Visa & MasterCard Will Penalize Not Sharing Data

Pablo Valerio, International Business & IT Consultant | 4/15/2013 | 29 comments

Pablo Valerio
The battle for big-data is moving to all levels of customer information. In an aggressive move, the two biggest credit card companies in the world, Visa and MasterCard, are joining forces to get the customer information they want and penalizing services that don't share the information.

Every time a card payment is processed by the ACH network, owned by the banks, both the issuing financial institution and the card's brand (Visa, MasterCard, Amex, or Discover) receive full details of the transaction: date, time, amount, and customer and merchant IDs. This information is invaluable for the financial institutions and credit card companies.

But digital or staged "wallets" are changing the playing field. Companies such as Google, Square and PayPal have been using intermediary payment cards for digital transactions without sharing the information with their users' banks and credit card companies. This trend will continue to become more bothersome to banks as PayPal gets into the physical payment business through their "in-store checkout" program. So far it has recruited popular retailers such as The Home Depot, Foot Locker, and Nine West. Not sharing data is unacceptable for the credit card companies, and they want to penalize that with higher fees.

The Visa and MasterCard fee will be charged on "staged" digital wallets, such as PayPal, Square, iZettle in Europe and Intuit's GoPayment, according to analysts. They intend to start charging the fee in June to companies that do not sign up for a new digital wallet operator registration process. This, payments consultant Tom Noyes says on his blog, requires that wallet providers pass both a Wallet ID and a Merchant ID to MasterCard for each transaction, ensuring that MasterCard can continue to build a detailed profile of a cardholder's spending habits.

According to a new report from Nomura Equity Research, "Now that PayPal has started moving to the physical point of sale, competitive intensity levels are rising as PayPal encroaches deeper into what has traditionally been the incumbents' turf."

"PayPal rides for free on the back of other business models," said Chris McWilton, MasterCard's president of US Markets at a conference last month. "I think they've got to be cautious that they don't get too big and start making people wake up and say, 'Wait a minute, I'm actually losing business here because of your moving into the physical space.' "

Initially, both credit card companies were going after Google Wallet as well, but recently they announced they are choosing Google Wallet as their preferred mobile payment system. This way banks can issue credit and debit cards both with Visa and MC logos and let users make payments with their smartphones or NFC enabled tablets. Until now Google was using a virtual credit card enabled in the NFC devices' wallet to allow users to pay tapping their phones, then charging the card associated with the service.

Google has been offering their Wallet service free of charge to banks and credit card companies to get access to customers' offline transactions. Now the mobile user who has the appropriate hardware downloads the app from their bank and can then use it to pay for small items with a tap of his or her smartphone. The bank and Visa or MC get the data they want, and Google gets the customer's offline shopping ledger.

Of course, the people who lose out in all of this are customers and CIOs. The customers give up their data to more people despite getting nothing in the bargain, and CIOs have to decide how much they want to be a party to the deal. Not only do they have to decide which wallets and payment options to support in the face of potential customer resistance, one has to wonder how long it is before card and wallet companies start asking for customer loyalty data or other non-transactional information.

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Susan Nunziata   Visa & MasterCard Will Penalize Not Sharing Data   11/30/2013 6:23:10 AM
Re: knowledge=power
@Tuscany: Thank you! I'm glad it had a positive outcome as well! needless to say, fraud alerts are now on all my accounts because, you're absolutely right, not every company uses its analytics for such purposes so effectively.

Tuscany   Visa & MasterCard Will Penalize Not Sharing Data   11/28/2013 12:46:05 AM
Re: knowledge=power
Hi  Susan,   Thank you for passing on that refreshing account of how customer analysis can actually benefit the customer.  I don't mean to be humdrum about the topic, but unfortunately not many do analysis as well as AMEX.   But I am glad to hear it worked for you !  : )

I just yearn for the day that your account becomes the rule rather than the exception.
Susan Nunziata   Visa & MasterCard Will Penalize Not Sharing Data   11/27/2013 4:09:47 PM
Re: knowledge=power
@Tuscany: Yes, and also that the data about our spending habits gets shared with others is disturbing.

However, I had a situation recently where my cardholder, Amex, used all that data about my spending habits to stop a fraudelent attempt to charge $8600 to my card. It was an online attempt at a retailer that I have never shopped at, and Amex was able to sort my data and instantly decline the transaction, so it was never posted to my account. When they called to tell me about it, they reviewed another 10 charge attempts that they had blocked, none of which were made by me. 

What's interesting is that even as they were blocking these attempts, and before I knew about it, I used my Amex card to purchase a dress from a place I shop often, and that charge was put thru. 

so, sometimes their ability to do this level of tracking of our purchase patterns can have good results.

Tuscany   Visa & MasterCard Will Penalize Not Sharing Data   11/18/2013 2:10:11 AM
Re: knowledge=power

"PayPal rides for free on the back of other business models," said Chris McWilton, MasterCard's president of US Markets at a conference last month.


Amazing the banks are threaten by a little competition. And this craze over transactional data.  Don't they have enough ? 

Just goes to show banks want to anticipate every twist and turn of our spending habits before they even form.

Susan Nunziata   Visa & MasterCard Will Penalize Not Sharing Data   5/3/2013 8:21:26 PM
Re: knowledge=power
@Henrisha: Right. It's a tricky balance. If it really bothered me that much, I suppose I'd rebel completely and return to a cash-only existence. So i have to admit I'm making the choice to trade my personal privacy for the conveience of using a card so that I don't have to carry alot of cash when I travel, which has its own set of safety risks. Nobody's forcing me to do it, ultimately.

It's an uneasy bargain any way you look at it, and I haven't figured out a way around it. 
Henrisha   Visa & MasterCard Will Penalize Not Sharing Data   5/3/2013 5:33:14 AM
Re: knowledge=power
@Susan, I share your sentiments. It all depends on the situation, but really, what's involved here is basically a compromise. In exchange for added security ie. against fraud, you have to give up a little of your privacy and go through the process of informing them when you'll be out of state or out of the country.

The added protection is worth it although I do have mixed feelings as well.
Henrisha   Visa & MasterCard Will Penalize Not Sharing Data   5/3/2013 5:30:08 AM
Re: battle for data
The fact that potential employers and even potential partners check Facebook first to see what you're like should say more than enough. Google has more on you than you think; if you value your privacy, then you should stay away from social networks. Because no matter how rigid your privacy settings are, stuff is bound to leak out.
Susan Nunziata   Visa & MasterCard Will Penalize Not Sharing Data   4/30/2013 5:05:40 PM
Re: knowledge=power
@Syerita: It is unsettling. In some ways, it is helpful. For example, my credit card company alerts me if there is any spending that is outside my "normal" spending patterns, such as a purchase in another state or something costly at a store where I don't usualy shop. On the one hand, I like that someone besides me is looking out for fraud. On the other hand, it bothers me that I have to let them know I'll be using my card in another state or country in order to keep them from blocking my purchase.
Syerita Turner   Visa & MasterCard Will Penalize Not Sharing Data   4/30/2013 9:07:06 AM
Re: knowledge=power
@kstaron...I am completely with you on that. It is creepy in my opinion. Why do you need to know that much about what I am doing. Cash is going out of the loop and before you know it; it won't even be made anymore. So cards are where its at. However with information being so open it really scares me to see what is needed and calculated in the future.
angelfuego   Visa & MasterCard Will Penalize Not Sharing Data   4/23/2013 9:57:01 PM
Re: battle for data
@adil, that is why I don't have a Twitter or Facebook account.
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