The Essence and End-Game of Innovation MasterCard Gears Up for

Transcription

2013
www.mastercard.com.hk
The Essence and
End-Game of Innovation
MasterCard Gears Up for the Chip
Card Era
The Ultimate Travel Companions–
MasterCard "Cash Passport" and
Electronic Traveler's Checks
MasterCard inControl–
Customizable, Secure Payment
Service
MasterCard's "Priceless Singapore"
Mesmerizes with "Priceless" Glitz
MasterCard Survefy on Consumer
Purchasing Priorities
Innovation through Developing SMEs–
New Wave of Growth in China
MasterCard Introduces Innovative
Digital Payment Means MasterPass
Traveler Rewards–
MasterCard Insider Privileges
Alibaba Group and MasterCard Sign
Memorandum of Understanding
MasterCard Joins Payment and Clearing
Association of China
2013
Ling Hai
Division President, Greater China, MasterCard Worldwide
Foreword
Innovation is "the" buzzword today but it often rings
you the hottest "chip card" topics, explaining how
From MasterPass mobile wallet technology to OTA-
hollow and sounds a bit wishy-washy somehow. For a
MasterCard is going to make migration to IC card easy
enabled mobile wallet business to the first of its kind
corporation to not be seen as merely paying lip service,
for you.
MasterCard 5% Traveler Rewards program for cross-
it has to have the right attitude towards innovation and
border spending all year round and the first World Elite
be able to champion innovative services and products
And, of course, we are more than happy to share our
MasterCard in Greater China, all are shining examples
that deliver real value. At MasterCard, we embrace
views and also our experiences acquired worldwide
that validate MasterCard as an innovator. Furthermore,
innovation not just to make payment safer and more
with the market. In March this year, Mr. Ajay Banga,
we have signed a Memorandum of Understanding with
convenient for our financial institution customers,
President and CEO of MasterCard Worldwide, visited
different industry leaders including Alibaba Group
partners and cardholders, but also as a process for
China again and for the third time addressed the China
and China CITIC Bank to strengthen cooperation and
creating value and proving to our customers, partners
Development Forum. Titled "New Wave of Growth
foster pioneering ventures, more evidence yet of our
and cardholders that we are their payment network of
in China – Innovation through Developing SMEs",
commitment to innovation.
choice.
the white paper we presented this year contains
recommendations of ways to fire up the innovative
When it comes to innovative payment, there is so
As a MasterCard Insider, you are probably well aware of
verve of small and medium enterprises. The paper
much we want to share. It is the wish of MasterCard to
the secure and convenient payment products and tools
is included in this issue for your information and as
continue striving to help each and every MasterCard
we provide. From this issue onwards, we will include
an opportunity for us to engage in a more profound
cardholder excel in his business and enjoy even better
a new column featuring the value-added network
discussion of the subject matter.
payment experiences.
services we offer which you may wish to know more
about. In other words, you will learn that apart from
"MasterCard Insider Newsletter", as mentioned, is
issuing MasterCard cards and processing transactions,
a bridge that connects MasterCard with financial
our global network also boasts a host of value-added
institutions and its business partners. It is thus its
services that can make your business more efficient
pride and pleasure to take on the important mission
and secure and your end-customers happier, hence
of introducing to its readers our most innovative
giving you the advantage of gaining and fortifying
products and services and industry leading initiatives
market foothold. In this issue, we will share with
in the past season in Greater China and worldwide.
MasterCard Insider Newsletter
01
2013
The Essence and
End-Game of
Innovation
Ling Hai
Division President, Greater China
Innovation is a buzzword of today, a word that can change the destiny of
"Render unto Caesar the things which are Caesar's, and unto God the things that are
entrepreneurs and small-and-medium enterprises. It is, however, also a source
God's" goes, its involvement should be limited when an active system conducive to
of "pain" as well as "pleasure" for major corporations. This one word speaks of
innovation already exists. What the market has to offer is risks or uncertainties, but
aspiration, yet seems to have meanings which can be worlds apart.
they should not be arbitrary. Market risks are the best governor of players' behaviors.
What we need is fair and reasonable market competition.
For an enterprise to be innovative, it has to have a culture that can absorb failure.
That is the essence of innovation, while the product is merely fulfilling an end-
For example, while it is the government's responsibility to provide legal protection,
purpose. Like a running river, a product novel today may very well lose its
the language of the law is subject to interpretation. Hence, a system that encourages
competitiveness over time. But when an enterprise has the capacity to absorb failure,
innovation needs laws that protect intellectual property rights and a legal
it has what it takes to thrive and stay evergreen. This is true in nature as well as in the
environment that is clearly defined, reasonable and pro-innovation. To innovate
corporate world. To innovate is to tango with risks, and to be stared down by failure
is to venture into the unknown, needing the law and clear policies as beacons to
more often than not. A corporation that cannot embrace failure will not have the
ensure the right course. A country should provide stability in the form of adequate
vivacity to dream and create.
laws that give innovation a systematic "protective shield", ensuring that intellectual
contribution and innovative ideas and efforts are protected, that intellectual property
A vibrant economy that wants to tap the tremendous power of innovation and
rights of innovators are not infringed, and commercial benefits brought about by
present innovators with a stage on which to realize their marvelous ideas has to
innovation to an individual or a corporation are not compromised. Innovation can
be able to offer protection as well as the essential hurdles called risks, the former
then go beyond an idea in the mind to execution without reservation. It is this that
from the government and latter with the help of the market. The government no
will drive the overall innovative capability of the market.
doubt has a critical role to play as the "guardian" of the economy, but as the saying
02
2013
efficiency. That's the way to go. The experience of
different economies around the world tells us that the
spark that ignites the fire of innovation often comes
from small-and-medium-sized enterprises. Limited
in size, they cannot compete with the Goliaths of the
business world on existing product or service areas.
They need to change the rules of the game, assert their
competitiveness and claim their share of the market
through innovation. In the current market structure,
however, their disadvantages are deep-seated, like
the different treatment they receive from the financial
market compared to state-owned enterprises. While
the government has obviously stepped up its efforts
in nurturing smaller businesses, like putting its weight
behind initiatives such as credit for small businesses or
micro-loans, if the market structure remains the same,
small-and-medium-sized enterprises will continue to
have their wings clipped. It is apparent that the most
important task at hand is to push for structural changes
of the market.
What qualities must a reformer have? He must have
courage, confidence and wit. Talent and passion
breed innovation that enriches and enhances our
lives. However, grooming geniuses takes time and
effort. The US has no shortage of innovators because
its immigration policies encourage the welcoming of
talents and its education system does not force feed or
let examinations reign supreme. A diverse education
system is worthy of exploration and attempt. Talents
at all levels and in different areas are essential catalysts
of economic development, an aspect the government
needs to consider and safeguard. The reality is,
education that stresses diversity is the "engine" that can
enliven innovation and see it thrive.
The Chinese say "without the grain, even the finest
consequences of government bail-outs of the capital
There seems to be a world of difference between
cook cannot work the magic of rice". While legal
market were evident in the Asian financial crisis and the
protection and risk, but for innovation to happen, we
protection is essential, innovators, whether well-known
US subprime mortgage crisis. The government should
need them to be close partners. The global economy
with plenty of experience or full of ideas yet to attract
also keep its distance from liquidity flow and let market
is changing and nobody knows what it is going to look
the spotlight, need capital support for their pursuits. A
forces, science and commercial viability preside. Let the
like in the future. But, we are lucky to be a part of it. As
mature and well-structured capital market is the engine
market provide a free and competitive environment for
a major business corporation, we cannot afford to falter
that gives innovation the drive and source of strong
players and shed light on projects promising the most
if we are to survive the fierce competition. We will not
cash flow for innovators to secure resources, human
return as destinations for capital.
shy away from trying to give innovation a "turf" to roam
or otherwise, and take their pet projects to fruition. A
country without a well-developed capital market is
Even with legal protection and capital support,
often short on innovative capability. The capital market
innovation is still a "familiar stranger" to many
is not a gaming table, but a test-ground for finding that
enterprises. The crux of the matter for them is where
perfect match between passion and reason, present
to look within for "the ignition switch". Speaking from
and future, and science and courage. In this respect,
personal experience, without structural change, there
the purpose of government protection should be to
can be no innovation. Overall growth of the Chinese
ensure that the capital market operates in good order.
economy driven by injection of resources is unlikely
No government intervention however is required
to last. For economic development to continue,
regarding investment risks as they are necessary for
current resources should be reallocated to readjust
keeping market players wary of their own acts. The dire
the current system with the goal of raising economic
free, from facing failure and going the extra mile to
make sure innovation will not be forgotten amid our
core business actions. When the country, the market,
businesses and individual talents each do their best,
we will be advancing shoulder-to-shoulder, as a superhighway with only fast lanes, moving ever closer to our
final destination where we will all prosper.
