Friday July 13, 2012
MasterCard’s Jim Cheah talks about the convenience of going cashless
Power Lunch by MARINA SUWENDY
OUR guest this week is an advocate for one of women’s best loved hobbies — shopping! Or actually, more accurately, an advocate for indulgence.
MasterCard Worldwide vice-president for Malaysia & Brunei and senior country manager Jim Cheah comes across as a man who bubbles with enthusiasm when it comes to embracing life and what the world has to offer.
He walked into our dining area and took great delight in the gastronomic spread prepared by Salmiah Isa.
And, when given the rundown of how Salmiah Isa came to be the resident chef at Menara Star, Cheah fully agreed that she is indeed an asset.
“She’s a heritage treasure and a hidden gem,” he said.
As we dined, Cheah took great interest in speaking with Salmiah Isa and her husband about their time with our late Tunku Abdul Rahman.
As he spooned a generous portion of the Sambal Belacan, he was happy to hear that his love for it was shared by our beloved Tunku — Salmiah Isa speaks fondly of how Tunku never went a meal without it.
However, once our tummies were satiated with dishes like Udang Goreng Asam, Kacang Botol Goreng Belacan and Fried Tempe with Chili and Ikan Billis, we got down to our interview.
Cheah gave me a brief history lesson stemming from the times of bartering and spice trading to what we have now — paper currency and plastic cards.
When our discussion moved towards the different credit cards, online payment gateways and overall competition, Cheah was unruffled.
“PayPal and services like it — they are restricted in terms of their usage. You cannot use them in stores, restaurants, and so on. And, Visa is similarly trying to do the same things that we’re doing.
“For us to focus on each other as competitors would be short sighted. The bigger market is cash. What we’re competing for is to replace cash.”
He goes on to speak of MasterCards focus on turning us into a cashless society and how this is actually beneficial to our government.
“Our main competitor is actually cash – we haven’t even penetrated 30% of transactions.
“There’s still a lot of room for us to improve in terms of penetration into the personal consumption space. To me, cash replacement is the more important thing.
“The cost of handling cash is so inefficient and people don’t really realise that.
“With credit cards it’s different. There is security, but that’s contained by the supplier — they pack a box of about 100,000 credit cards then ship it secure-packed. That’s it.
“But, cash is causing the government a headache. As consumers, we don’t always see this. There is the printing cost, the security of the printing plates, the security for shipping the new currency to every bank plus the transport cost, and so on. How much do you think that costs? It really is a lot.”
In light of advocating for cash-less society, and also the current trend of company personalised cards, The Star executive editor Brian Martin posed the question of the possibility of The Star having it’s own credit card.
To this, Cheah explains how the process would work.
“It’s quite simple. Part of my job is to be a match-maker. We’ll see whether you’re looking for a pre-paid, debit or credit card. Then, depending on your requirements and the segment that you’re going for, I’ll match you with a suitable bank.”
With there currently being three categories — pre-paid, debit and credit cards, I wondered if MasterCard has a preference for which their consumers choose to use and decided to pose this question to Cheah.
“We look at it from what it entails. Banks are sometimes an issuer and an acquirer — if you use your card at an acquired merchant of theirs, then it’s a closed loop. Then, we get zero. We don’t even see the transaction. So, it depends on the situation.
“If it’s outside transactions, then it depends on the transaction and level of service that MasterCard needs to provide. As long as it involves settlements, guaranteeing payments and switching the transactions, then it’s the same. It makes no difference to us.”
Magnetic stripes to chips
While explaining to me the evolution of credit cards, Cheah admitted that during the time of the magnetic stripes, though it provided added convenience over the previous pre-historic version (imprinters), it proved to be highly expensive for the industry.
“Mag stripes worked, but they can be compromised. And, these guys from Malaysia formed a huge fraud syndicate to steal information from the mag stripe.
“It was a global problem and the syndicate actually started in Malaysia. They stole information and cloned cards. They could even capture and transfer our data online by tapping the phone wires.
“We were actually number one in the world for fraud. The industry, as a whole, lost at its peak, over RM100mil every year for around five or six years,” he said.
With the instances of fraud that have plagued credit cards, I asked Cheah how the industry has evolved to safe guard us as consumers.
He tells me that credit cards in Malaysia now all incorporate a chip.
This surprised me and hasn’t actually been something I’ve taken that much note of. However, I noticed that some of my US cards did not.
