Europe Says Fair Play Is The Order of the Day for MasterCard

MA: Mastercard logo

MasterCard’s (NYSE:MA) operations in Europe faced a big setback this week as the European Union’s General Court ruled against the company’s challenge to overturn an earlier decision regarding the cross-border fees charged by the company. [1] Cross-Border fees are charged by MasterCard on international transactions. The court however, ruled that fees charged were inflated and unfair to both retailers and customers. MasterCard, along with competitors Visa (NYSE:V) are expected to contact the authorities to understand the rules for compliance with the ruling.

See Full Analysis for MasterCard Here

Compliance, With Defiance

Although MasterCard has announced its intention to appeal to the European Union’s highest authority, The European Court of Justice, the company has agreed to maintain fees of 0.3% of the transaction amount for credit card and 0.2% for debit card transactions. International Fees account for 27% of our price estimate for MasterCard.

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Waterfall Effect

The decision comes just a few months after the Durbin Amendment to the Dodd-Frank financial overhaul bill, which went into effect on October 1, 2011, limiting the interchange fees to 21 cents per transaction in the U.S. and we also expect it to have an effect on other court cases and inquiries regarding domestic interchange fees charged by credit card companies. The General Court ruled that multilateral interchange fees were not required for streamlined operation of the transaction system, which would bring local governments into play while deciding interchange fees for banks. We expect transaction fees to drop in the near future.

Sporting Events

This summer, two major sports events take place in Europe: the summer Olympics in London and the UEFA Euros in Poland and Ukraine. (See Visa Expects Mobile Payments Surge At Olympics) We expect international transaction volumes to rise as these games will attract a large number of sports fanatics from around the world, leading to increased tourism and merchandise sales. The growing popularity of mobile phone payments will allow customers greater convenience while making transactions on the go, promoting sports enthusiasts to spend more without the burden of carrying cash or traveler’s checks.

Our price estimate for MasterCard is $417, which is in line with the market price

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  1. MasterCard Loses Court Challenge Over Cross-Border Card Fees, Bloomberg, May 24th, 2012 []