03
MasterCard Gears Up
for the Chip Card Era
Henry Chen
Head of Customer Delivery, Greater China
Since the People's Bank of China published its
EMV is a standard accepted by the global payment
"Suggestions on promotion of Integrated Circuit (IC)
industry for IC chip-based payment cards and
card applications" ( 中國人民銀行關於推進金融 IC 卡應
acceptance devices including POS (Point of Sales)
用工作的意見 ) on 11 March 2011, card issuers in China
devices and ATM. It is short for the names of three
have been active in planning launches of IC chip-
international payment organizations – Europay,
based payment cards. Following the central bank's
MasterCard and Visa – combined. In February 1999,
principle "Led by the Government, realized by the
the three organizations came together to set up
market, guided by uniform standards and encouraging
EMVCo, a non-profitmaking entity, whose main tasks
innovation", the stress on uniform standards provides
were to lay down EMV Specifications and the approval
a solid foundation for having one card that works any
processes for chip-based cards and their acceptance
time, anywhere. For the IC chip-based payment card,
devices, and to monitor and ensure the interoperability
its international operational framework is the EMV
of the EMV standard, safety and compatibility of
standard.
chip-based payment cards worldwide. Europay was
acquired by MasterCard in 2002, JCB and AMEX joined
04
2013
the organization in 2004 and 2009 respectively, and
In 2004, MasterCard Worldwide started to actively
reportedly China Unionpay is actively seeking to join.
promote issuance and acceptance of EMV cards
EMV is short for the names of three international
The latest version of EMV – EMV4.3 – was announced
in China. A year later, it issued a co-branded M/
payment organizations – Europay, MasterCard
in 2011. Chip-based cards certified compliant with EMV
Chip-embedded EMV card with the Industrial and
and Visa – combined.
specifications can formally be called EMV chip-based
Commercial Bank of China, followed by a standalone
cards or in short EMV cards. To date, close to two billion
brand M/Chip EMV card issued by Bank of China which
EMV cards have been issued worldwide.
supported mainstream currencies including USD,
Pound Sterling and HKD. At the same time, it has been
Based on the universal EMV Specifications accepted
working with the Bank of Communications and China
by all, individual card organizations develop EMV
Citic Bank preparing to issue contactless EMV chip
applications to meet their own business requirements,
cards (with PayPass M/Chip). To facilitate acceptance
such as MasterCard's M/Chip 4 and UnionPay's PBOC
of foreign payment cards, MasterCard has collaborated
2.0, and so on. With the relevant approval processes,
closely with all relevant acquirers. As of now, nearly all
compliance of applications with the EMV Specifications
merchants accepting foreign EMV cards can process
is ensured. As for EMV-enabled acceptance devices,
transactions.
by adding a corresponding application program and
China (Australia), Bank of China (Thailand), Bank of
a public key certificate, they will be able to accept
From the card issuer's standpoint, being able to issue
China (Indonesia) and Bank of China (Singapore) have
EMV cards of various brands. In other words, all EMV
EMV cards grants an important strategic advantage.
partnered to launch a MasterCard-branded global
cards can be used with different acceptance devices,
With that ability, the card issuer can leverage the fast-
EMV card. Apart from advocating the issuance and
merchant processors and acceptance networks.
maturing EMV-accepting global environment to better
acceptance of EMV cards around the world, MasterCard
control the risk of card fraud and develop new value-
is dedicated to providing better services to Chinese
As a keen advocate of EMV standards adoption
added services. Since EMV contactless payment chip-
emigrants and the growing number of Chinese students
around the world, MasterCard sees secure global
based cards are at the heart of mobile NFC payment,
in different countries. This commitment underpinned
interoperability as a top priority. By mid-2012, there
they provide a competitive edge for companies that
the roll-out of the new product worldwide.
were close to 800 million EMV payment IC-chip cards
wish to boost their share of the mobile payment
carrying the MasterCard brand in circulation, with
market.
more than 22 million POS and more than 800,000 ATM
globally. The M/Chip solution of MasterCard has also
advanced from M/Chip 2 to M/Chip 4 and PayPass
M/Chip 4. The latest M/Chip Advance can support
conventional and contactless EMV cards, as well as
secure third party data storage.
Bank of China overseas branches
launch MasterCard credit card of
uniform EMV standard
MasterCard and Bank of China (Canada), Bank of
05
2013
The Ultimate Travel Companions —
MasterCard "Cash Passport" and
Electronic Traveler's Checks
Every year more than 930 million consumers around
the world travel abroad for leisure or business and
make purchases in foreign currencies. They need to
make exchange rate enquiries, pay fees for exchanging
money and often have to carry large amounts of
cash. They have to look for merchants who can cash
traveler's checks and present identification documents.
Thanks to MasterCard Worldwide's prepaid card
management platform Access Prepaid Worldwide,
consumers now have a better option—Cash Passport—
than using cash or traveler's checks. The new product
allows travelers to make payments and withdrawals in
local currencies quickly, easily and more safely.
Designed to be the "ultimate companion" of the
traveler, Cash Passport supports convenient and
secure e-payment anywhere in the world. Consumers
can make purchases at more than 10,000 selected
merchants in 20 countries on six continents without
having a bank account or credit checks. It supports
multi-currencies so that consumers may select a
Cash Passport for the specific currency used in their
destination and lock in the exchange rate when
purchasing the card. It allows consumers to cap their
spending ahead and save on currency conversion fees,
and is accepted by more than 30 million POS terminals
and ATMs worldwide. If Cash Passport is lost or stolen,
Access Prepaid Worldwide will refund the unused
amount on the card (as quickly as 20 minutes after
notification in some cases) and send a new card to the
customer within 24 to 48 hours.
06
At the same time, appreciating the needs of
and the quality merchant partners of CMN to give
Chinese tourists and students traveling and
Chinese travelers the most extensive privileges
studying overseas, both growing in number,
and convenience when making trips overseas. It
MasterCard has established a timely partnership
has helped to strengthen the competitiveness of
to introduce E-Traveler's Checks to the Chinese
Chinese electronic payment cards in global markets
market. At the award presentation ceremony of
and power the overall growth of outbound travel
the "2012 Most Popular Hong Kong and Macau
consumption in the country. And, marking the
Brands" in Guangzhou, China, MasterCard and
arrival of the Year of the Snake, MasterCard and
its partners China Media Network (CMN) and
Transforex also jointly launched the Transforex
Transforex Hong Kong unveiled the brand new
Snake Card that promises Chinese consumers
MasterCard E-Traveler's Checks. The product brings
convenient and attentive service when they spend
together the travel service resources of HNA Group
or withdraw money while traveling abroad.
MasterCard inControl —
Customizable, Secure Payment Service
MasterCard inControl is developed based on the
controls, and geographic controls, so that cardholders
and secure payment service from MasterCard's
company's unparalleled global payment process
can better manage their expenditures and budgets
inControl platform. MasterCard collaborated with Far
platform combining smart functions from its
in a smarter way. The control criteria of MasterCard
Eastern International Bank (FEIB) and National Credit
commercial and consumer products with personalized
inControl service can be adjusted any time by users,
Card Center to launch the MasterCard inControl service
real-time interaction services including alerts and
depending on their current purchase needs, with
platform to Taiwanese customers on 17 December,
notifications. With the support of inControl, consumers
adjustments taking effect in real-time.
2012. FEIB is also the first Taiwanese bank to launch this
and their families can control how, when and where a
first-of-its-kind consumer application.
MasterCard may be used. Cardholders can therefore
•Dynamic Virtual Card Number: VCN is a 16-digit virtual
plan their spending and allocate the funds available
credit card number generated by MasterCard inControl
Julie Yang, head of Taiwan, MasterCard Worldwide,
in their accounts, while receiving real-time dynamic
system, and helps reduce potential losses resulting
explained, "Having introduced MasterCard PayPass and
messages to ensure the safety of their transactions.
from stolen credit card numbers and card fraud.
mobile payments, we are now bringing into Taiwan
inControl also supports other innovative products
from MasterCard, offering better security in personal
finances, as well as effective corporate finance
management.
The MasterCard inControl service employs cardholder-
another innovative payments solution. Purchasing
•Alert & Notification: The MasterCard inControl service
control criteria allow cardholders to set restrictions on
platform automatically alerts cardholders when
when and where cards can be used as well as how much
consumption exceeds the set limit, is outside the
money can be spent on them. Cards employ virtual
purchasing category or geographic coverage set by the
card numbers (VCNs) to ensure that all transactions
consumption variables.
are highly secure. These changes are going to change
people's purchasing habits."
controlled functions, including Authorization Control,
Dynamic Virtual Card Number, and Alert & Notification.
MasterCard's previous Survey on Consumer Purchasing
The platform gives cardholders the ability to generate
Priorities – Money Management revealed that
a series of virtual card numbers with their preferred
respondents in Hong Kong spend 37% of their annual
purchasing amount limits, based on their various
income on household expenses, while 88% also plan to
shopping requirements, without worrying about
manage their money.
exposing their real card numbers on the internet.
Features of the newly-launched MasterCard inControl
service include:
Through inControl, cardholders can plan their
household expenses in advance, while setting credit
limits on supplementary cards before handing over to
their children.
