Time to Get Serious about Smart Cards: So Says MasterCard's New Strategist, Christian Fredrick
Arend, Mark, ABA Banking Journal
Last month, A. Christian Fredrick started work at MasterCard International as senior vice-president, strategic planning, which is a new position for the card association. (Exiting the association is Alex "Pete" Hart, president and CEO of MasterCard International. Hart's replacement is Eugene Lockhart, formerly of First Manhattan Consulting Group and Midland Bank, London.)
Fredrick comes from Fleet Financial Group, Providence, where he managed the banking company's credit-card business and managed the organization's automated teller machine (ATM) program.
Reporting to Peter Dimsey, president of MasterCard's U.S. region, Fredrick will offer strategic planning support for the region's three primary business lines: credit services, debit services, and remote banking.
Expanding the functionality of card-based products and offering consumers additional payment options are among Fredrick's goals.
The following are excerpts from a recent interview with Fredrick, conducted by Technology Editor Mark Arend.
Q.What is the gist of your role at MasterCard as director of strategic planning?
Fredrick: MasterCard is evolving from a credit card company to a payment services company. Broadly defined, that means giving the consumer payment services alternatives to pay before, pay now, and pay later for goods and services. Pay later is the credit card; pay now is the debit card. What's missing in the United States is the electronic pay before alternative. One of my assignments at MasterCard is to work on a pay-before product and introduce a service that is compatible with such products in the rest of the world so that we're not reinventing the wheel and having to fix problems later.
This means deciding what the technology will be--it may be a magnetic stripe-based card or a microchip-based one. We'll also have to define some standards to allow whatever technology is used to become generally accepted. Pay-before cards in existence today tend to be proprietary, such as those on some college campuses.
Q.What other projects do you have in mind?
Fredrick: Strategic planning for MasterCard involves looking two and three years out to see what the market for MasterCard's products looks like, what the association's membership will look like, its marketing strategy, and its market share--and to do that on an international basis. However, about 75% of my responsibilities will be focused in the U.S.
Q.Is criticism that the card associations have been reactive, not proactive, in smart-card development justified?
Fredrick: I don't think it's entirely justified. The card associations over the past few years have been very much involved in developing the debit products. Had I been directing MasterCard's strategy over the past few years, the debit card would have been at the top of my priority list, and I'd have taken a wait-and-see attitude on "chip" or smart cards. There is the feeling now in the industry that the time has come to begin some serious work on chip cards, and frankly, that's what I've been hired to do.
Q. Will you be involved in The Smart Card Forum, the group established last year to develop standards and sponsor smart-card projects?
Fredrick: I hope to be a key participant in that group, because they're doing some of the things that I've been asked to do. (See ABA BJ, July 1993, p. 70.)
Q. For all the marketing efforts of
the card associations, debit cards seem slow to catch on. To what do you attribute this?
Fredrick: The battle on the debit card front needs very much to be fought in the merchant community. The battle isn't MasterCard versus Visa, but rather it's convincing the merchants that direct debit at the point of sale is a service the consumer wants and should be available to them when the customer gets to the register.
Debit card usage is very spotty around the country. …