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Mastercard jumps on the digital payments bandwagon

PayPass aims to compete with PayPal and PayWave.

Mastercard is joining the electronic payments trend with the introduction of PayPass, its new digital wallet service. Although the available pool of words one can stick on the end of "pay-" is rapidly shrinking (between PayPal, Paywave, and this new service), Mastercard's plan is larger in scope than many of its competitors, comprised of three distinct components – an acceptance network (comprising PayPass Online and PayPass Contactless), a digital wallet service and an API (application programming interface – a way for developers to integrate external systems into their own programs).

Mastercard's masterplan is for customers to have a consistent experience no matter where and how they shop. Using smartphone payments on the same network as credit cards will hopefully spur takeup, and unifying the experience between online and offline shopping could also take some of the fear away from an otherwise novel experience.

Ed McLaughlin, chief emerging payments officer at MasterCard, said that:

Consumers are looking to pay for goods when, how and where they choose. Merchants want flexibility to easily accept digital payments so they can convert more browsers to buyers both online and in store. We realize that when it comes to payments, no single wallet will rule them all.

The new system is launching in the UK, US, Canada and Australia, but the two major partners are both from North America. Barnes and Noble and American Airlines have both implemented the PayPass online checkout button on their websites, and American will also integrate the PayPass wallet into its mobile application.

With its online and digital wallet services, Mastercard is moving into territory where it doesn't have the oligopoly it and Visa are used to in the offline payment market. What it will make of its new role as scrappy underdog to the behemoth that is PayPal will be interesting to see.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.