•Authorization Control: inControl allows cardholders to
set maximum purchasing amounts, purchase category
Taiwanese consumers can also enjoy the customizable
07
2013
MasterCard's "Priceless
Singapore" Mesmerizes
with "Priceless" Glitz
On 12 October 2012, MasterCard officially launched
shopping, travel, food and entertainment – and gives
"Priceless Singapore". Singapore may be small, but it
select access to a collection of exceptional experiences
packs a punch well beyond its size. To celebrate what
across the city.
makes the little island special, MasterCard launched
Priceless Singapore, making life even more Priceless
The MasterCard Priceless Cities program takes the long-
with unique and novel experiences specially curated for
running and iconic "Priceless" brand from one that
cardholders who live and visit its shores.
celebrates Priceless moments to one that enables and
brings these Priceless experiences to life. The latest
08
Be it pre-ordering the latest look right off the
MasterCard Index of Global Destination Cities, released
international runways, hobnobbing with Europe's
in June 2012, placed Singapore among the world's
royals at a charity gala, or living in the lap of luxury
top destination cities. Singapore ranked fourth out of
at invitation-only hotel suites, MasterCard's Priceless
132 cities globally by international visitor arrivals and
Singapore connects people with their passions –
fifth overall by visitor spending. Singapore's strength
2013
as a global city and a top destination in Southeast
appreciation of consumer needs to curate relevant and
Asia also makes it an ideal regional hub to reach out
appealing experiences for their customers. STB shares
to the five million consumers residing in Singapore,
the same philosophy and also adopts a visitor-centric
and to international visitors in the region and beyond.
approach to personalize the Singapore experience for
"Priceless Singapore" provides those MasterCard
our varied audience," added Ng.
cardholders who live in Singapore and the 13.2 million
inbound tourists (among which a 41.1% from South
Matthew Driver, President, South East Asia, MasterCard
East Asia and 25.7% from northern part of Australia)
Worldwide, explained, "In Singapore, our biggest
multiple exclusive privileges.
obsession is food, and shopping is our national
pastime. We have great attractions that have re-ignited
"Consumers today are well-travelled and discerning.
our love for our city, and world-class entertainment,
They seek exclusive offers and curated experiences that
arts and culture gravitate here – Singapore is an Asian
cater to their specific interests and needs," commented
hub with a sophisticated, internationally-minded
Sophia Ng, Assistant Chief Executive for Marketing,
population and attracts well-heeled travelers from
Singapore Tourism Board (STB)." We feel privileged that
regional markets. Priceless Singapore is MasterCard's
MasterCard has selected Singapore as the first city in
way of giving citizens and visitors a reason to let loose
Southeast Asia for their iconic Priceless Cities campaign
a little, break out of the routine – to take the time to
amongst other global cities. MasterCard's confidence in
forget about time, every once in a while. We want to
Singapore's depth and breadth of rich experiences to
enhance experiences in the city and make Singapore a
deliver priceless moments is testament that Singapore
little more priceless for cardholders."
has indeed come of age. We believe that Priceless
Singapore will resonate well with both Singapore
residents and our international visitors."
"MasterCard's marketing effort is rooted on a deep
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goods like refrigerators and washing machines (27%),
supporting life after retirement (26%) and getting
a new car or motorcycle (22%). What is noteworthy
is that more than half of Chinese respondents said
they saved for international travel, while only 18% of
respondents last year said the same.
Compared with consumers in China, respondents in
Hong Kong and Taiwan were more disposed to saving
for retirement (Hong Kong: 60%, Taiwan: 51%). The
other purposes were investment (Hong Kong: 58%,
Taiwan: 50%) and outbound travel (Hong Kong: 55%,
Taiwan: 41%) or paying for better housing (Hong Kong:
39%; Taiwan: 43%).
Other important findings of the
survey:
MasterCard Survey on
Consumer Purchasing
Priorities
Greater China Residents Prudent
in Money Management
According to the latest MasterCard Survey on Consumer
Purchasing Priorities, consumers in Greater China are
prudent when managing their money. The majority of
respondents in China (78%) said they would maintain
or increase their savings in the next six months. That
inclination was shared by respondents in Hong Kong
(71%) and Taiwan (79%).
The survey showed respondents in Greater China
had stronger intentions to save compared with their
counterparts in Asia Pacific (19%), Africa (16%) and
the Middle East (20%). Respondents in China said they
would save 26% of their income in the following six
months, followed closely by Taiwan (23%) and Hong
however, only 56% agreed that planning should be
done earlier rather than later.
•Chinese respondents were generally optimistic about
the prospects of life after retirement and believed they
would have sufficient savings for retirement by the age
of 54. As for respondents in Hong Kong and Taiwan,
they thought they would have the required savings by
62 and 59 years old respectively.
About MasterCard Survey on
Consumer Purchasing Priorities
The research is based on a survey conducted between
three percent respondents were confident of their
April and June 2012 with a total of 11,376 respondents
ability in managing daily expenses and actively took
aged 18–64 in 25 Asia/Pacific countries including 845
charge of investment decisions. Seventy-three percent
respondents in China, 421 respondents in Taiwan and
indicated that they regularly kept an eye on the status
409 respondents in Hong Kong by lpsos Singapore,
of their investments and 78% said they would make
commissioned by MasterCard Worldwide. Interviews
comparisons between different financial products
were conducted via internet surveys, personal,
before investing. Among respondents in China, more
telephone and Computer Aided Telephone interviews,
than 80% regularly kept track of their investments
with the questionnaire translated to the local language
and the same percentage of respondents said they
wherever appropriate and necessary. The survey and its
compared products before investing. They also believed
accompanying reports do not represent MasterCard's
buying appropriate insurance products should be part
financial performance.
As for money management strategy, respondents in
The Key Saving Goals Among
Consumers in Greater China
part of their monthly income and most intended to
Currently, for Chinese respondents, the main goal of
devise money management plans. The majority of
saving is to have money for investment (59%), followed
respondents in China (87%) and Taiwan (90%) stated
by paying for international travel (53%). Other reasons
that money management plans should be made as early
included spending on consumer electronics (51%),
as possible and that they would participate in doing
buying or renovating their home (48%) and white
counterparts in China (39%) and Hong Kong (37%).
attentive to their money management plans. Eighty-
Kong (21%).
percent said it was essential for them to regularly save
in Taiwan spent 44% of their
Furthermore, residents in Hong Kong are generally
of money management.
Greater China were generally more conservative. Ninety
10
so for their families. Among Hong Kong respondents,
•Respondents
income on daily household needs, more than their
2013
MasterCard Center —
a New Landmark in Beijing
Since 2011 after MasterCard Worldwide put its name on the Wukesong Culture & Sports Center, this modern
Beijing Olympic stadium has brought much pleasure and excitement to the Chinese capital. In 2012, two
events that took excitement to its climax at MasterCard Center were the NBA China Games and CBA Final with
Beijing Ducks winning the championship. Thousands of MasterCard cardholders enjoyed a rich assortment of
"priceless experiences" at the Center.
"Star-studded" NBA China Playoff
Lights Up MasterCard Center
Beijing Ducks Wins CBA Final at
MasterCard Center
On 11 October 2012, the debut match of the NBA China
On 30 March 2012, when the whistle ended the CBA final
Games was played at MasterCard Center between last
match with the Beijing Ducks winning its first overall CBA
season's champions Miami Heat and the Los Angeles
championship, the city of Beijing was in raptures. History
Clippers. It was also the first time an NBA champion
was made at the MasterCard Center. That night, the 18,000-
had played in China. The match brought under the
seat stadium in the Center was packed. The public stand was
MasterCard Center roof the top 10 NBA players, namely
"painted" white by a spirited audience wearing the white
LeBron James, Dwyane Wade, Chris Bosh, Ray Allen,
T-shirt with the slogan "I love Beijing" prepared for them by
Shane Battier, Norris Cole, Blake Griffin, Chris Paul,
MasterCard.
match were all snapped up within 24 hours after they
went on sale, and on the night of the match a full
stadium welcomed the teams.
For more MasterCard cardholders to enjoy the
sensational event, MasterCard mounted a microblog
lucky draw where winners had the chance to watch the
game in the VIP Box at MasterCard Center.
Party and Beijing Municipal Government. With support
from the government and residents, MasterCard Center
Chauncey Billups and Lamar Odom. Tickets to the
The Pride of Beijing
While the city of Beijing was thrilled and invigorated
by its native team Beijing Ducks winning its first overall
CBA championship, MasterCard Center has become a
"place of luck". Continuing the legacy of its former self
as an Olympic arena, MasterCard Center has since been
made the venue for all major sports events and matches
has become a new landmark in Beijing. And, on 14
May 2012, a new attraction—a life-size bronze statue of
Stephon Marbury – was erected at the Center.
