The Green Sheet Online Edition
May 24, 2010 • Issue 10:05:02
MasterCard on target with first quarter gains
MasterCard Worldwide is celebrating its first-quarter 2010 financial results, and for good reason. Quarterly revenue for the company grew 13.1 percent to $1.3 billion over the same period last year, while net income was up nearly 24 percent at $455 million, or $3.46 per diluted share.
In a May 4, 2010, earnings conference call, MasterCard Chief Executive Officer Robert Selander stated, "During the month of March, we saw positive growth in processed U.S. credit volume for the first time in approximately 18 months. This trend continues through the first four weeks of April."
According to MasterCard, a 4.6 percent surge in transactions processed is an early indicator of positive developments in economic data trends, which include such factors as stabilization of unemployment rates in the United States and increased spending in discretion-ary categories.
And while U.S. and Western European bankers remain mostly conservative in their outlook, many economists believe the global economy has reached a self-sustaining momentum, especially across Asia.
Expansion of its gateway footprint, which currently includes the MasterCard Internet Gateway System, is part of the company's global e-commerce strategy.
MasterCard President and Chief Operating Officer Ajay Banga said, "I think all e-commerce strategy goes past the gateways to looking at how you offer cardholders more rewarding and more finely tuned, unique and personalized offers of online shopping, which is what the MasterCard MarketPlace is about."
MasterCard stated that its MarketPlace allows cardholders access to merchant-funded offers, which can be preset to stated preferences. Merchants have an opportunity to customize offers to individual groups and monitor the results in real time, which improves conversion rates.
Leading the brigade in prepaid
MasterCard also reported that it continues to build market leadership in the prepaid segment with an emphasis on government programs and general purpose reloadable cards.
Starting in 2010, the U.S. Department of the Treasury will begin phasing in electronic payments to all new Social Security recipients, leveraging its existing Direct Express program with Comerica Bank, which has issued more than 1 million MasterCard-branded prepaid cards.
MasterCard believes the profitability and reuse dynamics of the prepaid segment represent enormous potential. Gift cards average between $70 and $80 loaded at one time, while general purpose reloadable and Social Security benefits cards average $800 per month. And the prepaid space for corporate payroll, benefits and medical reimbursement cards is wide open, the company stated.
Dealing with debit, interchange and dual roles
Responding to ongoing strength in the U.S. debit market, MasterCard has grown its debit book in the noncredit space to include SunTrust and a number of other U.S. banks. MasterCard said its recent pricing changes in the Cirrus ATM network reflect its commitment to balancing customer value with competitive pricing initiatives. In addition, company representatives expressed concern over the fiscal impact proposed interchange reform might have on consumers.
A lingering question in the payments industry is whether card brands like MasterCard should become involved in the acquiring side of the business. To test the transaction processing waters, MasterCard recently introduced a pilot program called Integrated Processing Solutions. MasterCard indicated it is also strengthening its presence as an acquirer internationally.
On the horizon: Banga stated that MasterCard upgrades its network twice a year and plans to incorporate new fraud detection and "remote point redemption" methodologies.
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