Mastercard and Microsoft walked a mile in each other’s shoes – or in an update on the old adage, spent three days hacking together – and came up with a new service to make shopping online easier and more secure around the world, not only for shoppers, but also retailers and banks.
The collaborative experience also kicked off a new way of thinking about innovation that promises to lead to even more developments to help e-commerce thrive.
New York-based Mastercard is a leading technology company in the payments space, processing about $20 billion in transactions a day across more than 210 countries or territories. And Microsoft is one of the top e-commerce merchants in the world, with online sales from the Microsoft Store, Xbox, Azure, Office 365 and more.
Both companies have felt an urgency in shifting toward online payments – especially with the increasing popularity of mobile apps and devices – that has made security more difficult even as consumers expect greater ease of use. So they brought together teams of engineers to tackle the issue at the recent Microsoft global Hackathon at Microsoft’s Redmond, Washington, headquarters.
“Both our infrastructures are used in creating online transactions, so we owe it to our customers to make them safe, secure and simple,” says Raj Dhamodharan, Mastercard’s executive vice president of channel propositions and partnerships. “Through co-innovation our customers benefit, because we’re solving a pain point that otherwise might take years to solve.”
The collaboration comes amid changing cultures at Microsoft and Mastercard that are being fostered from the top down.
“Both companies have shifted their mentality that by partnering and bringing in diverse thoughts, we build better products and work better together,” says Will White, Microsoft’s director of payments. “The benefit is you get true innovation from two companies that have radically different missions, in different industries, with different constituents.”
Mastercard provides payment services to Microsoft’s online stores, and Microsoft sells technology services back. So the Hackathon teams built on that symbiotic relationship and experimented with ways to securely store payment info, exchange credentials and authenticate identity with biometrics – using a PC to make a theoretical purchase of a game on the Microsoft Store as a trial.
Microsoft’s double role as merchant and tech company gave Mastercard engineers a better understanding of the challenges both stakeholders face, says Mohamed Abouelenin, Mastercard’s director of product development and innovation.
“That helped us push the bar in developing new services to help provide the best experience for consumers,” Abouelenin says.
It was the first time Mastercard had participated in another company’s Hackathon. The experience energized both groups and left them wanting more.
“I saw a big difference in my team when they got back, in how they approach their jobs and have a more customer-oriented perception of things now,” says Anand Mallepally, Mastercard’s vice president of cyber and intelligence solutions, whose group is based in St. Louis. Physically being together in Redmond was “a gamechanger” for the engineers as far as seeing situations from each other’s perspectives, he says. “I can foresee more and more innovative ideas now.”
That’s crucial at a time when chips on credit cards are stopping more fraud, leading criminals increasingly to focus on online forums instead, says Mallepally, who’s been working on fraud prevention and digital platforms with Mastercard for more than 12 years.
His team has to tread carefully, however, acknowledging that security protocols can bring friction to the shopping experience. Shoppers are turned off when they have to remember passwords or go through extra verification steps; retailers sell less when transactions take extra time; and the banks that issue credit cards incur extra expenses when they have to develop and implement new safety measures. So it’s critical to consider enhancements to improve the consumer’s experience, along with additional protections.
The situation is complicated by a new regulation Europe implemented in September that requires banks to communicate with the customer for two-factor authentication before online purchases – even for recurring charges such as monthly bills for utilities or streaming services.
The bank might send a code to a credit card customer’s mobile phone or email address, for example, and the customer has to type that in on the checkout screen before a purchase can proceed. That’s expected to reduce fraud but increase friction. It’s also expected to be adopted by other markets around the world, including the U.S., in coming years.
But biometric authentication on mobile devices – such as a fingerprint scanner – has been approved to allow consumers to skip that step.
That got Microsoft’s White to thinking.
“How do we level the playing field between the mobile checkout experience and the PC checkout experience?” he wondered. “And why can’t we make e-commerce payments as fast and simple as we have in the physical world, where you tap or insert a card and you’re done?”
The Hackathon teams found an answer to both, with an extra measure of innovation thrown in.
They decided to leverage the infrastructure Microsoft already has with its Windows Hello technology, which allows 900 million Windows 10 users to access their devices with a fingerprint or facial recognition, instead of a password. Through their combined efforts, they came up with a new feature that screens the user’s biometrics again and then, as long as they match the Windows Hello identification, automatically authenticates the buyer and approves purchases. The new service will give banks and merchants the assurance they’re dealing with actual customers, and shoppers won’t have to go through additional steps to prove themselves.
And the solution can be used across many types of computers, laptops and tablets, without requiring people to own or use a specific device, as the mobile-phone offerings do.
“It’s a solution that neither Mastercard nor Microsoft could have done on our own,” says Matt Rossmeissl, Microsoft’s general manager for commerce engineering operations. “We each had to bring our own expertise to the table to get this done. They’ve got the relationships with the banks, and we’ve got hundreds of millions of Windows devices out there.”
Biometric authentication is built to make online shopping easier for everyone, but it will be especially helpful for those with disabilities, says Priyanka Banerjee, a senior program manager under Rossmeissl. Entering a code for two-factor authentication is a difficult process for anyone who’s blind, for example, or can’t use their fingers to type, especially since those codes are time-limited and expire quickly. But biometric authentication removes that friction.
“Microsoft is very focused on inclusiveness and accessibility, and that’s something that hadn’t yet been thought of in this scenario” by financial services companies, Banerjee says. “What we have built can be extended to those with disabilities, with no extra setup required, and we can make the experience of everybody better.”
The collaborative process is also helping to bring the concept to market faster. The Hackathon engineers were able to accomplish in a few days together what would have taken a month or more apart, says Mallepally.
“We created a prototype in only a week’s time, and I think that will change the relationship between us and Mastercard going forward, because we’ll be more willing to try new things and go do growth hacking,” Microsoft’s Rossmeissl says. “We have at least 10 conversations in parallel going on with Mastercard now.
“If you approach a challenge with an open mind and go into it thinking that what we produce will be better if we work together and leverage our unique independent strengths, we’ll find solutions to problems that could be far better than what we could have done if we’d tried to solve them ourselves.”
All photos provided by Mastercard.