In 2013, MasterCard Center, as entrusted by MasterCard
Worldwide, will continue to carry the torch of bringing
"priceless" experiences to consumers. Explore your
"Priceless Moments" at MasterCard Center.
in the city by the Beijing Committee of Communist
11
2013
China:
MasterCard Partners with Banks
to Serve Cardholders' Overseas
Payment and Travel Needs
MasterCard and Industrial Bank
Offer Upgraded "Priceless"
Benefits to Business Travelers
MasterCard and Industrial Bank partnered once again,
this time to present customers with the upgraded
CIB Platinum Credit Card. The co-branded credit card
encompasses more than a dozen special benefits and
rewards tailored for the high-end business traveler,
aiming to take care of their diverse yet personal needs.
The product aims to offer tremendous appeal for
business travelers.
MasterCard and China Everbright
Bank Launch Euro Credit Card
Appreciating the growing trend of Chinese pursuing
studies abroad, MasterCard and China Everbright Bank
launched a MasterCard Platinum Euro Credit Card, the
first in China designed exclusively for use in Eurozone
regions. It is a high-end credit card created for travel
China Guangfa Bank Student
Credit Card
access to MasterCard's "priceless" privileges wherever
MasterCard and China Guangfa Bank ("CGB") have
overseas. They may adjust the spending and overdraft
jointly launched the CGB Student Credit Card for
limits on their children's cards any time as needed to
families with children studying overseas. The new card
easily manage their children's expenses.
offers diverse, convenient and high-quality financial
services to students studying abroad. It promises to
make everyday life easier for students by giving them
12
12
they are. Parents who apply for the card may also
apply for supplementary cards for their children to use
lovers, students studying in Europe and business
travelers to the region. Spending on the card will be in
Euros, hence saving conversion fees for cardholders,
who will also enjoy the many exclusive "priceless"
privileges MasterCard has to offer, such as buy-oneget-one-free Business Class tickets on China Eastern
Airlines' international flights, and discounts worldwide
from Hertz Rent-a-Car, among many others.
2013
Hong Kong:
Mr Bindra said: "MasterCard Worldwide is proud to
Hang Seng to Launch Mobile
Contactless NFC Payment
Service in Hong Kong
mobile payment project featuring MasterCard PayPass.
collaborate with Hang Seng Bank in the launch of this
With this new generation contactless payment, Hong
Kong consumers will, at the touch of a smartphone,
benefit from a safer, simpler and more convenient
payment tool. MasterCard is committed to providing
leading-edge technology and innovation through our
products in order to meet the demands of Hong Kong
consumers. In a market where Hong Kong consumers
each carry an average of two mobile phones, we believe
that our collaboration with Hang Seng Bank to offer
PayPass will meet the needs of this technology-savvy
market."
The Hang Seng Mobile Payment Service uses NFC
technology to provide consumers with a mobile
contactless payment platform. To enjoy this new
payment service, a consumer will need an NFCenabled mobile phone and must successfully apply for
a Hang Seng MasterCard credit card and the relevant
PCCW mobile service subscription. The customer can
then install the mobile wallet application developed
by Hang Seng in his/her mobile phone. After the
application is installed, the customer can download
In November 2012, MasterCard Worldwide announced
Mr Vicky Bindra, President, Asia/Pacific, Middle East
plans to develop an innovative mobile phone-based
and Africa, MasterCard Worldwide; Ms Rose Lee, Vice-
payment platform in partnership with Hang Seng Bank,
Chairman and Chief Executive, Hang Seng Bank;
PCCW mobile, digital security company Gemalto and
Mr Peter Pang, Deputy Chief Executive, Hong Kong
Samsung. Utilizing near-field communication (NFC)
Monetary Authority; Mr Alex Arena, Group Managing
technology, the service will enable customers to make
Director, HKT; Ms Suzanne Tong-Li, Senior Vice
purchases through their credit card accounts by tapping
President, Secure Transactions Asia, Gemalto; and Mr
their NFC-enabled mobile phones at payment terminals
Lawrence Chow, Chief Marketing Officer, Samsung
equipped with contactless readers.
Electronics HK, officiated at a ceremony to announce
this cross-industry initiative.
Macau:
his/her MasterCard credit card to the mobile phone
through over-the-air (OTA) provisioning. This OTA
provisioning is carried out by Gemalto using the mobile
network operator's telecommunications network. The
MasterCard credit card will be stored in the SIM card of
the mobile phone to protect the credit card information.
Using Single Wire Protocol (SWP), the credit card can
then be accessed by the mobile wallet application to
make payments when the phone is brought in close
proximity to compatible POS terminals.
The service is scheduled to be rolled out in 2013.
MIC Credit Card Promises
Protection to Car Owners
Last October, at the 2012 China (Macau) International
Exclusively for car lovers in the city, MIC AutoCard
Automobile Exposition, MasterCard, Banco Comercial
offers superb protection and spending privileges to
de Macau (BCM Bank) and Macau Insurance Company
the cardholder, including free personal insurance
launched the MIC AutoCard, the first credit card
protection, insurance plan privileges, auto products
designed especially for car owners in Macau.
and services at special discounts, wealth management
bonuses, spending discounts, bonus points, and more.
13
2013
New Wave of Growth in China
– Innovation through Developing SMEs
After growing at rocket speed in the past few decades, China needs a new growth model based on innovation and
higher value manufacturing and service. Furthermore, boosting innovative capability is crucial to the success of such
a model. Focusing on the right areas to enhance its innovation ecosystem will be important and SMEs may have to
be at the center of this; SMEs are the driver of innovation in most countries. Germany, for example, has grown strong
by leveraging the opportunities derived from innovation.
In China, SMEs are facing testing conditions that require
However, this wave of grow this not sustainable at the
urgent attention. This article discusses two of them:
same pace any more, as some of the premises of the
the first being financing hurdles and the second their
success so far are changing. On the demand side, the
extremely inefficient financial supply chains. Human
world demand for manufactured goods made in China
resources, the competitive legal environment, etc. are
is not as robust and importers are looking for better
other important factors to look at, but they will not be
and more creative products. On the supply side, China's
covered in this article.
low cost labor based comparative advantages are
shrinking. Global manufacturers are finding low cost
Zooming in on these two aspects, we made the
countries like Vietnam, Bangladesh and Africa more
following analyses drawing from our experience gained
attractive.
worldwide and the current situation in China. We
believe there are effective measures China can take
To remain globally competitive, China urgently
to solve the problems her SMEs face. Those measures
needs to embark on a new wave of industrial growth
included: 1) remove the structural advantages state-
driven by innovation rather than relative labor cost
owned enterprises have over SMEs; 2) build a financing
advantages. By innovation, we mean not just new
system that supports SMEs; 3) reform the interest rate
products or technologies, but also continuous process
regime, and 4) use payment innovation to give SMEs a
and design improvements to established products such
more efficient financial supply chain.
as automobiles or machine tools. Chinese leadership
has made it clear that a new development model is
Boosting innovative capability
is crucial to China's next wave of
growth
Over the past three decades, China has succeeded in
rapid industrialization to become the world's factory
required: a shift of focus to domestic consumption
and higher value manufacturing and service figures
prominently in the current five-year plan.
Importance of SME's in fostering
innovation
where the tasks of industrial production across most
industries are being outsourced to China. This wave of
growth in China has been driven by a global division of
labor as the world has recognized China's comparative
advantages including large-scale labor, low costs, and
relatively good infrastructure. China's entry into the
WTO magnified this phenomenon by giving China
unprecedented access to world markets, an opportunity
that China seized well.
14
SMEs are one of the most important drivers of
innovation in most countries. For example, in the US,
among high patenting technology firms, SMEs produce
16 times more patents per employee than large
enterprises [1]. The "German Mittelstand" companies
(Germany's SME segment) are some of the most
innovative in Europe with 54% of them launching an
innovation onto the market between 2008 and 2010[2].
2013
This should not be surprising because large established
Figure 1: Comparison of "Hidden Champions" among SMEs in different countries (2012)
enterprises face the "innovators dilemma" where their
profits depend on the stability of the very product
1500
markets that innovation always disrupts. SMEs on the
1307
other hand account for a disproportionately high share
of real innovation because it is the only thing that
makes them relevant to investors and customers.
1000
And this success at innovating does translate into
economic growth. "Mittelstand" accounted for 52%
of Germany's economic output in 2010; and whereas
500
366
large firms cut jobs between 2008 and 2011 (-2.4%), the
220
Mittelstand increased employment by 1.6%[2]. In the
US, SMEs accounted for 65% of net new job creation
between 1993 and 2009[3]. The impact on the overall
economy is even greater because new jobs create more
jobs, referred as the employment multiplier which for
some industries like manufacturing could be close to
3[4].
128
293
110
76
75
68
67
Italy
France
China
UK
0
Germany
US
Japan
Austria Switzerland
Others
Source: Germany's Federal Ministry of Economics and Technology (BMWi)
intellectual capital to innovative products and services.
will not be easy. In the 2012 Global Innovation
Research has also shown that SMEs with their local
Most of China's SMEs are focused on being suppliers
Index developed by the World Intellectual Property
focus on employment and spending are better at
to large companies or serving predictable, stable
Organization (WIPO) and INSEAD that ranks 140+
boosting the overall domestic consumption. For
industries (auto parts, packaging).For example, China
countries in their ability to continuously innovate,
example, spend with SMEs could have two to three
produces a fraction of the "Hidden Champions" (Figure
China was ranked 34 which was significantly lower than
times the impact on domestic spending compared
1), Germany produces and also far less than US and
US(10) and Germany(15). In particular, China under-
to spend with large enterprises, known as the local
Japan. "Hidden Champions" are highly successful small
performs on the state of its ecosystem that supports
multiplier effect[5].
companies that are leaders in their niche market[7].
innovation. On this element China was ranked 55.
