MasterCard (NYSE:MA) is looking to expand its digital services in Europe. The company has secured a five-year deal with U.K. mobile operator Everything Everywhere which runs the popular Orange and T-mobile services.  Everything Everywhere will initially allow its 27 million strong customers to access pre-paid money accounts via near-field communication (NFC) technology through their smartphones. This agreement is an extension of previous understanding between the two companies, wherein MasterCard provides the technology for Orange customers to make payments through NFC devices via Barclaycards.
Our price estimate for MasterCard is $451, in-line with the current market price.
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Initially, around 100,000 retailers across the country will support this technology, and the number is expected to grow rapidly over the next few years. Shoppers using mobile phones to complete payments are 14% more likely to convert a purchase than non-mobile phone users, according to a study by Deloitte.  The percentage of credit card customers using their mobile phones to complete transactions has increased from 4% in 2011 to 7% in the current year. These findings will influence merchant acceptance of the exciting new technology.
MasterCard’s closest competitors, Visa (NYSE:V), Discover Financial (NYSE:DFS) and American Express (NYSE:AXP) are also looking to grab a share of the market. Visa plans to launch a mobile application, V.me, later this year. The application will allow users to access various payment networks through their mobile phones and make payments at cashless NFC-enabled counters. Discover has entered an agreement with Ebay (NASDAQ: EBAY) to allow its customers to access PayPal through their mobile phones.  With both merchants and card operators looking to expand aggressively, we expect a steady growth rate in transaction volumes over the next few years. Credit cards account for 42% of our $39 price estimate for Discover Financial’s stock , which is in-line with the current market price.
You can gauge the effect of a change in forecast by modifying the charts above.Notes:
- Mastercard’s digital-wallet deal with Everything Everywhere, BBC News, 28th August, 2012 [↩]
- Smartphones will influence 19pc of retailers’ sales by 2016: study, Mobile Commerce Daily, June 28th, 2012 [↩]
- Paypal and Discover To Bring Paypal To Millions Of In-Store Locations, Press Release [↩]