Last week we published a story regarding FNB now accepting QR code payments at all of its Speedpoint terminals.

A fairly innocuous story we’re sure you’ll agree, but since publication of that story, a number of concerning issues have been raised.

Among those issues was an email which was sent to us on Wednesday morning from Zapper. In that email we were informed that contrary to our story, customers would not be able to make payments at FNB Speedpoints via Zapper, as it was leaving Masterpass, the tech that drives FNB’s Scan to Pay solution.

“Independent mobile payments, loyalty and rewards platform, Zapper, has exited their interoperability agreement with Masterpass, Mastercard’s QR payment service, which powers FNB’s Scan to Pay. The interoperability will cease effective from 25 October 2020, following the culmination of the 90-day notice period,” the company wrote in a press release.

As Zapper had given Mastercard 90-days notice on 24th July 2020 of its intention to leave, surely Mastercard would’ve informed its merchants of this shift? Unfortunately this doesn’t seem to have been the case.

Speaking to Jason Viljoen, head of digital payments at FNB on Wednesday morning, he told us that this development had come as a shock to FNB and it was working to amend its statements to reflect that Zapper would no longer form part of the Masterpass stable.

What’s going on?

In 2018, Masterpass by Mastercard signed interoperability agreements with Zapper.

At first this looked like a good thing as it meant that could use Zapper or Snapscan (which was already a part of the network) to pay so long as you were at a Masterpass terminal.

More importantly, it gave the likes of Zapper access to a major firm’s network.

The trouble is that looking back at press releases, Mastercard was seemingly looking to position itself as the app to use.

This sort of language is common in press releases as every company or brand will tell you that their solution is the best one and you should be using it instead of competitors.

But this becomes problematic when you are urging users to use your app in place of your partners.

And this brings us to the important question – why is Zapper leaving the Masterpass network?

Gotta have faith

On Wednesday morning we spoke with Brett White, chief executive officer at Zapper and asked him rather pointedly, why Zapper was leaving Masterpass by Mastercard?

“The nature of the interoperability forces the apps that want to participate in Masterpass QR codes to process transactions the way Masterpass wants to process transactions,” White told Hypertext.

By taking this approach it prevents the application’s owner from working directly with the merchant and that hits the app in the pocket.

“Businesses in this industry make money on the acquiring side, so if you don’t hold that relationship in terms of processing the transaction you get excluded from the commercial end of the process,” the CEO said.

With Masterpass acting as the intermediary between the likes of Zapper and merchants, this means that the cut these partners gets is lower than if they went at it alone. Of course, Masterpass through Mastercard has a wealth of resources here, so its a trade-off. You lose your independence for those resources, but as we learned, that trade-off might not be worth it.

Masterpass has reportedly introduced unnecessary complexity to Zapper’s payment process which resulted in a friction-filled payment experience.

Worse still, it appears as if some Masterpass affiliates were trying to undermine Zapper.

“What was happening was Masterpass affiliates approached Zapper merchants and told them they no longer needed Zapper because they could use their code,” White continued. “This resulted in an unsustainable business relationship.”

“If that model continued then independent players such as Snapscan, ourselves and others would have no space in the market we helped build,” White adds. “We are committed to working with industry peers to find a solution that works for all parties and that offers users and merchants greatest freedom of choice.”

Of course, this is one side of the story and we have contacted Mastercard to give its side of the story. The firm provided us with the following statement.

Card and other electronic payments are built on top of the common industry standards to ensure that there’s a consistent expectation that it will work, regardless of the bank, the merchant or the network. That’s the value that we deliver every day and we will continue to work with partners across the industry to ensure a secure and easy to way to pay for South Africans and people around the world. That’s what we’re striving to deliver in QR today.

Consumers with any South African Masterpass app or any banking app enabled by Masterpass Scan to Pay can scan any Masterpass QR code, or any SnapScan QR code. Only consumers with Masterpass-enabled apps can scan Masterpass QR codes.

As a point of background, Masterpass today works with all of South Africa’s major banks and is accepted by a wide range of merchants. Similar to other parts of our business, Mastercard/Masterpass does not hold a direct relationship with the merchant. Merchants have a bank that connects them to our network and ensures the simple and continued guaranteed payment.

Rules around processing of transactions are governed by the regulators – Payments Association of South Africa and the South African Reserve Bank – not Mastercard.”

That statement doesn’t address the core problems White raised.

There’s the claims that Masterpass affiliates were undermining Zapper’s business, which aren’t addressed at all.

The firm also sweeps the fact that its partners lose out on money by saying merchants deal directly with banks.

But that isn’t the issue here, the issue is that in order to reach merchants, Mastercard is making it more difficult for independent players to operate in this space.

For the consumer, Masterpass looks great because it includes a variety of payment solutions, but it appears as if the folks behind those solutions are coming off second best in this relationship.

Interoperability is wonderful, but when it comes at the cost of making the market smaller so that it’s more difficult for independent players to enter it, we have to say something and cut it off at the pass.

Plainly put, this is unacceptable and Masterpass would do well to reconsider how it’s doing business locally.

[Image – CC 0 Pixabay]