Other data suggests a big gap in China's ability to foster
Like other countries globally, in China SMEs have
been the drivers of innovation accounting for 66% of
patents[6]. However, the issue in China is that when
compared to SMEs in Germany and other global
powerhouses, China's SMEs are not able to translate the
Current Status: China's ecosystem
supporting innovation will have
to significantly improve
innovation:
To lead on innovation in the next wave of growth
China is ranked 70 compared to US which is 4.
● Fair and efficient access to capital for all participants
– Based on World Bank's ease of getting credit index,
15
2013
● Human capital grounded in academic rigor and
function. With large enterprises, banks feel comfortable
in China's economy. China's large banks have little
creativity– China's education system as exemplified
providing working capital because these firms have
incentive to serve SMEs because they can easily earn
by the memorization heavy university entrance
substantial capital, an earnings track record or state
very good profits by only serving the SOE customers.
exam "Gao Kao" discourages entrepreneurship and
guarantees to protect them from loss. This logic also
creativity[8]. In contrast, the US education system
dissuades banks everywhere from lending to SMEs
Many SOEs are large in size and operate in protected
strikes a good balance between knowledge based
which typically lack sufficient history and stability of
industries; hence loans to them possess many
learning and creativity and has over half of world's top
earnings. Since working capital is a survival issue, SMEs
advantages over SME loans in terms of large loan size,
100 universities compared to 2 for China[9].
are forced to turn to expensive finance companies
lower risk, and ability to provide sizable deposits. These
along with grey lending by so-called "shadow banks".
advantages, combined with a guaranteed healthy
interest margin via the tightly regulated deposit rate
● Fair regulation and rules of law that encourage
market participation. China has significant ground
The situation in China is no different. Only the most
cap and lending rate floor under the current interest
to cover – for example, Intellectual Property Rights
qualified SMEs can get loans from banks, hence SMEs
rate regime in China, make lending to large SOEs very
Index[10] ranks China 59th and US 4th.
account for only 20-25% of bank loans despite driving
attractive financially. In fact, all banks need to do is to
a much higher share of GDP[6].In addition, the interest
balloon their loan sizes to make more money.
Access to capital is an area where SMEs are the most
rates for loans to SMEs in China are significantly
disadvantaged and is often a survival issue as well. We
higher than those to large corporations. For example,
This is made worse by the "life-long loan responsibility"
will focus on this issue in this paper.
SME loan interest rates by banks were estimated to
policy at state-owned banks. This policy, designed to
be about two times of the rates enjoyed by large
reduce lending risks by holding the lending department
corporations (i.e., rates for SMEs were often 20%-50%
staff responsible for the life-long performance of a
over the benchmark rates set by PBOC, while the large
loan, has the unintended side effect of staff becoming
corporations may receive up to 30% discount off the
overly concerned with lending to SMEs for fear of loan
benchmark rates)[11]. Many SMEs cannot obtain bank
defaults that threat their job security, even if they can
financing even at such rates, and have to seek out so-
charge higher interest rates to compensate for the
called "social lending" that carries much higher rates.
higher expected losses.
Bank financing issues for SMEs in China are magnified
Instead, the lending department staff often finds
by the state-owned enterprises (SOE) dominance
comfort in lending to those large state-owned
Let's examine the access to
capital in more detail
1. Lack of Access to Low-Cost Financing
The key reason behind SMEs difficulty in getting
working capital has to do with banks that are in the
business of providing working capital and how they
16
2013
enterprises that are considered implicitly guaranteed
professionals[15] SMEs are urgently in need of new
Economies are well served when they have the right
by the government, so that they can avoid the severe
electronic payment means that serve their unique
mix of global banks, large national banks and smaller
penalty of loan defaults under that policy. This is
needs well.
regional / local banks to create efficiency in financing.
an unfortunate issue limiting SME access to bank
Because large banks dominate China's banking
loans because state-owned banks dominate China's
The problems in the financial supply chain are
landscape, elevating their performance in serving
banking industry with over 70% in assets[12]. Till now,
magnified in the case of cross border payments that
SMEs is also important. Although not easy, this can
China's banks have not developed sufficient tools and
are much more complex and involve the coordination
be achieved. A notable example is JP Morgan Chase
of value chain participants and systems across national
that enhanced its local banking capabilities in the US,
boundaries. A lack of alignment with the global open
including hiring more small business bankers, leading
payment standards like in China further aggravates
to over $20.2 billion in new credit to small businesses
capabilities to profitably and supportively lend to SMEs.
2. Significant inefficiencies in the financial
supply chain
The other reason that makes working capital financing
issues worse for SME's is the significant inefficiencies in
their financial supply chain, specifically their procureto-pay processes. And given the important role SMEs
play in cross border trade including in China, cross
border financial supply chain inefficiencies are equally
important as domestic supply chain inefficiencies.
The roots of the inefficiencies in the domestic and cross
border payment systems are small businesses' scale and
cost structure that make SMEs unable to benefit from
the traditional electronic payments. The result is higher
working capital requirements for SMEs because of the
lower velocity of capital through the supply chain. The
other impact is higher operations costs for SMEs to
support their financial supply chain that puts them at
a significant competitive disadvantage compared to
large enterprises.
To understand these inefficiencies, it is important to
understand the key process drivers and the role of
electronic payments in reducing the costs and lengths
of those processes.
the issue because of the greater need for integration
during 2012, an 18 percent increase over 2011[23,24]
between domestic payment systems and international
systems and the requirement to participate in disparate
payment systems.
Mobile payment in Japan is a case in point. Although
Japan led the world initially on contactless and mobile
contactless payment implementations, its FeliCa
technology failed to join the ISO standards later.
The end result was that Japan's standards are not
compatible with the rest of the world, and Japan's
FeliCa standard operators are now looking for ways
to support open loop standards and move away
from FeliCa and migrate to international standards
(ISO 14443) for seeking cost effectiveness and global
compatibility. Recently, NTT DoCoMo, one of Japan's
largest telecom operators, announced to partner with
MasterCard to bring the FeliCa based mobile wallets
solution to be open-standard based[14].
Cross-border payment is just one example of how
open standards could benefit SMEs. ISO has repeatedly
argued that open standards support SME development,
because compliance with such standards help SMEs
compete on a level playing field with bigger enterprises
and open up the export markets[14].
Interestingly, bulk of the process activities are nonpayment related. For example, 86% of costs related to
France is an example of a country that has long
a check transaction in US are for non-payment related
neglected the importance of SMEs and their financing
activities like approvals and reconciliation[13] and
requirements and is just realizing its mistake. For
are likely to be smaller (thereby making the process
historical reasons bank finance has always been largely
faster) for electronic payment methods that lend
closed off to SMEs in a highly concentrated banking
themselves better to automation compared to paper
system with strong ties to national champions and
based payments like checks and cash. Unfortunately
the state. It took France until 2008 to come up with
for SMEs, their scale and cost structure make the
its own term for Mittelstand: "Entreprises de taille
traditional and broadly available electronic payment
intermediaire"[22]. But the success of the Mittelstand
methods like ACH and credit transfer less feasible for
has motivated France to transform its own SME
them, leading to not only higher costs but also slower
segment to boost its growth as the euro crisis chips
procure-to-pay processes than large enterprises. For
away at the success and confidence of the large
example, penetration of electronic payments in SMEs
national champions[22].
in the US market is significantly lower at around 30%
of dollar value compared to a 60% penetration for
all businesses[14].Additionally, based on research
conducted by CFO Research services these inefficiencies
Recently Hollande's government announced a new
bank called Banque Publique d' Investissement (BPI) to
steer public and private capital into SMEs[22].
were mentioned in the top 5 concerns by finance
17
2013
Figure 2: Financing Structure of SMEs in Germany (2010)
substitute for vouchers and transfers through checks
or other expensive means. So, once a travel agency
100%
90%
21
20
80%
70%
23
26
60%
50%
11
15
11
21
23
27
13
12
12
15
requests for a hotel room in a small hotel overseas, the
16
and the hotel would have immediate access to the
11
25
45
43
51
50
49
48
Finally, electronic payments provide better information
that is critical for prudent SME lending. Innovative
payment players like Alibaba have leveraged their
2005
2006
Government subsidy
2007
2008
Loans from national banks
2009
2010
Loans from local banks
Note: "Others" includes alternative forms of financing including mezzanine or venture capital
Source: Germany's Federal Ministry of Economics and Technology (BMWi); MasterCard Analysis
3. Reform Interest Rate Regime
electronic payment systems in the areas of trade
finance, T&E and purchasing as well as supply chain
China should continue to carefully reform its interest
finance. SMEs that have access to electronic payment
rate regime to let the market forces set equilibrium
innovations are able to improve efficiency and margins.
interest rates by risk profiles. The resulting drop in the
lending margin to large corporations will motivate
A recent study of 50 US suppliers which included
many SMEs showed that commercial card acceptance
China's banks to increase focus on SME lending in order
enabled an order-to-cash cycle that is 10 times or 34
to preserve good interest margin. Of course, interest
days shorter than that of
rate reform is not without risk and regulators and banks
need to prepare carefully:
● The key task of bank regulators is to set appropriate
standards of bank capabilities, not just financial ratios,
and see they are achieved and maintained by individual
banks through capability audits
● Banks must get ahead of the curve in building
pricing and risk management capabilities to operate
safely and profitably in a liberalized interest rate
environment before the gradual process of reform gets
ahead of them
Checks, ACH, and Wire transfer, resulting in significant
improvements in working capital requirements for the
suppliers[25].
