MasterCard has been feeling the heat of Bitcoin for over a year now. Bitcoin has become big enough worldwide so that it can no longer be ignored as a viable payment option and currency. In a state-of-the-business interview with the International Business Times, Ann Cairns, president of international markets for MasterCard was asked directly about Bitcoin and how it compares to MasterCard.
MasterCard is feeling the pressure from Bitcoin’s innovations
MasterCard and their executives have been thinking long and hard about Bitcoin for over a year now since it became a major economic force in Australia. Last year, Australia had as much as 7% of the world’s Bitcoin market under consumer control, and the Senate was considering making legal accommodations to the digital currency. That’s when MasterCard attacked.
They launched an aggressive lobbying campaign directly with the Senate against Bitcoin and its unregulated nature. MasterCard also crafted an explainer video, designed to tear its image down. With a coordinated banking effort to thwart Bitcoin exchanges by closing associated banking accounts for the industry last month, the Bitcoin wave of support seems to be subsiding, but MasterCard definitely felt threatened.
"Bitcoin in its current incarnation is slow in the sense of being able to do a transaction and have it properly authenticated, which can take quite a few minutes. It doesn't really work in today's fast-paced shopping environment; even more so in train stations and so on when you have got millions of people trying to go through turn-styles – there you need real-time, instantaneous authentication, and delivery.”
Commercial banking and merchant payment interests like MasterCard have a major problem with the cryptocurrency’s lack of regulation. MasterCard doesn’t want to get steamrolled by its decentralized nature like newspapers did versus the Internet.
“I don't see that the world's financial systems will allow that to continue unregulated. It would be difficult for economies to run themselves if that was the case,” Cairns continues. “In terms of regulation, in terms of law and order, in terms of the way people run their economy on any massive scale - Bitcoin will have to evolve and change in order to have massive global adoption.”
One clear advantage Bitcoin has over traditional card payment systems is the matter of consumer identity theft. In the U.S., credit card fraud is on the rise, too. About 31.8 million U.S. consumers had their credit cards breached in 2014, more than three times the number affected in 2013. That doesn’t include debit card fraud statistics. Many traditional payment programs still use unencrypted, insecure programs like email.
"If you do a transaction over email it's not very secure. It's un-encrypted, it goes out into the ether sort of free and people can read it and so on, which is becoming quite a big issue now for many people,” states Cairns.
With Bitcoin, a consumer’s identity is never tied to each transaction, like a card purchase, creating a huge safety net. MasterCard is working on improving their consumer protections and is even beginning to use encrypted technologies that Bitcoin has used since its inception to protect consumer information, starting with MDES, or MasterCard Digital Enablement Services. This retains your 16 digit card credentials in a container and sends an encrypted version of them instead.
She sounds like she’s talking about Bitcoin in describing this system’s use in the marketplace.
"Once that starts to be used ubiquitously that will be a very simple and easy thing to do. At this stage, it's just starting to happen; the banks are starting to adopt it, the merchants are starting to adopt it,” said Cairns.
ECG monitoring? Is this what’s needed to have secure card purchases?
In order to protect traditional payment systems, MasterCard and other merchant services providers are left to take more, not less, consumer information, including biometrics.
Many smartphones now use fingerprint scans, but where those scans end up being stored and protected is most likely a centralized server that may be compromised. MasterCard Identity Check takes selfies of consumers to authenticate transactions. Cairns also mentions the Nymia wristband, measuring the users’ heart and ECG to authenticate use by constant user surveillance.
"With this persistent authentication you don't even have to do anything, you have got this wrist band on and when you make a payment you can just communicate with a terminal or something and say that's me,” says Cairns, clearly impressed by the innovative use of biometric technology.
It seems a consumer’s personal information dispensed into the global ether is not being reduced but increased to protect merchant account systems like MasterCard from fraud liability. Bitcoin is not perfect, but it certainly has that part right. It sounds like desperate companies do desperate things to keep you secure. Somehow, the level of card user security will be directly tied to how much more personal information the user provides to make that happen.
Does that make you feel more secure? Data breaches are going global, and card companies now want your fingerprints, pictures, phone information, and now ECG monitoring, for your own good?
You know what they about teaching an old dog new tricks. The trick seems to be on the consumer and their personal information being sacred. MasterCard has some unproven security ideas, but for everything else, there’s Bitcoin.