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MasterCard tries to zap PayPal with own-brand mobe wallet

MasterPass eyes lead in pay-by-mobe race

Internet Security Threat Report 2014

Walk into any of Apple’s 400 shops, pick up an accessory, boxed software or any one of the other items the Mac maker’s stylish emporia have out on shelves, and, if you have an Apple ID and an iPhone, you can buy the products you want without having to interact with one of the firm’s happy-clappy minions.

The system works with an app that taps into each shop’s Wi-Fi network to link a phone camera scan of an item’s barcode with Apple’s pricing database and your Apple account details. Key in your Apple ID and password to confirm the purchase and you’re ready to go.

Apple's Apple Store app for in-store payments

Apple's Apple Store app supports in-store payments - but there's still no escape from the blue shirts

You even get a virtual receipt you can show to overzealous store detectives as proof of purchase.

Avoiding paying shoppers being collared as shoplifters aside, it’s a system MasterCard would very much like to see made more broadly available, and this week it announced MasterPass, a system it hopes will soon allow users to pay for any item, in any shop, by phone.

MasterCard comes late to e-payments. PayPal, the doyen of digital payment systems, was founded 15 years ago, in 1998, building its business on the back of internet users’ fondness for bidding in sales hosted by eBay. The online auction site liked PayPal so much it bought the company, in 2002.

Like Apple’s Apple ID system, PayPal hides a user’s credit card details away behind a single log-in system, making sure the retailer - online or off - gets its money without having to view or store the customer’s numbers. So do similar services from Google, WorldPay and others.

Give the credit card a hiding

That’s very convenient for the buyer, but less appealing to the likes of MasterCard and Visa, and the banks whose cards tap into these firms’ payment clearing systems, all of whose business depends on taking a small cut on each purchase. Tucking away the card at the end of the customer interaction chain subverts the brand recognition that MasterCard and Visa strive to build in order to promote usage and increase their revenue from all those transaction fees.

Existing online payment schemes were devised to allow users to buy goods online and pay for items through an intermediary who they trust to protect their financial details more than they do the vendor, the better to preserve the security of their financial information.

That’s much less of an issue for high street purchases. In real shops, customers are happy to hand over the card they might want to obscure when shopping online. The change now taking place, thanks to initiatives like Apple’s payment app and similar utitiles from other shops and suppliers, is consumers’ growing desire to pay not with a card but their phone.

MasterCard MasterPass

MasterCard's all-encompassing m-payment system, MasterPass

The Apple Store app uses barcode scans and Apple’s own Apple ID system, originally created to allow fans to pay for music downloaded from the iTunes store but since rolled out across all of Apple’s e-commerce outlets. Pizza Express, a restaurant chain, offers a similar app: your bill has a numeric code which can be tapped into the app and then paid for through PayPal.

With a smartphone in your pocket and a secure payment app installed on it, you might not even need to carry cards at all, calling into question the livelihood of the likes of MasterCard and Visa. If you don’t need your credit card to buy things, only a PayPal account, why not link it direct to your bank account or PayPal’s own credit facilities and cut out the go-between card altogether? PayPal and Apple don’t yet offer credit, but all they need to do so is a suitable licence. In Europe, PayPal has one.

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