Another example of SMEs benefiting from global
payments networks' infrastructure takes place in the
e-commerce space. Chinese SMEs who sell through
AliExpress.com now can easily accept international
credit card payments of overseas buyers, who are often
SMEs themselves. If not for this solution, the traditional
trade finance products like Letter of Credit would be
expensive and slow for the small quantities of goods
sold through AliExpress.com.
4. Develop Electronic Payment
Innovations that Meet SMEs' Unique
Needs
SMEs in the travel industry have benefited from
recent payment innovations. For example, eNett
SMEs' financial supply chain hardly benefits from the
provides an innovative payment solution to small
traditional electronic payments such as
travel agencies who need to pay hotels and other
travel suppliers. It uses a MasterCard technology
ACH and credit transfer. There is a need to create
18
reconciliation, and payment process. This makes the
process for the small travel agency and the small hotel
10%
Others
agent is able to streamline the payment overseas
far more efficient and faster.
30%
0%
funds on confirmation. On the other hand, the travel
without a complicated billing, exchange conversion,
12
40%
20%
payment is sent to the small hotel by a virtual card,
that dynamically generates virtual card numbers to
payments infrastructure to successfully expand into
SME lending. By controlling credit risk through visibility
on SME sales information, Alibaba's SME financing
business has grown rapidly, and is well-received by its
SME customers[26].
2013
Summary
Sources：
To ensure high growth rates, China needs to foster
Based on global benchmarks, we recommend that
innovation in the economy. Our analysis shows that
China adopt a number of measures to help remove the
having SME's drive innovation in the economy is
obstacles China SMEs face. These recommendations will
very efficient. The biggest obstacle to SME's ability to
improve access to working capital and financial supply
support innovation is accessx to financing. China needs
chain efficiency for SMEs.
to tackle four key issues in reducing the financing
obstacles for its SMEs:
1. An Analysis of Small Business Patents by
Industry and Firm Size (2002-2006) by US Small
Business Administration, Office of Advocacy,
(2008)
2. Germany's, Federal Ministry of Economics and
Technology(BMWi)
3. Analysis of Small Business and Jobs by US
1. Create ground rules and discipline for large SOE
Small Business Administration, Office of
financing that starves SMEs of market demand and
Advocacy, (2010)
bank financing
4. Economic Policy Institute, US
2. Build an SME banking focus by beefing up small local
5. Institute for Local Self-Reliance
banks and by improving SME banking capabilities and
6. Chinese Academy of Social Sciences and China
motivations of large banks
3. Reform the current interest rate regime that
guarantees healthy interest margin making lending to
large SOEs very attractive financially for banks
Association of Microfinance
7. Wikipedia
8. MasterCard Advisors Analysis and National
Journal
9. Times Higher Education World University
4. Enable electronic payment innovations to reduce
significant inefficiencies in the financial supply chain
that are magnified for cross border trade
Rankings 2012-2013
10. Property Rights Alliance
11. China Economy Website
12. National Bureau of Economic Research
13. Purchasing Card Benchmark Survey, RPMG
Research 2010
14. MasterCard Advisors Analysis, 2011 and 2012
15. CFO Research Services, 2012
16. Institute for Development Policy and
Management, University of Manchester
17. Harvard Business School Research, 2012
18. China's National Bureau of Statistics
19. US Federal Deposit Insurance Corporation
(FDIC)
20. Diagnose Mittelstand 2012, Deutscher
Sparkassenund Giroverband
21. German Bankers' Association, www.
germanbanks.org
22. The Economist, Oct 2012
23. JP Morgan Chase Plans Continued Support
for Sound Lending and Regulatory Reform, JP
Morgan News Release
24. Chase Tops $20 Billion in 2012 Small Business
Loans, JP Morgan News Release
25. MasterCard and Kaiser Associates, Commercial
Card Acceptance Cost-Benefit Study,2012
26. Securities Times China
19
2013
MasterCard Value-added Network Services Column
The "CHIP" Era Begins for Bank Cards
MasterCard OBS services ease migration to chip card
for card issuers
"Frauds involving the magnetic stripe card are so prevalent
today that card security has become a major concern for
us all. Issuing EMV chip cards applicable worldwide is the
obvious trend, and we are all migrating from the magnetic
stripe to the chip. It sounds easy, but the fact is changing
the processing system is a headache—other than the
money involved, to issue new cards only after the system
is changed is the same as giving others the head start in
the market. Are there any services that can help us with the
problem and let us issue chip cards as soon as possible?"
— A concerned bank
For card issuers, EMV chip technology allows them to
better control forgery risks, offer new value-added
services and issue cards acceptable worldwide. More
importantly, EMV chip-based contactless financial IC
cards that are at the core of Near Field Communication
of a magnetic stripe card to protect cardholders. Card
("NFC") payment, meaning they can present card
issuers can tap market opportunities and, at the same
issuing organizations the platform for snatching shares
time, buy more time for transforming their processing
Chip OBS 3: It is a solution for card issuers when their
of the mobile payment market. However, the migration
systems. It is a provisional solution with strong merits.
processing systems are down. MasterCard Worldwide
subsequent processing.
will take care of verification of ciphertext in a chip
process is far from simple. Hoping to help card issuing
organizations win time for launching chip cards and
Chip OBS 2: It serves card issuers who have in the
card transaction and use the result in processing the
tap first instance market opportunities, MasterCard
process of transforming their processing systems.
transaction as authorized.
has come up with an important value-added network
They can start issuing chip-embedded cards before the
service—On-Behalf Services ("OBS").
transformation is completed. Chip OBS 2 can help them
verify the ciphertext in a chip card transaction and
There are three types of OBS that can meet the needs of
incorporate the result validity of the ciphertext into the
card issuers in different stage of the migration:
original transaction data to relay to the card issuer for
Chip OBS 1: It is for card issuers who have not done
anything to transform their transaction processing
On top of being the fastest payment processing network and a more secure payment platform that
systems. Once the chip personalization system
promises more convenient payment experiences, the MasterCard Worldwide Network also provides value
structure is put in, they will be able to launch chip card
added network services that deliver additional gains. In the "MasterCard Value-added Network Service"
products. The MasterCard Worldwide Network switch
column, you will learn about innovative technologies and services that the MasterCard network offers
can [intercept] chip card-related data in a transaction
including such as authorization, security assessment tools and inControl, etc. that can help you address
while the operating format of the card issuer's
practical problems that arise when doing business and enhance cardholders' payment experiences. If you
processing system remains unchanged. Although the
need more information about MasterCard's value-added network services, please contact your MasterCard
solution does not exploit fully the advantages of chip
Account Manager or write to Mr. Henry Chen, General Manager, Customer Service, Greater China,
card technology, it uses to a good extent the anti-
MasterCard Worldwide at [email protected]
fraud feature of chip card better than the capability
20
2013
MasterCard Introduces Innovative
Digital Payment Means MasterPass
MasterPass – an optimized
payment means that makes instore and online shopping simple
and more pleasant.
MasterPass is a digital payment means recently
introduced by MasterCard. Tailored with the future in
mind, it allows a consumer who shops in-store or online
to pay using any payment card or [compatible/enabled]
devices. All it takes to have a great shopping experience
is a simple click, tap or touch.
The MasterPass suite of services
includes:
consumers may be, merchants have a consistent way
the different ways we currently pay for purchases,
from the traditional plastic bank card to mobile wallet
representative of future payment modes, and allows
consumers to make easy and convenient payments
anywhere."
Supporting Partner Quotes:
to accept electronic payments. MasterPass supports
the use of NFC, QR codes, tags and mobile devices at
points of sale, be it at the register in-store or in the
aisle. For online purchases, it provides shoppers with a
simple check-out process freeing them from having to
enter shipping details and card information with every
● We understand the strategic importance of
achieving true convergence of all digital payments
included in terms of acceptance, security and ease
of use. MasterPass allows us to offer our customers,
cardholders and merchants a competitive real-time
e-commerce solution and makes a solid foundation
for new in-store shopping experiences. Santander
Edward McLaughlin, Chief Emerging Payments Officer,
become a shopping device. MasterPass brings together
offer of flexibility that matches the need of time."
