Mobile-based transactions took another step forward as MasterCard (NYSE:MA) unveiled plans for PayPass Wallet Services in an announcement on Monday, May 7.  Following the recent announcement by Visa (NYSE:V) to release its digital wallet, V.me, in Europe this fall, MasterCard said that its services will be launched in the third quarter of 2012, initially in the U.S., Canada, the U.K. and Australia and would subsequently be launched in other countries. PayPass is a digital wallet program that will allow customers to make cashless transactions online or through mobile phones. MasterCard has kept its platform open to allow users to use services from rival companies such as Visa, American Express (NYSE:AXP) and Discover Financial (NYSE:DFS).
Acceptance and Growth of Cashless Transactions
Mobile payments have been growing rapidly (See Banks and Wireless Carriers Get Serious About Mobile Payments), and we expect the trend to continue with the growing popularity of smartphones such as Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android-based phones. The technology is still in a nascent stage of development but the possibilities have captivated the imagination of customers as well as merchants all over the world. Convenience is of paramount importance today and an increasing number of retail customers are already make online purchases from the comfort of their homes through e-commerce websites like Amazon (NASDAQ:AMZN).
Wallet services will enhance the shopping experience of users both online and on the go as they afford great flexibility while making transactions. We expect this innovation to have a positive effect on transaction volumes as customers will be encouraged to spend more.
Open Network Gives PayPass Edge Over Competition
The PayPass Acceptance Network will allow electronic payments through a Near Field Communications (NFC) device such as a mobile phone, using MasterCard’s service and is quite similar to the services offered by Visa, Isis and Google Wallet. The company, however, will try to attract banks by allowing them to design their own platform using the PayPass Wallet and PayPass API (Application Programming Interface) and connect to the acceptance network.
As the wallet services are open, consumers will be able to use the debit/credit card of their choice and will not be restricted to MasterCard. We believe this will lead to healthier relations with banks, merchants and customers and will help MasterCard increase its market share.
MasterCard has already seen a boost in its market share for debit cards (see Debit Card Growth Fuels MasterCard’s Q1 Results) and will look to capitalize on its innovations, going forward.
The mobile payments market will be very competitive in the years to come, and we will keep a close eye on further developments in this sector.
Our price estimate for MasterCard is $465, which is about 10% above the current market price.Notes:
- MasterCard Simplifies Shopping with Launch of PayPass Wallet Services, May 7th, 2012 [↩]