MasterCard Acquires Travelex Prepaid Cards
PURCHASE, N.Y. – MasterCard announced this morning it is acquiring the prepaid card operations of the British currency exchange company Travelex, a major provider of prepaid cards and foreign exchange for credit unions, for $458 million.
MasterCard is acquiring the Travelex operations that manage and deliver consumer and corporate prepaid travel cards to business partners around the world, including credit unions and banks, retailers, travel agents and foreign exchange bureaus. These operations also manage cross-border payroll, per-diem and expense-management prepaid cards for corporations. MasterCard has no plans to issue cards directly as a result of this transaction.
Travelex makes “chip and pin” debit-type cards that, like traveler’s checks, are a way of carrying and spending money abroad. MasterCard will take over the operations that manage cards used for international payroll as well as other expenses, but will not issue its own cards through them. Prepaid cards may not be subject to the same Dodd-Frank regulations as debit cards, and could offer financial services companies a way to maintain profitability as new rules cut into traditional profits.
Arjay Banga, president and chief executive of MasterCard, said in a statement on Thursday that the cards were one way of serving the underbanked, and might well be used by government agencies to distribute payments for programs like social security.
The deal is an extension of a long-term partnership between MasterCard and Travelex. Last year, the two companies expanded their relationship by agreeing to convert the majority of Travelex card programs to the MasterCard brand and by implementing the global prepaid transaction-processing capabilities of MasterCard Integrated Processing Solutions.
Prepaid is one of the fastest-growing payment card categories. According to a 2010 Boston Consulting Group study commissioned by MasterCard, prepaid is expected to reach more than $840 billion in global volume by 2017, a compound annual growth rate of 22%. This same study estimates that the prepaid open-loop market in the travel sector is expected to grow at a rate of 31% over the same period.