● MasterPass checkout services: wherever the
purchase.
MasterCard Worldwide, said, "Any electronic device can
MasterCard's global payment network, MasterPass is an
● MasterPass-connected wallets: banks, merchants and
Cards and MasterCard share the same vision for digital
partners can offer their own wallets, and consumers
payment and of a ‘world beyond cash'. We look
can store card information, address books and more
forward to extending the benefits of MasterPass to
in a secure cloud hosted by an entity they trust. The
more markets around the world." – Javier Herraiz,
wallet is open, meaning in addition to MasterCard
Global Director of Innovation in Payments, Santander
cards, consumers can use other branded credit, debit or
Cards
prepaid cards with it.
● "As a leader in digital retailing, we want to always
MasterPass has evolved from the PayPass mobile wallet
● MasterPass value-added services: these are designed
be at the forefront of new payment means. With
unveiled in Spring 2012 by MasterCard. It has been
to enrich the shopping experience of consumers before,
MasterPass, we will be able to provide consumers with
on trial with the help of selected merchants and card
during and after checkout. They include different
a simple, convenient and safe way to shop even when
issuers. Consumers around the world will be able to
information and messages like account balances and
they change their payment method mix frequently—
sign up for the service through financial institutions
real-time alerts, loyalty program offers and benefits of
either on the internet or via mobile devices or in store."
in Australia and Canada by the end of March 2014?,
other initiatives such as "Priceless City".
– John Walden, Managing Director, Argos
and in the United States and United Kingdom later in
Spring and Summer respectively. Furthermore, in 2013,
Patricia Hewitt, Director, Debit Advisory Service,
MasterPass will be available to markets worldwide
Mercator Advisory Group, said, "The most successful
including Belgium, Brazil, China, France, Italy, the
next generation payment product will cater for a wider
Netherlands, Singapore, Spain and Sweden.
range of users in its design allowing them to better
their user experience heeding their own business
needs and evolving industry dynamics. Backed by
21
2013
MasterCard Insider Privileges
- Traveler Rewards
rewarding!
The MasterCard Traveler Rewards program covers
merchants in fashion and lifestyle, airlines, hotels,
"Traveler Rewards"program
makes MasterCard the most
valuable payment brand
5% MasterCard Traveler
Rewards for purchases:
restaurants and online shops, including popular
The program has the support of close to 200
Oriental Hotel, British Airways, Bang & Olufsen and
participating partners in Hong Kong, Macau, Taiwan
Amazon China, etc. It allows MasterCard cardholders
and mainland China. MasterCard cardholders in China
in China to shop and save and at the same time "earn"
will receive Traveler Reward Dollars equivalent to 5%
exclusive rewards.
consumer choices in China like Apple Store, Omega,
Chow Sang Sang, Fortress, the Macau Mandarin
of their spending with any of the selected merchants.
They may then use the Reward Dollars to redeem
Earn "5%" reward:
or purchase products, more spending, more reward
MasterCard "Traveler Rewards" program takes you on
dollars all year round. The program is independent
How easy is it to join the reward program? Like
a tour of Hong Kong, Macau and Taiwan all year round
of other promotion programs or discounts offered
a breeze! MasterCard cardholders in China just
and comes with discount on discounts.
by different merchants. Consumers can enjoy the 5%
need to do two things:
reward while gleaning great bargains online or in-store
The MasterCard Traveler Rewards program is the
discounts in Hong Kong, Macau and Taiwan, in other
strongest yet reward program for MasterCard
words, savour discount on discounts.
merchants or during transactions processed through
the MasterCard network. Spending brings pleasure
and saving money while doing it makes it all the more
22
site mastercardrewards.cn to register and
make redemption claims? later. Reward Dollars
cardholders in China. It promises savings to MasterCard
cardholders in China who spend with participating
First of all, visit the official Traveler Rewards
Millions of participating
merchants
equivalent to 5% of your spending will be
credited automatically into your registered
Traveler Rewards account. And, redemption is
easy—spending more than USD400 is all it takes.
2013
So, just add mastercardrewards.cn as a browsing
our prestigious cardholders and staff, and
favorite. Register and make redemptions!
"MasterCard Offers" are theirs to claim. Just visit
and spend at stores with the logo and claim
Then, look for the "MasterCard Offers" logo.
exclusive privileges every day.
The new logo is designed to make it easy for
MasterCard cardholders to find participating
merchants of the "Traveler Rewards" program.
Those who are familiar with MasterCard might
know the name "MasterCard Insider". That
is what we call our close partners among
financial institutions, our business partners,
To join the MasterCard Traveler Rewards program, one only needs to
own a MasterCard issued in China, then go to mastercardrewards.cn and
register. When the cardholder makes a purchase with his MasterCard
in a shop carrying the "Traveler Rewards" program logo, he will receive
Reward Dollars equivalent to 5% of his spending. And every Reward
Dollar is equivalent to one US Dollar for redeeming cash vouchers on
mastercardrewards.cn to spend with selected merchants.
23
2013
Alibaba Group and MasterCard Sign
Memorandum of Understanding
MasterCard Worldwide recently signed a
management, and MasterPass electronic wallet
China," said Lucy Peng, CEO of Alibaba Small and
Memorandum of Understanding ("MOU") with
services, among others.
Micro Financial Services Group.
the largest e-Commerce company in China,
Alibaba Group to explore ways to collaborate in
"MasterCard and Alibaba Group have
e-Commerce. The two partners will work together
collaborated closely in the past in the
to build a better e-Commerce environment for
e-Commerce arena from integrating Alipay into
the convenience of consumers and small and
the global payment solution of DataCash to joint
medium enterprises (SMEs) both inside and
promotions with AliExpress to building an anti-
outside China. They will cooperate on issues of
piracy mechanism. This MOU is another major
common interest including helping to combat
milestone in our alliance to hurl the development
the infringement of intellectual property rights.
of and innovation in e-Commerce in China. We
are looking forward to reaping the fruits of our
As leaders in their respective industries, the
collaborative efforts," said Ling Hai, Division
two companies believe that innovation and
President, Greater China, MasterCard Worldwide.
cooperation can drive e-Commerce development.
24
They pledged to join hands to enhance the
"We are delighted to be taking our partnership
e-Commerce environment and give users of
with MasterCard to a more advanced level.
Alibaba's payment platforms like AliExpress and
Alibaba Group and its affiliate Alipay will work
affiliate Alipay with safer and more convenient
with MasterCard on a number of innovative
payment experiences. They agreed to cooperate
services that can provide optimum shopping
on innovative fronts covering cross-border
experiences to consumers and a better online
payments and acceptance, security and risk
business environment to SMEs inside and outside
2013
MasterCard Joins Payment and
Clearing Association of China
MasterCard Worldwide announced that its Beijing
closely with companies, organizations, regulators
offer advice on areas such as payment security,
representative office has been accepted by
and authorities in and associated with the
international trends, consumption trend analysis
the Payment and Clearing Association of China
Chinese payment industry. It has kept bringing
and operation mode. We are delighted to join
("PCAC") as an observer at the Third Meeting
the most innovative, world standard products
PCAC as it means MasterCard will be able to
of the First PCAC [Board of Directors?/General
and solutions to China. At the same time, it
better placed to take part in deliberations
Council?] held recently. MasterCard, PCAC and
has joined forces with its Chinese partners to
important to the payment industry in China,
its members will share knowledge of mature
develop new products that meet the specific
aiding its internationalization and furthering
cases and experience in the hope of fostering
requirements of the market, providing Chinese
communication in and the healthy growth of the
innovation in and development of the payment
consumers with shopping experiences that are
industry."
industry in China.
safe and convenient in all corners of the world.
MasterCard set up its Beijing representative
Ling Hai, Division President, Greater China,
office in 1987 with the permission of the People's
MasterCard Worldwide, said, "The China market
Bank of China, making it the first international
is of great importance to MasterCard. We have
payment organization to enter the China market.
effective communication and collaborative
In the past 25 years, due to its strong roots in the
mechanisms in place with regulatory authorities,
country, MasterCard has remained dedicated in
relevant departments and industry organizations,
growing together with the China market, working
allowing us to initiate active discussions and
25
2013
areas including product development, maintenance
of operation, risk management, technical support and
processing of transactions, etc. to ensure product and
service quality. This latest pact, with its mind and heart
on the virtual payment field, will encourage electronic
payment innovation and development in China,
representative of another milestone in the country's
advance towards a "world beyond cash".
As understood, the partnership in the virtual payment
space is an important move for China CITIC Bank
with online banking as a strategic focus. Building
on their cooperation in areas including product
development, cross-border payment clearance and
promotion of innovative products, the two parties
are going to brave new grounds on the substance
and level of collaboration. The bank is going to seize
opportunities in the emerging online financial product
sector, particularly in the areas of e-Commerce, mobile
payment and online credit services.
