Daniel Cohen, head of emerging payments for Latin America and the Caribbean at Mastercard, discusses payments innovations that the company is developing.
Daniel talks about plans to introduce payments capabilities through social media platforms, authentication and anti-fraud advances, and why he believes tokenization will become even more important in the future. He also shares his perspectives on what LatAm can learn from payments industry developments globally, the key tech advances to watch this year, and how to ease the “pain of paying” for consumers. This episode is in English.
The interview is part of iupana’s April 2018 special series on mobile payments.
Our podcasts are designed to be listened to, and we highly recommend you listen to the audio for the full experience – the emphasis and emotion that you can’t see on paper. We provide the transcripts for your convenience, however please be aware that these may contain small errors.
How are Latin Americans going to be paying for goods and services in 2023?
Daniel Cohen, Mastercard: We have some really interesting things that we’ve learned over the last couple of years, we’ve been doing this. I think some of the key learnings from last year, first of all, how important the consumer experience is. Consumers really adapt to things that are easy to use, that are safe, that are just inherent into their day-to-day lives. That’s one and this is all leading into where we’re going.
The second key learning that I think is really important is that we learned the power of tokenization. When we take the 16 digits of the MasterCard and the expiration date and all these numbers, it’s tricky to enter them into a mobile app or use the screen of our small mobile devices to make payments. When we take that away and we simply tokenize it, it’s a much better user experience, it’s a lot safer.
The third learning is how important the merchant relationships, the type for merchants we’d like to call in the industry the use case, right? I’m hailing my Uber, I’m pre-ordering movie tickets or I’m buying coffee. All of that leads us into where we’re going.
I think the one thing that we know is that when it’s easy, when it’s safe, consumers will adopt it. We believe consumers are going to continue shifting a lot of their spend to digital, a lot of their spend to the mobile devices as we go, and then potentially into other types of devices. We have wearables, we have potentially payment credentials in our vehicles, there’s a plethora of ways that we can pay moving forward in Latin America.
The second thing about tokenization, we’ve seen this huge surge in the number of tokenized transactions that have come into the market either through the banks launching tokenized transactions, or for example, we have Samsung Pay live in Brazil and in Mexico. We have other players coming soon. All of those transactions are tokenized. Third, I think we’re going to see more and more digital merchants, some merchants that are what I like to call digital by design, they’re born digital. If we think of a Netflix or we think of Spotify or we think of an Uber or Google, Facebook, and all of these players, they’ve really grown up digital. I think we’re going to see more and more of these types of merchants in Latin America and growing more and more.
You said the consumer experience needs to be easy to use and safe. I think it’s interesting what we’ve seen over the last few days, a week or so with what’s going on with Facebook and Google. Maybe it’s different when it comes to money, but people sometimes seem to prioritize the easy to use over the safe?
Daniel Cohen, Mastercard: Yes, it’s interesting. We launched in Brazil. Sometimes you have an issue in parking in general, right? I’ll give you an example. I went to a shopping mall in São Paulo, there’s like a- do you know the kind of machine where you enter cash or card and you can pay for your parking and then you can take your car and your leave? The machine was broken. The gentleman who is running the parking lot, we were around going around looking for him, was out to lunch so we literally didn’t have a way to pay and take the car out. We left the car, we went upstairs, and we took an Uber.
One of the things is we’ve partnered with a company that has an application in Brazil for parking. People can go into the app and prepay their parking. We’ve seen a surge and it’s simply because it’s so much easier to go into an app, enter your payment credentials and just pay. Behind that is MasterCard’s technology and technology of the company called Zuul and so consumers know in this instance that it’s real, that it’s safe, and they opt for it. We’ve seen tremendous growth in those types of solutions. I think that’s important. Consumers will always think about safety and ensuring that their payment credentials are safe and guarded in the ether, but they will also go for what makes their life better and what solves a problem for them. That’s why we focus so much on the experience and the safety and security.
That’s why also, as I mentioned earlier, the importance of tokenization. I don’t feel comfortable, me as an executive at MasterCard, with 16 digits and all of this information flowing out there in the cloud. We’re very focused on ensuring that everything’s encrypted, that consumers’ information is not simply out there, it’s tokenized, that it’s safe and secure.
Are there other innovations that you’re looking at on the security side at the moment?
