payments to be made using the existing direct entry system or the NPP. It plans to allow merchants and banks to select the payment channel.
Pricing for banks to add account-to-account services has not been finalised but is likely to be a fixed fee per transaction, making it relatively attractive for larger transactions. The service, which Mastercard has developed with Canadian fintech EonX and Cuscal, will launch in the second half of this calendar year.
Mastercard is a $US320 billion NYSE-listed behemoth. Its stock is down 10 per cent year-to-date – similar to Visa, which is down 7 per cent; both are relatively resilient against another payment stock, PayPal, which has halved over the same period.
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