Can New ‘Credential’ Concepts from Mastercard and Visa Recapture Consumers’ Eroding Loyalty?
Mastercard One Credential joins Visa Flexible Credential (as well as PayPal and others) in the latest race to hit the payments space. But can the offerings overcome consumers’ love of mixing and matching financial products?
By Steve Cocheo, Senior Executive Editor at The Financial Brand
The newly announced Mastercard One Credential, designed to enable consumers to preset their choice of payment channels, adds more competitive heat to a race that has been underway for awhile.
The mid-February introduction of Mastercard One comes in the wake of a similar offering from Visa called Visa Flexible Credential unveiled in mid-May 2024. Both are part of a "one payment credential to rule them all" movement that is supposed to play to consumers’ desire for payments convenience — although it may also be designed to push back against Americans’ growing tendency to spread their financial business across multiple providers and types.
How Mastercard One Credential Will Work
Envision Mastercard One Credential as a railroad switch yard, where groups of railcars are assembled on different tracks according to purpose, destination, and so on.
Consumers using One Credential will make purchases through a single touchpoint with retailers. Based on criteria set by the user, purchases under a certain dollar amount would be routed to the consumer’s debit card, drawing on their checking account. Charges higher than that would be shunted to their credit card. And charges above a certain level would be switched over to the consumer’s buy now, pay later account.
A sample of how Mastercard One Credential could appear to customers of Mastercard issuers. Consumers’ relationships will continue to be with the issuers.
Note that all three relationships are with the same provider — the consumer’s bank deposit account, their credit card issued by that bank, that bank’s option for buy now, pay later. While this initial example of set up is one way the account could work, other options may be available, depending on the issuer’s product design. Sawhney points out that financial providers might give consumers the option to route transactions to different pay types by purpose, such as airline tickets to credit, and all clothing to debit. She adds that Mastercard’s technology would also enable transactions to be paid with points out of the provider’s loyalty program, as another option.
This all brings up a key point. As Sawhney notes, Mastercard is a B2B2C player, providing the technology enabling One Credential and routing it through the Mastercard network. But the implementation, marketing and customer communication will all be on the issuer. (By contrast, American Express and Capital One/Discover incorporate both issuing and networks.)
"We supply the ingredients, but the banks then create their consumer value proposition," says Sawhney.
One Credential to Rule Them All Means One Issuer, Too
And that brings up another key point. As envisioned, all payment methods that will be available through the single One Credential will be from a single provider.
"In the U.S., more so than other countries, consumers might have multiple accounts at different banks," says Sawhney. "But Mastercard One Credential is not trying to solve for being able to manage your flows across various banks."
Sawhney explains that a key target for One Credential, based on consumer research, are younger consumers — Millennials and Generation Z. While the approach isn’t exclusively for them, Mastercard found in market research that they liked the idea of having a single credential that was pre-programmed to follow spending preferences.
"Most consumers, especially younger consumers, are going to start this with the financial institution which gave them their first checking account," says Sawhney. From the bank’s perspective, the attraction they are offering is formalized money management. Once adoption grows, she adds, customers will likely want embellishments to what’s going to be on offer originally.
So, to pick up on the railyard analogy again, One Credential will not offer the ability to move charges to another "railroad." Once your transaction is in one railroad’s yard, it stays in that yard, for now. Setting preferences under One Credential will be accomplished either via the provider’s website or via their mobile app.
"What we’re not doing at this time is going beyond the walls of their bank and asking the consumer to connect other accounts from other institutions," says Sawhney. She says markets where open banking has become more ingrained offer some fintech wallets that group accounts from multiple providers in one place, but that’s not One Credential.
Note that this is not a design limitation — it’s actually by design.
Sawhney explains that the One Credential relationship becomes a built-in means of cross-selling. By grouping things together, and demonstrating innovation, "they’ll get that credit card, they’ll get that buy now, pay later," says Sawhney.
Galileo, a vendor owned by SoFi that is working with Mastercard on the credential offering, sponsored a study last year by Datos Insights that demonstrated that consumers have been "stitching together" their own custom combinations of payments choices and banking tools that cross provider lines.
In answer to an emailed question concerning this "stitching" trend versus credential programs, Galileo said that with Mastercard One Credential "banks will be better equipped to offer more of the payments options customers are looking for, saving them from going elsewhere to meet their needs."
Added the vendor: "Streamlining services provided by one issuer makes more payments options digitally available right in the palm of a customer’s hand. It’s a big opportunity for issuers to meet their customers where they are and enable younger consumers to use multiple financial products."
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How Mastercard One Credential Will Work with Wallets and Retailers
Sawhney explained how One Credential will work within digital wallets and on retailers’ sites and within their apps.
She says that consumers who load cards into digital wallets who also have a relationship with a provider that offers Mastercard One Credential will tend to load that relationship into their wallet as their top of wallet choice. She thinks they will also load individual cards into the wallets for times when they want a transaction to go specifically to one of the options within the One Credential relationship such that it is not the preference set up in One Credential.
"But we do think that as One Credential adoption increases, the default credential that is established through the preferences will be the main and default top of wallet credential that they’ll use as the learning curve happens," says Sawhney. Once the preferences have been set up, the "switching engine" will send each transaction to the payment type the consumer specifies.
Sawhney says the process will work similarly when a consumer registers their payment information with an ecommerce provider for the first time. Inputting the relationship that’s the starting point for the One Credential accounts will allow purchases to automatically flow through as directed by the consumer to their provider.