Daniel Cohen, Mastercard: I think one of the key things in this digital world and mobile payments is I need to know that you are you, so to speak, that the end-user is actually you. We take a scenario where I’m sitting on my couch at 2:00 AM in Mexico City and I’m potentially buying a good or service that’s coming from Europe or Asia or somewhere else. How does that merchant know that I am really me and that this is my card and it’s not fraudulent? One of the areas that we’re very keenly focused on is authentication. How do I ensure that that cardholder is that cardholder?
We have many ways to do this in the payments world. Previously, we did it potentially with the signature, so if I was standing face to face with you in a merchant, I would sign a piece of paper, then we went to the chip and we would insert the chip into a proper terminal and then enter a PIN or a four-digit identification number.
In the digital world, that becomes a bit more complicated if you will. We use passwords and security questions, «What’s your mother-in-law’s maiden name?» and then different ways of doing that, for example there’s technology called CAPTCHA where we look at images. We’re moving now to the next generation. How do we introduce into Latin America more sophisticated ways to do this and to authenticate that users are there? That’s one.
Secondly, MasterCard has made a series of acquisitions. In the past year, we’ve bought a company called Brighterion which uses artificial intelligence a lot for the purposes of controlling fraud. We’ve also purchased a company out of Canada called NuData. Using technology from NuData, we can track movements of the finger and how the phone is being held to determine if it’s really the user or the owner of that phone that’s using it. Fascinating ways of using technology to verify that the end-user is really the end-user.
That last one seems… shall we say, impressive? Do users really hold their phones and use their phones in such distinctive ways that they can- maybe not authenticated, but that can work as a secondary verification?
Daniel Cohen, Mastercard: Yes, it’s fascinating. There are things that are very unique about end-users. For example, your retina, your heartbeat, your fingerprint, all of these things are unique. We have the technology today. It’s not pie in the sky or futuristic. I think a couple years ago, it was but today, we have this thumbprint now. The latest iPhone has come out with facial recognition, the iPhone X. We have a lot of this technology at our disposal. The cool thing about NuData is it’s so unique. We’ve done another pilot with another Canadian company which is actually tracking your heart rate because we each have a unique heartbeat if you will, it’s fascinating. The technology is really there. It’s just a matter how do we use it and using it effectively to monitor fraudulent use of the payment.
There’re already a lot of incipient, different mobile payment schemes in different parts of Latin America. What needs to happen to make mobile payment systems much more widely spread, in the sense that they’re much more common place to be used? What needs to happen for it to really take off?
Daniel Cohen, Mastercard: One of the things that we’re keenly focused on is the whole topic of acceptance. I need to ensure if there’s a mobile wallet or there’s a mobile payment system that it can be accepted. We are very focused on the growth of the contactless ecosystem. There are several ways to make a transaction inside of a merchant. One is the contact, like I said, you either sign or you swipe the card with a magnetic stripe or you enter the card with the chip into a terminal, but the other is without contact: I touch the phone to the terminal, I pay and then I can go, which is great.
We are keenly focused on growing acceptance. I mentioned earlier Samsung Pay and some of our partner wallets that are being launched in Latin America. We have to also ensure that the acceptance infrastructure is there, offline and online. So we’re very focused on online as well, so when I get to a website, can I use my card, you need to make sure that that works. The other thing is again very, very focused on user experience. We are working very closely with our merchants and with the merchant partners in the ecosystem to ensure that acceptance is being done properly in the online environment. When I go in, what do I have to do there? Do I have to enter a whole bunch of information?
If I just want a park in São Paulo, the example that I gave you earlier. Do I really need to enter my birth date? My full home address? Or do you just need my license plate and my debit card number? Those are the things that we’re working with merchants on. It’s really about creating the proper acceptance ecosystem to enable the growth of some of these mobile payment options.
Tell me about some other new projects that you have perhaps beyond the security side of things. Tell me about some of the new initiatives that you have. I don’t know, is there a specific example that you can point to that’s exciting this year and some part of the region?
Daniel Cohen, Mastercard: Yes, I’ll tell you that there are certain industries and segments that we’re very keenly focused on. So one we’re very, very interested in everything related to the basic needs in Maslow’s hierarchy of needs. That means I want to get entertainment, I want to get food, I need to get there, I need to get back home. We’re very keenly focused on pre-ordering of food, delivery of food, are things that we’re looking on very, very closely in the region. We extend tremendous growth especially in Colombia and Central America and a lot of these services that are coming at you. Very similar to how Uber disrupted, if you will, the taxi industry.