Keeping pace with electronic payment innovation, it
will enhance virtual payment experiences—online,
mobile and others—of customers, craft versatile
electronic payment tools to achieve the goal of building
an "Online China CITIC Bank". In addition, seeing
channels as a critical competitive resource in the future,
channel development is the next emphasis of the bank.
It will extend its branch networks and, as technology
advances, enhance the capability of its electronic
channels to lower costs and boost their ability to
bring convenience and hence customer satisfaction
China CITIC Bank and
MasterCard Ink Memorandum
of Understanding
on all fronts. In late 2012, the bank set up an online
banking department and laid down the strategic goal
of building an "Online China CITIC Bank". By stepping
up cooperation with e-Commerce enterprises and
capitalizing on the growing popularity of purchasing
financial products online and social e-Commerce
platforms, the bank will explore joint efforts with
online enterprises, payment companies and network
operators, as well as strengthen development of
26
China CITIC Bank and MasterCard Worldwide have
handset payments and development of smart handset
innovative online banking products and the quality of
signed a Memorandum of Understanding ("MOU")
applications, with the aim of optimizing e-Commerce
its online banking services.
agreeing to cooperate in 2-dimensional barcode and
experiences and providing China CITIC Bank card
virtual payment areas within and outside China. The
cardholders with new and innovative payment services
strategic partners hope to develop innovative payment
domestically or overseas. Zhu Xianghuang, President
products and services that can give safe and efficient
of China CITIC Bank, and Tim Murphy, Chief Product
payment experiences to domestic and overseas
Officer of MasterCard, attended the MOU signing
cardholders and merchants.
ceremony.
As leading players in the payment industry in China and
MasterCard and China CITIC Bank's Credit Card Center
operations and enhance customers' overseas shopping
the world, China CITIC Bank and MasterCard will draw on
boast a strong partnership in the electronic payment
experiences. This will lay a solid foundation for CITIC
their respective strengths and cooperate strategically in
front marked by the launch of an array of popular credit
Bank card to become "China's global card".
areas including online payment acceptance, virtual card
card products. With a global network and professional
payment security, 2-dimensional barcode payments,
knowledge, MasterCard will support its partner on
"International operations" are the bank's latest strategic
development. This marriage of strength-on-strength
with MasterCard, who owns leading technologies in
the global payment industry, will no doubt zest up
the bank's overseas bank-card payment business,
conducive to helping it realize internationalization of its
2013
MasterCard and The Agricultural Bank of
China jointly Launch"Cash Passport"Electronic
Traveler's Cheque
Access Prepaid Worldwide, a wholly-owned subsidiary
return the unused amount on the "Cash Passport"
cash' and the Cash Passport bears witness to this effort.
of MasterCard Worldwide, and The Agricultural
and will receive a new card within 24 to 48 hours.
This latest partnership enables the bank's customers
Bank of China have signed an agreement recently
Consumers can now purchase "Cash Passport" traveler's
to experience the benefits of this innovative product,
to jointly launch the MasterCard "Cash Passport"
cheques or top them up at selected points of sale of the
letting them enjoy the pleasures of traveling without
electronic traveler's cheque. The partners vow to
Agricultural Bank of China.
having to worry about loss of cash and exchange rate
provide outbound travelers a safer, more flexible and
convenient payment means.
fluctuation. And, on top of that, spending with the
The MasterCard "Cash Passport" traveler's cheque is
Cash Passport entitles them to exclusive MasterCard
designed to be the ultimate traveling companion,
privileges wherever they are, true to the MasterCard
The MasterCard "Cash Passport" is an electronic
meeting the spending needs of outbound travelers and
promise of one needing but one card to roam the
traveler's cheque product that can be topped up. It
students studying overseas, both growing in number
world."
currently supports three major currencies, namely
in China. It promises to be a convenient and safe
USD, Euro and the Pound Sterling, and is accepted by
electronic payment and is more attentive to the needs
more than 34 million merchants and 1.9 million ATMs
of consumers on the road afar.
for withdrawal around the world. Consumers may
select "Cash Passport" in the currency used at their
Ling Hai, Division President, Greater China, MasterCard
destination countries and lock in the exchange rate on
Worldwide, said, "MasterCard is committed to providing
purchases to control expenses and save on exchange
cardholders in China with innovative payment means,
fees. Furthermore, in case of loss, the consumer can
helping the country evolve into a ‘world beyond
27
2013
Hong Kong product story
MasterCard and AEON Credit Asia
Commit to Delivering Innovative
Payment Services in Hong Kong
MasterCard announced its collaboration with AEON
co-branded credit card. AEON has also successfully
Credit Service (Asia) Co. Ltd ("AEON") to enhance
installed MasterCard PayPass terminals at the newly-
the growth in innovative payment services in Hong
launched self-service kiosk counters in all supermarkets
Kong. Under the agreements signed, both companies
located in AEON stores throughout Hong Kong,
will focus on three strategic areas – e-Commerce,
providing consumers a fast, safe and smart way to pay
contactless payments, and mobile payments solutions
for everyday purchases.
– to offer better payment experiences for local
consumers, merchants and business partners.
MasterCard will also work with AEON to introduce NFC
payment solutions in Hong Kong and present safer
In technology-savvy Hong Kong, MasterCard and AEON
and more convenient payment experiences to the
have recently collaborated to deploy the MasterCard
consumers, enterprises and merchants in Hong Kong,
Internet Gateway Service (MiGS) for online payment
thereby advance the "world beyond cash" aspiration.
acceptance services, equipping business partners
NFC payment is an innovative new payment mode
with highly stable and efficient online payment
that enables consumers to load encrypted credit card
capabilities to tap the growing business opportunities
information onto their handsets for making purchases
in cyberspace.
and other transactions with designated merchants.
Sharing the vision of a "world beyond cash", MasterCard
and AEON launched AEON's first MasterCard PayPass
Citibank Hong Kong Partners with
MasterCard to Launch first Global
Credit Card in Hong Kong
MasterCard Worldwide and Citibank Hong Kong
spent locally and overseas with no limit on the
recently announced the launch of their joint
points to be earned and no expiry date. What's
effort—the global credit card Citi Prestige. The
more, the bank extends a preferential mileage
product is also the first World Elite MasterCard
conversion rate—the cardholder earns one
product introduced by MasterCard for the
Asia Mile for every HK$6 spent locally or HK$4
affluent in Greater China who travel frequently
overseas, making the desire for an exquisite
and around the world. Supported by MasterCard's
lifestyle a reality.
global payment network and leveraging
Citibank's worldwide presence, the card offers
cardholders unparalleled payment experiences
and a wealth of superb privileges.
Citi Prestige Card offers cardholders two and
three reward points respectively for every dollar
28
2013
Taiwan product story
MasterCard, Cathay United Bank
and Chunghwa Telecom Team up to
Present OTA Virtual Credit Card
MasterCard Worldwide, Cathay United Bank and
Chunghwa Telecom have recently teamed up to
launch the first Over-the-Air ("OTA") technologyenabled virtual credit card in Taiwan. It will be on
trial among employees of the three companies
and be available to consumers by the end of the
year at the earliest.
Since the Financial Supervisory Commission of
Taiwan passed the security regulations for virtual
credit card and gave permission to financial
institutions to issue them, major banks have
responded very positively. The product of this
alliance is the first OTA-enabled virtual credit
card in Taiwan.
The application procedures of the virtual
credit card are a bit different from those of the
traditional credit card. An applicant has to first
apply with Cathay United Bank, then get a SWPSIM card from Chunghwa Telecom and next go to
Hami to download the "Hami smart wallet APP".
To activate the card, one just needs to follow
the instructions in the banks' acknowledgement
As for security of the card, Chunghwa Telecom
service system of Chunghwa Telecom. A customer
said, apart from the built-in PIN protection of the
who lost his handset may call either party to
handset itself, another PIN is required to activate
suspend the service and curb potential loss to
the "Hami smart wallet APP". In other words,
theft. However, a formal report has still to be
to use the payment function, one must enter
filed with the bank within 24 hours for the "zero
his self-chosen PINs. In the future, when other
risk" principle to apply. Personal loss is capped
banks are permitted to operate related business,
at NTD3,000 in proven loss due to theft or fraud
multiple bank cards can be integrated into the
and in special cases subject to investigation.F
same platform and users can set different PINs
for different cards for added security.
letter, enter the certification code, his ID number,
the credit card number and expiry date, etc.
At the start, virtual credit cards have to work
with MasterCard's PayPass contactless credit card
According to Cathay United Bank, it has
system, which covers 20,000 to 30,000 merchants
completed linking its system with the customer
in Taiwan and 700,000 merchants worldwide.
MasterCard Introduces Debit
Cards with Taiwan Banks
MasterCard and a number of Taiwanese banks including E. Sun Bank, Cathay United
Bank and Taiwan Business Bank have jointly introduced to Taiwan breakthrough debit
cards that marry the merits of PayPass and the Easycard.
Left：E. Sun Bank is the first commercial bank in Taiwan to exclusively issue the MasterCard debit card.
Right：The Cathay United Bank debit card.
29

The Essence and End-Game of Innovation MasterCard Gears Up for

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