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MasterCard Worldwide spent 2007 settling into its new role as a public company. The role included promoting itself as a worldwide network offering new payment products based on a well-known brand.
With MasterCard's initial public offering behind it and rival Visa Inc. stuck in its pre-IPO quiet period, MasterCard was able to focus on making news, particularly with promotions and pilots around its contactless PayPass and prepaid card products.
"We saw more focus on product enhancements. There was a big push from MasterCard in contactless, PayPass," says Red Gillen, a senior analyst at Celent, a Boston-based financial-services and technology consulting company. "And the MasterCard brand did really well in the reloadable prepaid space."
MasterCard faced the same headaches as Visa and other competing card networks from the massive TJX Cos. Inc. data breach announced in January last year and congressional hearings regarding merchant complaints about interchange.
And representatives of the Merchant Payments Coalition, which includes the National Retail Federation, National Association of Convenience Stores and other merchant groups, said they would fight interchange rates they consider too high through "legislation, litigation and innovation."
MasterCard does not receive interchange, so instead threats that could affect its switching and processing of transactions are a threat to its bottom line. But despite the adverse legal and economic conditions, MasterCard's transaction volume continued to grow.
The card network says purchase volume on its U.S. consumer and commercial credit and charge cards totaled $548 billion last year, up 7.7% from $509 billion in 2006.
The number of MasterCard credit cards issued in the U.S. reached 279 million in 2007, up 7.3% from 260 million issued in 2006
Some 116 million signature-based debit MasterCards were on issue as of the end of 2007. Purchase volume on those cards totaled $267 billion, up 23.6% from $216 billion in 2006. MasterCard includes in its debit data PIN-based transactions from competing networks whose brands also appear on debit MasterCards.
The prognosis for consumer use of contactless payments remained mixed in 2007. MasterCard announced in October that banks had issued 16 million PayPass cards and tokens that are accepted at 55,000 merchant locations.
It also announced promising results from PayPass trials in taxicabs, subways and mobile phones.
Still, some analysts say widespread contactless adoption is years away.
Indeed, MasterCard has a history of beating Visa to the punch for trying new payment products and business models, agrees Bruce Cundiff, Javelin Strategy & Research analyst.
Visa waits "for MasterCard to put its neck out there and waits to see if it works," he says.
MasterCard's stock price of nearly $200 per share in mid-March suggests investors are confident in the network's ability to generate a profit. That is nearly five times MasterCard's opening stock price of $40.30 per share when it opened on May 25, 2006. CP
