Mastercard recently released a report, The Future of Payments: 9 Trends to Watch, which looked into the changing payments landscape and what technologies and innovations are transforming it. PaymentsJournal sat down with Ken Moore, Chief Innovation Officer at Mastercard, to discuss key findings from the report and look ahead to the digital transformation that could take place over the next decade.

There were a lot of interesting findings that came out of the report. What stood out to you? One of the big themes that emerged was this reimagining of money. So what can be considered as money beyond cash in your pocket and the balances in your bank account to this broader range of assets that can be transferred seamlessly between participants, consumers, merchants, and businesses.

Over the next decade—and we can see it already in loyalty points, cryptocurrency, I would argue data, among other things—have now become asset classes that have similar characteristics to money in that we understand the rules around them and how we can transfer them. (Another big theme) is intelligent experiences, which is the convergence of digital and physical in all aspects of our lives, but with a heightened focus on delivering experience. And finally, there’s (the idea of a) sustainable future.

This is taking the principles of environmental, social, and governance (ESG), and not just it becoming a boardroom conversation but a key aspect in how we design, build, and deliver products and services. When I was looking at the research, what stood out was this continued shift to a bigger digital footprint. Overall, we’ve seen this move toward a more cashless society—and I say that with an asterisk because cash isn’t ever going away.

Are you seeing the same on your end? The pandemic accelerated the adoption of new behaviors. It was with us for a long time, so some of those early behavioral shifts became habits. But in all honesty, this shift had started before the pandemic.

For one, governments—particularly in emerging economies—have been continuing to push financial inclusion via access to digital payments. It’s also become cheaper and easier for merchants to accept mobile payments. Any device can become a commerce device, and we’ve seen an increase in the number of merchants that are accepting digital payments.

While cash is expected to drop significantly between now and the end of the decade, I don’t think it’s going away. I don’t think a cashless society is imminent. The only thing that could really bring us toward that true cashless society is the emergence of Central Bank-issued digital currencies.

But even then, I don’t necessarily see governments stopping the printing of cash. It’s (more) likely they would let digital payments, central bank-issued digital currencies, and cash coexist. I’m sure digital payment adoption is also going to look different on a global scale.

Adoption of these different trends is going to look different across different markets and in different parts of the world. What I think will be helpful—and we’ll see this play out in crypto, in particular—is clear regulatory environments and standards. It’s really important to support trust in whatever use case or digital payment method you’re driving.

And it’s particularly important as we look at some of the new asset classes or the broader adoption of nascent asset classes like crypto. The second thing is, it will vary a little bit with the kind of maturity of the underlying technology. For example, augmented reality is much closer to us than virtual reality.

These metaverse-style worlds that we were talking about a year ago, they’ll come, but I don’t think they’ll come anytime soon. Whereas augmented reality, this overlay of digital information on top of the physical world—and whether that’s seen through your camera phone, a set of glasses, or something else—that’s closer in. It will also vary depending on the sector.

We could well see that convergence of digital and physical play out in the retail sector before we see it in some of the other sectors. Particularly this convergence of physical and digital. That’s interesting.

What can other industries learn from retail? We’ve seen adoption of technologies in retail that can easily be transferred to other sectors. With augmented reality, you can step into a store and browse the shop’s inventory based on a physical item in front of you. You can drop other items in beside it (to compare).

I’ve seen that in a couple of online e-commerce sites as well. I know from the airline and travel industry, if you were sitting on a plane and you were trying to go somewhere, how do you get an experience of the city or the destination that you’re going to before you ever get there? I’ve seen brands start to look at it in that context. Similarly, in the automotive industry, how do you test drive a car and customize the inside of it? It’s really about the transferability of technology from one sector into a number of others.

One thing that you also mentioned previously was the importance of compliance and regulation. We’re seeing an emergence of various payment methods and technologies. And with that come regulation and compliance, which can be considered by some a hurdle—especially when it comes to garnering consumer trust.

What’s your take? I don’t know that I would necessarily describe it as a hurdle. As consumers, we want to have trust in the companies that we do business with, and unfortunately, we have seen too many bad actors over the past couple of years. And I think it’s eroded our trust in some of these experiences that we have been trialing over the past couple of years.

When you get a safe regulatory playing field in a very principled way, it’s progressive, but it’s also focused on consumer protections and privacy, as well as on regulatory and compliance adherence. That’s a good thing, and companies will adapt to fit with that. Sometimes technology and innovation run ahead and it takes a while for regulation to catch up, and in those instances we see bad things happen.

But that innovation has created the art of the possible. It’s shown people what can be achieved. When regulation catches up and we see rules and principles emerge, companies adhere to those.

As we look into the payments space five to 10 years from now, what are you most excited to see? The biggest one would be the tokenization of everything—seeing data being tokenized and exchanged more freely, but with rules around it. And seeing digital goods being more accessible as well. Because if we have an NFT or something like that, in essence it’s a digital receipt of ownership.

Suddenly, this broadening of things that you can exchange with me as two people who want to transfer something of value between us, that’s exciting. And it would be massively transformative in the world. You put that then together with the utility of a digital wallet.

Imagine, you can combine your car keys and house keys together with all the functions that you actually have in your physical wallet today, all wrapped up in the security of a bank vault. You put those things together and there’s incredible possibilities for growth.

By Rimma Kats
May 04, 2023 00:00
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