Questions that can’t be answered until consumers begin to try out credentialing include: Will they appreciate the control sufficiently to give up some flexibility and choice of payment provider? And how do issuers vie for being top of wallet with credentialing if a consumer has more than one issuer in their wallet who offers credentialing?
Read more: How MasterCard, Visa, AmEx Will Lean into Innovation in 2025
Where Could One Credential Go from Its Beginnings?
Clearly, it’s still very early days for even the basic blueprint of Mastercard One Credential. For that matter, in earnings briefings since announcing the program Visa has had little to say about Flexible Credential.
Mastercard’s announcement also comes shortly after the approval of the Capital One and Discover merger by shareholders, which now awaits the OK of the Federal Reserve and the Comptroller of the Currency. The combination, which Capital One management anticipates will receive final approval early this year, will put together a highly tech-savvy card issuer with a company operating extensive credit and debit networks. It’s hard not to envision the combined company adding an entry to the credential race.
"Capital One/Discover will play, and American Express has to figure this out too," says payments consultant Richard Crone. But he adds that the proprietary PIN debit networks must also find a way to compete as well.
Some in the payments space point out that PayPal was already in the race, and, globally, wasn’t alone.
"With PayPal, you can log in and either choose a bank credential or you can choose the balance that you have with PayPal, or you can even do an installment plan with PayPal in many cases at the time of checkout," says Seth Perlman, global head of product for i2c, Inc., in an interview. The firm is part of a group of payments companies announced as working with Mastercard on One Credential implementation with issuers.
The difference, Perlman continues, is that PayPal currently requires intervention at the time of checkout to select the form of payment within its options, whereas Mastercard One Credential provides preselection and customization, which we’ll come to.
"You could say the race got started when PayPal got started," says Crone. "PayPal allows you to seamlessly choose between credit, debit, prepaid, buy now pay later, and supports literally any credit and debit or prepaid card brand and rails."
In fact, Crone argues that PayPal has "lapped" Mastercard and Visa. And during PayPal’s late February investor day, leaders detailed efforts to add multiple forms of artificial intelligence, including agentic AI, to the company’s payments experiences. (This is covered in a separate article.)
Visa’s first U.S. partner pick was not a bank but Affirm, the fintech payment company known initially for BNPL. An Affirm spokesperson confirmed by email that the company’s use of Visa Flexible Credential, scheduled for activation in late 2024, is live, but information beyond that was not available. The matter didn’t come up during the firm’s early February earnings briefing.
In Mastercard’s announcement of One Credential, which will be available globally, Wio Bank, a digital banking platform in the United Arab Emirates, is mentioned as being live with the service. In the U.S., in an interview Bunita Sawhney, chief consumer product officer at Mastercard, says that the network is working with issuers and associated enablers in the U.S. but that launches here will most likely not come until the fourth quarter of 2025.
However, with these products available not only to traditional bank issuers but also to fintechs like Affirm and other nondepository players, the potential enhancements down the road can quicken the pulse of the payments nerd.
"You can envision that they may choose to take this product in other directions," says Seth Perlman of i2c. "I think the goal is to put a lot of automation into the consumer’s hands, and give them whichever configurations, whichever variables, the issuer chooses and allow them to be automated at the network level."
On the surface, says Richard Crone of Crone Consulting LLC, credentialing looks like a defensive strategy. Allowing the consumer to specify the payment type within the provider’s "walled garden" and they at least are using something offered by the company, whichever option fits their particular configuration.
But that’s not the end game, Crone says.
First, he says, it’s easy to imagine credentialing beyond the payment types already discussed as being among the options for consumers. Marry to that the variety of artificial intelligence tools available, or becoming available, to developers that could expand the utility of what’s offered through credentialing.
Crone says that a given credential could be used to shunt transactions not only among debit, credit, BNPL and loyalty, but to conceivably any payment channel, always using the networks’ rails for at least part of the transaction. He suggests that this could include instant payment services like FedNow and the Real-Time Payments Network of The Clearing House as well as pay-by-bank transactions.
For Visa and Mastercard, at the least, he says, "the end game is to be a network of networks," carrying more and more fee-bearing traffic over rails that cost virtually nothing to continue increasing traffic upon.
The more connections that get loaded into credential services, says Crone, the more artificial intelligence would offer in helping the consumer choose the optimal path for a transaction, based on multiple factors, including the availability of discounts, points, what have you. The AI would comparison shop in the moment, with the latest opportunities digitally at hand. It’s possible that the AI could also drive advertising elements that would create income and potentially additional transaction volume.
Tying all this into digital wallets could multiply the possibilities, Crone believes.
Read more: Yes, You Can Compete with the Major Card Issuers. But It Takes Creativity and Focus.
What’s in It for Issuers and for Mastercard?
Implementation of credentialing among banks and fintechs may boost volume, in terms of transactions on their payment instruments, but also on networks.
Crone has done some figuring. He estimates that Mastercard One Credential’s implementation could expand use of Mastercard’s tokenization service by 30%. He says 54 billion new transactions would travel on the network’s rails annually, entailing $2.8 trillion in additional total payment volume. To Mastercard, that could mean as much as $1.5 billion in net new revenue from tokenization fees.
For traditional issuers, as credentialing changes the flows and patterns of transactions, sharp attention will have to be paid to the bigger picture, Crone says.
"Ultimately," he says, "this is about control — who owns the payment experience, who influences consumer choice, and who monetizes the transaction flow for embedded payments."
