A Year of Milestones For MasterCard

  Despite a struggling economy and terrorism-spawned uncertainty, 2002 proved to be a watershed year for MasterCard International. The association finally achieved its long-time goal of surpassing Visa-at least in two categories.
  MasterCard receivables at year-end stood at $285.8 billion, up 14.5% from $249.7 billion at year-end 2001. That compares to Visa's estimated 2002 receivables of $266.6 billion.
  And the number of MasterCard credit cards in circulation in the U.S. rose to 266.9 million in 2002, up 15% from 232.4 million a year earlier. Visa had 258.4 million credit cards in issue at the end of last year. "It is a good indicator that people are preferring MasterCard-branded cards," says Ruth Ann Marshall, president of MasterCard's North American Region.
  'Significant Role'
  Marshall says that Citigroup Inc.'s Citibank, which began switching from the Visa brand to MasterCard brand four years ago, played a "significant role" in MasterCard's emergence as the U.S. credit card leader. Citi, the world's largest card issuer, had $116.6 billion in North American managed receivables as of Dec. 31 and almost 85 million accounts.
  MasterCard reported U.S. credit card gross dollar volume jumped 15% to $530.2 billion from $459.6 billion a year earlier. Of that amount, purchases accounted for $374.1 billion and cash volume an estimated $156.1 billion.
  At year-end, MasterCard had 30 million acceptance locations worldwide, including automated teller machines. That's a 25% increase from 24 million in 2001.
  The key to MasterCard's progress lies in its strategy of "being the best business partner and working with our banking customers to show them ways to be more profitable," Marshall says.
  An area that MasterCard is putting more emphasis on is commercial cards, particularly cards for small businesses. "It's 12% of our volume and growing very, very fast," Marshall says.
  MasterCard also made headway in the quick-service restaurants market, with 24,000 locations signed, Marshall says.
  Although MasterCard is finding success in some areas, it still has challenges ahead. For one thing, it is still a distant second to Visa in offline (signature-based) debit. At year-end, MasterCard had 47.1 million Debit MasterCard cards in circulation, up 15% from 40.9 million in 2001 but well below Visa's 127.8 million check cards.
  Gross dollar volume for MasterCard's debit program was $69.6 billion, up 21% from the year-earlier period but still less than one-third of Visa's debit volume.
  To close that gap, MasterCard is placing "a huge emphasis in the area of debit," Marshall says. Debit has been growing at a rate 2-1/2 to three times faster than credit, she says, adding "we intend to be the global payment leader and that involves a lot of work in the space of debit."
  In online debit, MasterCard in March approved domestic interchange increases for its Maestro personal-identification number-based point of sale network. The current rate is 9.5 cents per transaction. With the new changes, effective July 1, four merchant or usage categories will qualify for different rates (Card Watch, page 8).
  At year-end 2002, there were 505.2 million Maestro cards in issue worldwide, up 17% from year-end 2001.
  As with the other card brands, MasterCard saw a drop in the growth of travel-and-entertainment spending last year, due to the weak economy and terrorism fears, Marshall says. "We've seen a slowdown like everyone else has but we haven't suffered to the degree that other companies have," she says, adding that T&E spending represents less than 10% of MasterCard's volume.
  To encourage overall spending, MasterCard last year spent $694 million on marketing and advertising, up 37% compared with 2001's $506 million.
  About $73 million of 2002's advertising expenses resulted from MasterCard's purchase of Europay International, now known as MasterCard Europe. The Purchase, N.Y.-based bank card association in June completed the merger with its European affiliate and formed a private stock corporation, MasterCard Inc.