New MasterCard Fee a Sign of Digital Wallets’ Evolution to Mainstream (March 21, 2013)
March 21, 2013
The news that MasterCard soon will begin charging a fee to operators of some types of digital wallets has many industry observers considering the move a shot across the bow in a coming struggle for access to digital wallet customers. But others say the fee simply represents a step forward in the process of digital wallets becoming a mainstream form of payment.
The new fee, which was detailed in a research note issued this week by Nomura Equity Research, reportedly will be levied beginning in June on transactions funded with MasterCard-branded credit cards over so-called “staged” digital wallets. Staged wallets—which include those from PayPal, Google, iZettle and Intuit Inc., according to the Nomura note—work by drawing funds from a payment card that has been pre-linked to a consumer’s wallet, and do not share details of the individual transactions to the card network. The new rules mean issuers of staged wallets will need to either pay an extra fee to MasterCard on each transaction, or begin providing more detailed data to the payment network, so it can continue to reap valuable information from cardholder spending habits.
The exact size of the fee has not been disclosed, but it will apply only to credit transactions made in the U.S. and won’t affect debit card or prepaid card transactions, according to Nomura. MasterCard may not be the only payment network to charge a fee to operators of staged wallets. When asked at a conference yesterday if Visa was planning its own digital wallet fee, Visa Inc. CEO Charlie Scharf reportedly said, “I think it’s totally appropriate to do that.” He added that “not allowing data to be passed through to our issuers makes us re-think our pricing and our rules.” Both MasterCard and Visa have digital wallet products of their own.
Lee Manfred, a partner with First Annapolis Consulting, called the fee “another step in the continuing evolution of the mobile wallet from novelty to mainstream business.” Manfred tells Paybefore the charge will likely do little to hinder the rise of digital wallets. “I doubt this will be a material impediment to wallet adoption. There’s clearly interest and demand; if the market won’t bear this fee, it will be competed away or eliminated,” Manfred says.
MasterCard could not be reached for comment by press time.