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November 2005 • Volume 10 Number 11
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Member Profile: MasterCard International
Prior to joining MasterCard International, Dr. Merschen was head of Citigroup's Global Competence Center for chip card-enabled solutions, mobile financial services, PKI, and biometrics. As vice president and director of emerging technologies, he was the single point of contact within Citigroup for deploying business solutions based on emerging e-business technologies. Most recently, he managed the technical implementation of Citibank's U.S. consumer smart card program. He defined and deployed their strategy for mobile and alternative distribution channels for financial services delivery. Dr. Merschen also represented Citigroup on the Board of Directors of the GlobalPlatform consortium. Prior to Citibank, Dr. Merschen had numerous engineering, development and marketing responsibilities within IBM over a 14-year period, with assignments in Germany, the UK and New York. In his most recent position at IBM, he had worldwide responsibility for their research & development activities and strategic alliances for smart card technology and solutions . Dr. Merschen holds a Ph.D. and Masters degree in mathematics and physics from the Technical University of Aachen, Germany.
MasterCard and many of its customer financial institutions view EMV chip cards as the next generation technology platform for card based payments. MasterCard enables the EMV chip based payment products, network infrastructure and implementation services to help its customers migrate from magnetic stripe to chip technology. Complementary to the basic payment functions, the MasterCard OneSmart™ suite of value-added solutions provides a series of options and multi-application packages enabling financial institutions to create innovative offerings for their cardholders. 2. How do you see the new contactless payment initiatives changing the US financial payments industry? What trends do you see developing in the market that MasterCard hopes to capitalize on? MasterCard PayPass™, our contactless payment solution, offers consumers a fast and convenient way to pay for small ticket purchases. PayPass enables merchants to enjoy faster throughput and can create a more comfortable shopping environment for their customers. For the payments industry in general, contactless payments will help reduce the use of cash in favor of electronic payments. PayPass was first offered for magnetic stripe processing environments, such as the US. For markets with an EMV chip infrastructure, OneSmart PayPass was recently launched, combining the risk management features of EMV (e.g. allowing highly secure off-line transactions and pre-authorized payments) with the convenience of PayPass . MasterCard has always leveraged chip technology to help optimize our business solutions. Similar to how EMV chip addresses security in the physical world, EMV chip can also provide strong authentication in non-face-to-face transactions - which currently constitute more than 25% of MasterCard's business. MasterCard's OneSmart Authentication program provides a robust and efficient solution that addresses the strong authentication mandate legislated by the Federal Financial Institutions Examination Council (FFIEC) with a deadline of year end 2006. The program leverages the same infrastructure as EMV and is applicable to the many channels the FFIEC wants secured including: e-banking, e-commerce, telephone and mail order, and general access to account data. The program is extremely easy to use. A standard EMV-based debit or credit card is inserted into a small and inexpensive handheld reader (not connected to your PC), you type in your PIN on the reader's PIN pad, and on the display you will read a one-time-password (OTP) the card has produced after it has verified the PIN. This OTP can now be used to authenticate you for all remote channels, proving that the card was there and the correct PIN was entered, basically creating the equivalent of a card present situation. 3. What obstacles to growth do you see that must be overcome to capitalize on these new opportunities? Again, this is all about business optimization and growth. Any activity needs to be supported by a solid business case which - on one hand, needs to be customized bank by bank, merchant by merchant. On the other hand, if you look at a market migration to EMV in well developed markets, such as the U.S. or Canada, you need to make sure the key players in the market agree on a common framework against which the individual players can choose to execute. Another challenge is mastering the complexity of a technology revolution like EMV migration. MasterCard has spent a lot of time and effort creating best-in-class processes, and has built a lot of expertise over the years to understand the specifics of migration and to be able to support its customers in an efficient and professional way.
As stated earlier, MasterCard views chip as the next technology platform for card based payments, which underscores that chip plays a very important role in our technology and business roadmaps. All MasterCard regions outside North America are heavily engaged in EMV migration supported by business frameworks that balance migration efforts between all stakeholders. Particularly, Latin American banks have leveraged chip card to fight fraud in their domestic and intra-regional transactions. In Canada, banks are in the process of defining how to best leverage EMV for their market. In the U.S., chip seems to be well positioned to fight card-not-present fraud through strong authentication programs mentioned earlier and to increase convenience and speed through PayPass . The U.S. market needs to constantly re-evaluate its need for EMV in the light of the migration taking place in the rest of the world, mitigating against many categories of card fraud. As this international migration to EMV takes place, it is very likely that fraud may eventually move to the U.S. We have very clear examples about how fraud migrates from one country to the next once chip has been introduced in one country. 5. How do you see your involvement in the Alliance helping MasterCard become successful? The smart card industry continues to mature around the world. Aligning the fundamental core infrastructure and understanding necessary to deliver real value through smart cards and its related technologies is critical, and we see the Smart Card Alliance playing a critical role in this. Through its councils, workgroups, and educational outreach efforts, the Alliance has played a significant role in creating a forum where vendors, service providers and end-users can work together to define a practical path to value creation. It is good to see the Alliance's efforts being extended to Latin America and Canada. MasterCard views its involvement with the Alliance as a competitive advantage.
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This month Smart Card Talk spoke with Dr. Toni Merschen, Head of MasterCard International's Chip Center of Excellence, based in Waterloo, Belgium. Dr. Merschen oversees all business, product, and deployment aspects of chip-based solutions for MasterCard's Global Advanced Payments Solutions. This includes the management of the Center of Excellence, which represents extensive and unique expertise in chip business and technology, spread across locations in Belgium, the UK, and the US. The Center assists MasterCard's Customer Group in all Regions to provide recognized industry leadership and support to our customers in chip programs and services. Dr. Merschen is also responsible for developing, coordinating and executing MasterCard's chip strategy and tactics on a global basis .
1. What are MasterCard's main smart card initiatives?
4. What do you see are the key factors driving smart card technology in the financial payments market in the U.S., Canada and Latin America? What role does smart card technology play in supporting MasterCard's business? 