There’s a lot happening in Latin America in terms of delivery and all of those things. That’s an area that we are looking at. We are also looking a lot on person to person payments and if you think about the rise of chatbots and a lot of the things you’re seeing on all these messaging platforms and social networks, that’s an area that’s of keen interest to us in Latin America when we think about how do consumers interact with merchants? How do consumers interact with their bank and those that are providing financial services? How can that be done? Is it via a chatbot, like a little robot that you can chat with?
How can payment be done through that thing? How can we enable our market places in different platforms that consumers are using to ensure that they can interact with that merchant, but then pay that merchant in these type of matters? Those are a lot of things we’re looking on, and then of course, we are looking at the next generation. As I mentioned, what about wearables? What about all these things that are happening in consumers’ lives and how we can incorporate the payment aspects of it?
I think for me it’s very important that nobody wakes up in the morning and says, «Huh, today I’m going to pay to listen to my favorite song.» Despacito. I’m not going to wake up in the morning and I’m going to pay for a cup of coffee at Juan Valdez. I’m not going to wake up and go and pay for the bus ride. They’re actually thinking about I want to enjoy the music that I love. I want to enjoy the cup of latte with soy milk and macchiato whatever in Juan Valdez. I want to go out to a movie with my partner and the person that I love. They are not thinking about the payment and so we want to take the pain of payment out of the experience, if you will.
Nothing more frustrating than trying to buy a coffee and having just sign up for an application and putting your name and your address and coming up with a password and all the rest, right. So it’s a matter of streamlining the system?
Daniel Cohen, Mastercard: Yes, I’m not going to mention the name of the coffee shop that – I presented a big payments conference in São Paulo and I was like, «Oh, I’m so tired after flying all night. I need to go and get a cup of coffee,” and then I crossed the street and there was a huge line at the door, it was 15 people. I took a picture and then I walked into the convention center and I got up in front of 3,000 people and I put the picture up and I said, «I try to go get a coffee and this is what I face.»
Why don’t they have an app where I could preorder and just walk by and grab the cup of coffee, very similar to what Starbucks has here in the US? Those are the types of solutions that we love because they make consumers’ lives easier and they take the pain of paying. Because, think about it: the ordering of the coffee is probably 10 seconds, they input your order. The rest is them making it and then you going for the process of paying. There’s got to be a better way, that’s what we’re focused on very keenly.
What are you seeing in other markets that can be transferred to Latin America? What are some of the other success stories that you’ve seen in other perhaps emerging markets or developed markets that you’re looking at applying to Latin America?
Daniel Cohen, Mastercard: Yes, obviously, the Asia Pacific is a region that’s very advanced in terms of the adoption of technologies. So we pick great things coming out of Japan and Singapore and China, and I work very closely with my colleagues and my counterpart in that region. We see a lot of things around transportation, paying for trains. If you look at Hong Kong, there’s a transit of card that actually allows me to then go out and buy newspapers and coffee and all things.
Those types of solutions for transit is something that we’re working very closely on here in Latin America and looking how we can bring solutions for transit. We’ve done a lot in terms of Colombia, but I think some of the ideas that we were looking on in Mexico and Brazil is how do we really provide holistic solutions for transit because it’s something that people pay once or twice a day even to get from point A to point B. Some of the other things that we’ve seen in terms of innovations on a lot of the social platforms and the chat platforms that we mentioned… Oyster is in London. In Hong Kong I think it’s the Octopus card, right? I don’t know.
Katie Llanos-Small, iupana: I don’t know, I know it’s Oyster in London and I know there’s a great contactless payment system there as well. You don’t need necessarily your Oyster Card, you can just touch your credit card to get in there and get on to the train.
Daniel Cohen, Mastercard: Yes, you mean in Transit for London?
Katie Llanos-Small, iupana: Yes.
Daniel Cohen, Mastercard: Yes, that’s the gold standard in London in terms of transit payments, but in Hong Kong one of the things that we look at is the card can be used in the train system, in the underground in Hong Kong, but then I can go out and there’s a chain of bicycles and I can use the same card to then tap, take the bike out and do the rest of my trip to the office on a bicycle. Those are the things that I think in Latin America could really improve consumers’ lives and so we’re very keenly focused at looking at those opportunities and working very closely with muncipalities.
In the case of Colombia we worked very closely with Recaudo Bogotá which is the transportation authority, if you will, and we’re working with them very closely on improving payments and we see huge adoption when we do those type of things.
