As MasterCard Inc. (MA) pushes to expand overseas, its second-place status behind Visa Inc. (V) may turn out to be a benefit.

The world's second-largest payments network has aggressively pursued international growth in recent years — partly because it can afford to spend less time defending its established business than Visa does, says Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, Inc.

"It's very clear that the international opportunity is greater than that of the U.S," Sakhrani says, referring to MasterCard's growth prospects. "I think that there's tremendous potential, and that they have the benefit of being the smaller player and not having to play as much defense."

MasterCard reported its third-quarter earnings on Wednesday. Its progress internationally, where it saw 17% growth in gross dollar volume compared to a year ago, was a particular bright spot in a generally good report.

The Purchase, N.Y., company reported net income of $772 million, or $6.17 per diluted share, which was up from $717 million, or $5.63 per diluted share, in the year-ago quarter. That beat the average estimate of $5.92 per diluted share from 35 analysts surveyed by Bloomberg, and shares of MasterCard were up 1% in mid-day trading Wednesday.

Total net revenue was $1.9 billion, a 5% increase from the third quarter of 2011.

MasterCard chief executive officer Ajay Banga emphasized the company's inroads in making deals that will allow it to gain greater share of various overseas markets.

"We won significant business in Europe this quarter," Banga said in a news release. "Additionally, emerging geographies and governments continue to provide great opportunities for growth.

The list of international deals that MasterCard made in the third quarter includes a partnership with Swedish bank Nordea. During a conference call, Banga told analysts that as a result of the deal, MasterCard expects to double its market share of debit cards and credit cards in the Nordic and Baltic countries over the next three years.

Another deal with Czech bank CSOB is expected to result in a 20% increase in MasterCard's market share in the Czech Republic, according to Banga.

Yet another new partnership should give MasterCard greater access to the market for prepaid cards in East African countries such as Kenya. MasterCard estimates that it will deliver more than a million prepaid loyalty cards under the deal with supermarket chain Nakumatt.

In a fourth deal, MasterCard has become the exclusive debit card network for the Commercial Bank of Qatar, according to Banga.

The logic behind MasterCard's overseas strategy is simple: there is more potential for strong growth in card revenue in international markets than at home.

According to a report from the Royal Bank of Scotland, the United States accounted for 40% of the global market for non-cash payments in 2009, but growth was much faster in central Europe, the Middle East, Africa and Latin America.

MasterCard's third-quarter earnings report illustrated the trend. In the United States, gross dollar volume on credit card transactions barely budged, ticking up to $142 million in the third quarter, a 1% increase from a year ago. U.S. debit card volume was stronger, increasing by 14% from the year-ago period, as new rules for routing debit transactions have shifted some of Visa's dominant market share over to MasterCard.

But in other countries, MasterCard saw a 10% increase in gross dollar volume for credit cards, and a 12% jump for debit cards, compared to the year-ago period.

The volume growth was surprisingly strong in Europe, where gross dollar volumes, based on local currencies, rose by 14.5% from the year-ago period.

Banga said that MasterCard has benefited from having comparatively larger footprints in northern Europe and central Europe than in the parts of the continent where consumer spending has been hit hardest by the Euro crisis.

"We are less exposed to Portugal and Ireland and Greece and Spain," he said.

Looking ahead, MasterCard's potential to post strong growth rates in overseas markets may be helped by the fact that it is starting from a lower base than Visa, according to Sakhrani. He noted that MasterCard is not only competing against the big international card networks, but also local companies.

Sakhrani said the biggest disappointment in MasterCard's third-quarter earnings was its expenses, which rose 5% to $854 million from the year-earlier period.

"If you look at expenses, they were a little bit higher than we thought," Sakhrani said. "One of the key strengths of the business model is that there's tremendous operating leverage. And we're not seeing it right now. The question is can we see it in the future."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.