Mastercard’s Recent Acquisitions Key To Future Revenue Growth In Fiercely Competitive Payment Industry

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Lately, Mastercard (NYSE: MA) has been on an acquisition spree to augment its product offerings across various categories. In this article, Trefis takes a quick look at Mastercard’s product offerings and the impact of recent acquisitions on its technological capabilities.

Mastercard earns its revenues from transaction processing, domestic assessments, international transactions, and other value-added services. Trefis highlights key components of Mastercard’s revenues and the trends in underlying drivers in the interactive dashboard along with our expectations for FY 2020.

A quick look at Mastercard’s products and solutions

  • Mastercard’s product portfolio can be broadly classified into two categories: core products, and value-added products.
  • Core products are the basic credit, debit and prepaid card solutions to financial companies. The solutions defer for the three customer categories, standard, premium and affluent, based on usage. Mastercard B2B and Vocalink are additional core products that offer invoicing management solutions for small businesses and real-time payment solutions for the account-to-account transfer, respectively.
  • Value-added product offerings include security products, reward programs, payment processing gateways, and data analytics. Mastercard’s security solutions include EMV technology, biometric technology, and fraud detection systems.
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New value-added products and solutions to fulfill consumer demand

  • The year began with Mastercard acquiring Ethoca in March, a technology solutions company that enables merchants and issuers to identify and resolve digital frauds, such as false chargebacks.
  • In April, Mastercard acquired Vyze, a point-of-sale financing company that offers retailers access to a network of creditors so that customers can avail various financing options at the time of purchase. Buy-Now and Pay-Later is a prominent retail financing option that is being utilized in the retail industry to boost sales by offering instant credit.
  • With the acquisition of Transactis (yet to be finalized), the company plans to bolster its Bill Pay Exchange product, which allows banks to offer an easier bill payment facility to consumers by integrating utility and credit card bills with banking applications. Transactis offers a simple bill payment solution for small businesses without online billing capabilities.

Real-time payment solutions were a focus for core products

  • After a tussle with Visa to acquire Earthport, Mastercard enhanced its cross-border network capabilities with Transfast in July. Similar to Earthport, Transfast offers a low-cost alternative to international wire transfer, which costs nearly $25 per transaction.
  • In August, Mastercard announced its plans to acquire Nets’ Account-to-Account payment business for $3.2 billion, an addition to Vocalink’s real-time payment capabilities along-with a new billing technology.
  • Lastly, the company has partnered with R3, a prominent blockchain company, to co-develop cross-border payment solution based on distributed ledger technology. (You can view our earlier analysis on the benefits of DLT technologies for Visa and Mastercard here).

With an overall strategy based on personal consumption expenditure and increasing use of electronic payments, Mastercard has been developing technological capabilities to confront challenges associated with shifting consumer preferences and a rapidly-changing competitive environment. These efforts should help Mastercard’s revenues grow steadily over coming years.

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