And on the social side, the social and the chatbots what innovations do you see there?
Daniel Cohen, Mastercard: Yes, we are working very closely with different people. Obviously, I’m not going to say the names of the companies but you know who the leaders are in this space. We’re very keenly focused, especially in Brazil, in terms of enabling a lot of the payments that could take place over social platforms. When we think of- we have a pilot in the United States very successful. I wouldn’t even call it a pilot anymore with Facebook and Facebook Messenger where we enable the payments.
If you go into Facebook Messenger today, one of the options on the bottom you’ll see a little dollar sign and if you click on that you can send money or request money from another Facebook Messenger participant. We’re looking at bringing these types of technologies to Latin America in the markets where available now depending on what social platform is that’s the most popular in the given market, but those are the types of partnerships that are–
That’s person-to-person payments?
Daniel Cohen, Mastercard: Person-to-person, potentially person-to-merchant and definitely interesting things coming down the pipeline.
Any other final thoughts or final remarks about the future of mobile payments and merchants?
Daniel Cohen, Mastercard: I think one critical thing that’s great is that the population is young, it’s growing tremendously. There’s a ton of opportunity in Latin America and the devices themselves are getting increasingly more sophisticated as we go so it’s almost like you have this little computer in your pocket. There’s so much we can do. Couple that opportunity of the population growth with the growth of the devices and their computing power and you really have a beautiful marriage, if you will. I see a ton of opportunity in terms of that growth.
Will any Latin American country become cashless in the next 10 years?
Daniel Cohen, Mastercard: Potentially. If we look around the world, we see India. India’s government has issued a push to move India to a cashless society. We’ve seen in Hungary a big push of cashless cafes and cashless restaurants. Potentially, we could see a big push in Latin America of a country deciding that they want to go cashless. Cash is expensive, it’s easily destroyed or stolen or disappears. It’s tougher for governments to control tax evasion and all these other things when things happen in cash. I could potentially see a regulatory move in several Latin American countries to work to eliminate cash.
A bonus question here, is there any country in particular that you would put your money on to go cashless first?
Daniel Cohen, Mastercard: There’s one country that I shouldn’t name that has very high rates of inflation and they’re having trouble moving bills around and printing money. We can’t even fit the cash into the ATMs or enable people and if you want to withdraw $100, you would have to bring three Samsonite suitcases. I can definitely see them moving towards digital payments especially because they just launched their own cryptocurrency as well.
What’s the biggest hurdle for the adoption of digital payments?
Daniel Cohen, Mastercard: I think the biggest hurdle goes back to what I mentioned about acceptance. If we don’t profitably build the acceptance in the ecosystem in order to enable that, that’s potentially a hurdle for the adoption of digital payments. And the other thing is obviously the fraud. We’ve looked very closely at putting out all these tools to stop the fraud, but obviously, a hurdle is if fraud continues, then it will hinder the ability of digital payments to grow significantly.
What’s the top tech advance to watch this year for mobile payments?
Daniel Cohen, Mastercard: Obviously, the hottest thing on this circuit is BlockChain and cryptocurrencies. I would say that’s a big tech advance to watch this year, but potentially, more importantly, is actually the growth of artificial intelligence. Artificial intelligence really has the ability to transform payments both on the security and control of fraud front, but also on the ease of use and the consumer experience. I think those are two areas to watch this year.
Will we get to a point where there’s one single mobile payment technology that dominates in Latin America and if so, what would that be?
Daniel Cohen, Mastercard: Potentially. I would like to believe that it’s going to be tokenization. That tokenization is going to be the single sort of payment technology that really dominates in Latin America and I believe there’s potential to get there because of the security elements, because of the safety that it provides the transaction, because of it’s ability to reduce the cost of that transaction, because of the ability to, if you will, protect merchants from fraud, tokenization will definitely dominate.
Would you say that banks should develop their own mobile payments platforms or do they need to collaborate with others?
Daniel Cohen, Mastercard: I definitely think that consumers, if you look at all the applications and all of the things that they’re doing on their mobile devices, one of the top things that we see that they’re doing is actually interacting with their bank or their financial services or their institution that tends to be, if it’s- the top thing that they’re doing in Latin America tends to be WhatsApp or Facebook or Instagram followed by their bank’s application so there’s definitely room for banks to develop their own mobile payment platforms and to interact with their consumers. It’s sort of like they have the real estate and they should definitely take advantage of it.
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