CFO Martina Hund-Mejean says that after the financial crisis,
millennials focused mainly on debit cards. That's starting to
change.
By Maria LaMagna
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 14, 2017).
Mastercard has set its sights on millennials.
Martina Hund-Mejean, Mastercard Inc.'s chief financial officer,
says the company is positioning itself to take advantage of a shift
toward greater use of credit cards by millennials as they become
more confident about managing credit and debt.
The number of credit cards held by millennials in the U.S.
amounted to an average of just over two per person in 2016, up 52%
from 2010, according to Experian PLC, with an average balance per
person of $3,542, up 32% from 2010. Grabbing as big a slice as
possible of that growing market would help Mastercard compete with
Visa Inc. in the overall credit-card market, where Visa captured
53% of purchases in the U.S. in the first half of this year,
compared with 22% for Mastercard, according to the Nilson Report, a
trade publication.
In an interview with The Wall Street Journal, Ms. Hund-Mejean
discussed Mastercard's efforts to attract the next generation of
credit-card users around the world. Edited excerpts follow.
From insight to product
WSJ: What are some of the consumer insights you've learned
recently about millennial behavior?
MS. HUND-MEJEAN: During and after the financial crisis,
millennials were seeing how tough it actually was for their parents
to be paying back the credit they got extended by providers and by
banks. A lot of the millennials started using only debit-card kind
of products because they thought they knew they could be doing
their household budgeting in a better way without falling into the
trap their parents fell into.
Well, lo and behold, as the millennials are maturing over the
last two, three, four years, we're starting to see a changed
behavior. They're starting to feel much more comfortable in terms
of their own budgeting discipline. They learned it through what
they're doing with their checking account and their debit
account.
Everybody thought millennials are interested only in debit.
They're actually growing into the credit-card space.
WSJ: How is Mastercard using that information in its
business?
MS. HUND-MEJEAN: We know from research that millennials want to
have more discipline when it comes to money management and want
more control over spending. They also love to travel, see the world
and have a memorable experience; they would probably enjoy
travel-related rewards. They are concerned about digital security,
and a good user experience is what they are looking for.
So, based on these insights, we enhanced our World Elite
credit-card platform in the U.S. Instead of a ready-made,
one-size-fits-all rewards program, our benefits optimizer provides
cardholders a single online touchpoint for rewards management.
People can track and manage multiple Mastercard accounts. From
there they have the flexibility to access and activate their
benefits, even selecting new ones. Pay With Rewards, a mobile app
where consumers can set up when and where to redeem points
automatically at the time of transaction, was developed from
research that showed us that millennials want instant
digital-redemption options.
Ease and safety
WSJ: Are millennials particularly interested in mobile and
seamless ways to pay?
MS. HUND-MEJEAN: Digital and physical are moving together, it's
completely converging. When you think about consumers, what they
really like to do, they don't care if they're in a store or on a
website, they want to pay the same way. Millennials and even
centennials [those born after millennials] are no different in this
respect. Where they're different from my generation is that they
have been born into this technology-driven world. They have a
mobile way of life.
So, in a mobile-first life, they expect to engage, interact and
transact with friends, family, brands and even their money
digitally. And they want to do so in simple and safe ways. That's
where technologies like biometrics are coming into play. Some of
our internal research has found that nearly 60% of millennials in
the U.S. would like to be able to make payments by scanning their
smartphone.
WSJ: Mobile payments have grown significantly, but usage is
still relatively small. Mastercard has invested in various ways of
making payments, including wearables that can be used for payments
and an app that works with smart refrigerators to pay for the items
they order. Why do that now?
MS. HUND-MEJEAN: You need to think of this as a marathon, not a
sprint. Plastic cards have been around for 50 years. People know
how to use them, and merchants know how to accept them. So, that
acceptance grows faster and easier.
For mobile payments, we're building on what we've learned. But
think of it almost as the chicken and the egg. Merchants begin to
accept mobile payments when there's enough pull from consumers for
that. Consumers also tend to pick up mobile payments when there's
enough acceptance for them. And then eventually the whole thing is
picking up steam.
WSJ: As millennials have grown up, they've also seen many
examples of data breaches and incidents of fraud online. It wasn't
that long ago that companies including Mastercard began to require
a switch from traditional credit cards that have a magnetic stripe
to Europay-Mastercard-Visa, or EMV cards, which have added security
features including a chip. Despite those upgrades, we still see
cases of fraud. How is Mastercard moving forward to secure
transactions?
MS. HUND-MEJEAN: In terms of EMV, which is only a small
subchapter of fraud, everywhere EMV is rolled out, fraud has
declined in a very significant way, even in the U.S.
Where the fraud has increased for the U.S. is online. And that
is because EMV is only in the physical space.
But chip-card technology is serving as a base for securing the
online world as well, [by enabling the creation of] a unique code
for every purchase. If that code appears more than once, the
transaction would be red-flagged as fraudulent.
WSJ: To keep online payments secure, you've also invested in
tokenization, which allows consumers to make payments without
vendors having the ability to store cardholders' account
information. Instead, the vendors receive a unique series of
numbers -- a "token" -- that is used to validate the customer's
identity. Is tokenization enough when it comes to preventing online
fraud?
MS. HUND-MEJEAN: Tokens are creating a safer way to send data
electronically, and our work in biometrics -- what some people
refer to as selfie pay -- is helping to drive greater verification
of the cardholder's identity.
If you were to think about fraud traditionally, think of a
balloon. You could squeeze or reduce the air in one part, and it
would flow to another part. That's what you've seen as new
technologies are introduced in-store or online. What we're working
on now is to not just move that air, or fraud, around, but to
reduce and eliminate it through a multilayered strategy. And our
security development over the years and recent acquisitions speak
to that.
WSJ: What are some of those acquisitions? What else are you
doing to reduce fraud?
MS. HUND-MEJEAN: We're heavily investing to make sure we get to
the next areas of where we can keep you safe. Some of the areas are
biometrics. Now you're using your thumbprint. Mastercard did selfie
pay, which is facial recognition, which gets a lot more points in
terms of recognizing you than a thumbprint. That might be the safer
thing.
Currently, people identify themselves online with passwords and
security questions, but these are neither secure, because they're
easily stolen or socially engineered, nor easy to use, because they
are often forgotten, there are too many of them. Mastercard
Identity Check Mobile eliminates the need for cardholders to recall
passwords, dramatically speeding up the digital checkout experience
while also improving security. Instead, the cardholder can verify
their identity by using the fingerprint scanner on their smartphone
or via facial-recognition technology by taking a selfie photo.
Just recently [in March], one of my favorites, we bought a
company called NuData. They recognize you depending on how you hold
your iPhone and what you actually do in terms of typing in your
password, at which speed you're typing in your password, and what
else you're doing on the phone. So there's a lot of data and a lot
of artificial intelligence behind it that NuData uses.
No end for cash
WSJ: Visa recently offered $10,000 each to as many as 50
restaurants and food vendors who were willing to stop accepting
cash. What do you think about efforts to go cashless?
MS. HUND-MEJEAN: I believe for decades we'll still be having
cash. We probably will always have cash.
Even though one of our vision statements is "a world beyond
cash," there will always be cash in countries for certain things.
People will feel more comfortable with cash. I come from Germany.
You will not get rid of cash in Germany. The grandmother will want
to give a bill to her 10-year-old grandson and not have the parents
know about it.
Ms. LaMagna is a reporter for MarketWatch in New York. Email
mlamagna@marketwatch.com.
(END) Dow Jones Newswires
August 14, 2017 02:48 ET (06:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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