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Mastercard (MA) Brings Tokenization Service to SBI Card App

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Mastercard Incorporated (MA - Free Report) recently announced that it has collaborated with India’s leading credit card issuer, SBI Cards & Payment Services Ltd, to launch contactless payments on the SBI Card app. Following this tie up, SBI Card app becomes India’s first credit card issuer to utilize Mastercard’s tokenization platform — Mastercard Digital Enablement Service (MDES).

The latest move enables SBI Card Mastercard cardholders to make payments of upto INR 2,000 with merely a tap on their mobile. For payments exceeding INR 2,000, the cardholders need to provide their Card PIN on the point of sale (PoS) terminal.

In order to avail such benefits, the cards just need to undergo a one-time registration on the upgraded version of the SBI Card mobile app. Following the registration, cardholders can make payments easily by merely unlocking the phone screen and keeping the device in close proximity with any contactless PoS terminal. This, in turn, eliminates the need to carry physical cards.

Notably, the COVID-19 pandemic triggered surge in demand for contactless payments provided a boost to tokenization. Mastercard’s tokenization service works by replacing cardholder information, such as account numbers and expiration dates with a unique digital identifier (a token) that can be used for payments without exposing a cardholder’s more sensitive account information. Apart from eliminating the need for carrying physical cards, MDES also paves the way for faster, more convenient and secured digital payment experience.

Hence, Mastercard’s tokenization service is likely to instill a sense of trust and confidence about MDES among customers. Another noteworthy feature of MDES is that the platform not only blocks the transaction in case of suspected fraudulent activities but also breaks the link between the token and card in case of misplacement or loss of card or device. It can also reissue the token or card without creating hassles for customer.

Notably, shares of Mastercard have gained 17.9% over a year compared with the industry’s growth of 10.6%.

Among its peers, Visa Inc. (V - Free Report) and American Express Company (AXP - Free Report) have rallied 15.5% and 0.7%, respectively, in a year, while Discover Financial Services (DFS - Free Report) have lost 6.4% in the same time period.

Constant Efforts to Strengthen Presence in the Indian Market

The latest move clearly hints at Mastercard’s interest to cater to the growing demand for cashless payments in the India market. Also, the move seems to be time opportune since the coronavirus outbreak has compelled people not only in India but across the globe to prefer contactless payments as it minimizes contact.

In fact, a Mastercard survey to gauge Indian consumer sentiment with regard to contactless payments found out that more than 54% of the participants knew how to use a contactless card on a PoS machine. The same survey also unveiled that 74% of the participants believe that they will continue to make digital payments in the days ahead, which highlights that the trend of digital payments is likely to stay even beyond the pandemic.

Moreover, Mastercard has been making every effort to help small businesses in India, which have been grappling with the pandemic-induced financial uncertainties. The company has made several investments to roll out cost-effective solutions for assisting small businesses to adopt digital means. The company has also extended a helping hand to women entrepreneurs. Case in point, it recently introduced Project Kirana wherein Mastercard collaborated with the United States Agency for International Development (USAID) under the Women’s Global Development and Prosperity Initiative (W-GDP).

Furthermore, it is worth mentioning that India is a big market for Mastercard given a large chunk of the population who are eager to utilize debit or credit cards for conducting online shopping. Elevated smartphone usage has also propelled the way for e-commerce market growth in India. Notably, the Indian e-commerce market is projected to rise to $ 200 billion by 2026 from $38.5 billion in 2017, per India Brand Equity Foundation (IBEF).

These initiatives position Mastercard well for long-term growth. Notably, it has a Zacks Rank #4 (Sell).

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