MasterCards Marketing Department Tackles Bitcoin

Using terms like "peer-to-peer mobile payments" and “reaches the unbanked” in their opening salvo, MasterCard has announced a new service, launching in the United States, that appears to be a direct response to the threat that Bitcoin represents.

"MasterCard Send™ is a first-of-its-kind, global personal payments platform that’s breaking down network barriers by facilitating secure payment transactions through a single connection. MasterCard Send enables funds to be sent and received typically within seconds – far superior to existing solutions that either limit transfers within a closed-loop network or that involve ACH which can take several days for funds to be received."
— – MasterCard

Many of the features touted on the website are new to legacy finance platforms, but bitcoin already implements them. These include claims of global payments, mobile remittances, direct disbursements for businesses, and “P2P” payments as well.

There was no launch date mentioned, nor word of which mobile platforms are going to be supported, in any of the literature. Send appears to be in a pre-signup phase, available in the US only.

While many of the claims made in the literature sound like they were directly designed to compete with Bitcoin, it may be more appropriate to compare them to services like ApplePay, PayPal, and Google Wallet. After all, these services still use centralized legacy banking services, with facilities such as the “chargeback”.

The root of the difference between Send and Bitcoin is that MasterCard is using their own credit card infrastructure, centrally controlled by servers they own, as it always has done. We can be fairly confident of this because they claim to be able to stop money from moving across borders, impose limits, and stop money laundering within their system.

“The platform uses transaction limits and cross-border blocks to avert money laundering.”
— – MasterCard

While fervent bitcoiners may be happy to see such an intentionally self-hobbled offering, mainstream consumers could prefer a system that attempts fraud prevention in a way they are familiar with. Regulators will undoubtedly favour a system based on legacy financial solutions, that is perhaps more “legal” than bitcoin with its “wild west” reputation. Thankfully for the fervent bitcoiners, there are many other drawbacks with the Send platform.

Since the payment backbone is still apparently being made through MasterCard’s existing infrastructure we can only surmise that privacy protections are not improved, and chargebacks could still occur up to 540 days after these quick transactions. In an attempt to tackle fraudulent payments, chargebacks can put a receiver’s’ account overdrawn, creating more fees.

No mention of minimum payment sizes was made, so it can safely be assumed that micropayments are still impractical for MasterCard Send.

With Send, there is no immutable ledger, no currency of its’ own, no commodity, no way to earn dollars through mining, no way to send them through chat apps nor videogames, no way to tip others with them online, and the dollars Send shuffles around are not programmable, nor can they facilitate smart contracts. To compare Send to bitcoin is to overlook quite a lot of what makes bitcoin unique and valuable.

A major question left unanswered by MasterCard’s literature is that of continuance. It appears that MasterCard is claiming that their service enables "banked and unbanked recipients globally" to receive funds with MasterCard send, while only those users with a US debit account of some kind can send the funds.

If this statement is true, one might reasonably assume that everyone on Earth with a smartphone will be able to download some kind of MasterCard Send app, and receive funds on it.

At this stage Send encounters the same fungibility issues of any mobile money based system. If you send $10 to your friend in Nairobi, how is she going to use that $10 to pay for something locally. More than likely recipients in under banked regions will be trading in cash based economies. It will be interesting to see how Matercard tackles this, perhaps merchant fees will facilitate a roll out of new masterCard terminals.

Until MasterCard is more forthcoming with details about how people can use Send without being linked to a US debit account, talking about sending money to people who are “unbanked” appears to be far less useful than it sounds. As a first-world solution for mobile payments, MasterCard Send may have what it takes to compete with ApplePay and PayPal, but claiming that Send is a solution for sending money to the developing world seems disingenuous at this point.

Even more egregiously, MasterCard uses the phrase “P2P Payments” in their marketing literature, demonstrating that money can be sent person to person:

However, this usage appears to be designed to confuse. The abbreviation “P2P” has long been used in computing and other circles to mean “Peer to Peer” which is a benefit that Bitcoin enjoys, but Send does not. Actual P2P payments would require that there be no central server, and every node on the network is identical and equal in importance to every other node. As MasterCard demonstrates elsewhere in their literature, they leverage control through central servers, and US debit card holders have more abilities than other Send users do, making this use of “P2P” apparently duplicitous.

More information about MasterCard Send may clean up some of this rivalry. Until then, perhaps bitcoin supporters will be mostly flattered by this apparent adoption of 21st Century financial tools. However, given that most current Mastercard users have normal bank accounts with normal debit and credit cards, and all of the disadvantages that come with those, Send may very well prove to be the most desirable ‘upgrade’ to money that is available to non-bitcoiners today. Given that unlike ApplePay and Google Wallet, Send apparently allows users to send dollars directly to each others smartphones. At the very least, Send could make a large impact on the mobile payments market, changing the dynamics of the space permanently.