But, Cheah isn’t surprised, and he tells me that calling up my US card issuer and requesting for a card with a chip might be a possibility, but it might simply be that they are not using this system yet.
Cheah informs me that the US has been one of the slowest countries to migrate over to this system, which he also finds surprising, considering that they are a country that usually tries to keep in-touch with most advances.
And, with pride, Cheah informs me that Malaysia has succeeded in being the first country that has fully embraced and converted over to using credit cards with embedded chips.
“It cost the industry about RM500mil to upgrade the whole system — the terminals, the back-end host system, the card and the issuing host system.
“The terminals will do a pin verification on the chip first, and it sends only transaction data. The terminal itself will do the reading of the chip. And, each chip has encrypted data that the Europay, MasterCard and VISA (EMV) standard terminals will verify if it’s genuine EMV data”.
But, what about online shopping? Considering that Malaysia, though a late-bloomer with regards to the rest of the world, has started to embrace the world of online shopping, I thought it fair to ask Cheah his views on how safe this actually is.
Or, are we in some ways undoing their security efforts and again opening ourselves up to be victims of fraud?
Cheah reassures me on this and summarises the extensive steps that the industry has taken.
“We’ve now got very specialised programmes that are targeted against Internet fraud. You hear of online stores that have had their systems hacked and account numbers stolen.
“These things sometime seem beyond our control — hackers have even hacked into the US Department of Homeland Security. But, we’ve come up with a couple of key fraud avoidance steps, to prevent Internet fraud from reaching epic proportions.
“One of which is the secure code, which uses encryption and decryption — people are taken to a secure site, they enter their pins/passwords, then it will come back to our authentication service.
“We’ll authenticate the encrypted data, then, revert with an approval code if the data is from a bona fide cardholder.
“On top of that, Bank Negara also has mandated what we call ‘two-factor authentication’. Not only will transactions over the Internet be verified, but there’s a second factor of authentication.
“Usually, this will be a cellphone – a SMS will be sent to re-confirm that you are the actual purchaser. So, it’s not just the Internet, encryption and pins/passwords, but also personally contacting you on your cellphone. And, since this has been mandated by Bank Negara, it is now a must for Internet transactions in Malaysia.”
The conversation then flowed to where he sees the credit card industry heading.
Cheah speaks of the MasterCard PayPass Wallet and how this will enable us to have greater ease in using credit cards.
With excitement, Cheah takes out his phone and shows me a function called Near Field Communications (NFC).
He explains that this will later on work hand-in-hand with their PayPass Wallets.
“It will come in the form of a widget. The banks can subscribe to our wallets and when that happens, you will be given a site to enter. You verify your information and approve the widget to be downloaded into your NFC enabled cell-phone.”
He goes on to speak of the day when we’ll be able to merely tap our cellphones to authorise a lunch payment at a fast-food joint. But, is it realistic as this may take time to incorporate.
“We have to allow for the enabling of the point of sale (POS) terminals to enable us to use this. On that side, we have to work with our banks to start educating and installing devices that are NFC friendly.
“It depends on the speed of the banks. We will be develop the widget, which will cost a lot. But, for the banks, the device itself might cost around US$100 per terminal, which is not that expensive,” he said.
However, Cheah assures me that though payments will one day be made with a simple tap, they will be implementing security measures such as an enforced limit, so that there is no fear of someone attempting to charge a luxury item, if in the unfortunate circumstance that someone undesireable does get a hold of your cellphone.
He stresses that PayPass Wallets will be purely for the convenience of small, daily purchases such as meals and movie tickets.
MasterCard has always had the aggressive marketing campaign surrounding one word — Priceless.
They take pride in offering access to experiences to help create priceless moments for their customers.
For the regular consumer, they’ve got exclusive sales, dining promotions and travel promotions.
For their World Elite cardholders, they have got things like a concierge service, backstage concert tickets and luxurious travel packages.
And, being in his position, Cheah probably has access to all of this and more, so I asked what his most recent priceless moment was?
Being an avid golfer, it is no wonder that Cheah’s most recent priceless moment relates to golf. With delight, Cheah shares his moment.
“The first time the LPGA was held in Malaysia, I got to meet top lady golfers like — Michelle Wie, Natalie Gulbis, Sandra Gal, Beatriz Recari and Frances Bondad. I thought — Wow! These are all top women golfers who have won tournaments before on a global basis. I got to shake their hands, talk to them, got some golfing tips.
“And, I even got to have a photograph with them and that’s hanging on a wall in my office right now.”