Mastercard International Inc.
Mastercard International Inc.
MasterCard International Inc.
founded: 1969 as interbank card association.
headquarters: 2000 purchase st.
purchase, ny 10577 phone: (914)249-2000 fax: (914)249-4250 url: http://www.mastercard.com
MasterCard International Inc. is the second largest global payment services provider in the world, behind the leader Visa. It is a franchise financed by its members, which are the financial institutions that actually approve or reject credit applications, issue credit cards, and set interest rates and fees. MasterCard itself provides services for these members, primarily brand management, franchise management, and transactions processing, such as authorizing purchases on cards.
MasterCard's chief products are the MasterCard credit card and the Maestro debit card, both of which can be used in the MasterCard/Cirrus ATM network owned by MasterCard, the world's largest ATM system.
MasterCard's revenues in 1997 were $1.08 billion, with net income of $39.7 million. The company recorded 6.5 billion transactions with a gross dollar volume of $602.0 billion that year, a 14-percent increase. There were 341 million MasterCard-branded cards in circulation in 1997.
In 1996 MasterCard's total revenues were $945.5 million, an increase of almost 16 percent over 1995's revenues of $781.7 million. In 1996 MasterCard handled more than 7.5 million transactions per day, in more than 150 currencies, and had 400 million credit and debit cards in circulation.
The origins of modern credit cards emerged in the late 1940s, when a few banks gave their customers paper that could be used like cash at stores. By the 1960s several networks of banks had been created, with one bank in each city accepting cards as payment from a group of local merchants. In 1969 one of these networks was organized as the Interbank Card Association (ICA), the forerunner of MasterCard. Other credit card systems, notably Visa's predecessor BankAmericard, were originally owned by a single bank.
By the late 1960s, ICA spread across the United States and had begun to issue cards in other countries, including Mexico, Canada, Europe, and Japan. In 1979 ICA changed its name to MasterCard to emphasize its global focus. In 1988 MasterCard bought the Cirrus ATM network; in 1991, it began issuing Maestro, a debit card. Despite numerous management changes during the late 1980s and 1990s, MasterCard continued to grow internationally, and by 1997 its revenues were passing the billion-dollar figure for the first time.
Traditionally MasterCard has focused its marketing on middle-market consumers, unlike its competitor Visa, which targets more upscale customers. It is thus more frequently accepted at outlets such as supermarkets and fast-food restaurants. By the late 1970s, MasterCard had positioned itself as a globally operating payment services facility.
MasterCard's strategy in the late 1990s was stated by William I. Jacobs, MasterCard's executive vice president for global resources, in a company press release on February 26, 1997. MasterCard planned to focus resources on its core products and services—those that enhanced its global payments network. Regional operations, such as the Midwestern BankMate EFT network, would be shed, while global operations such as the British company Mondex International, a developer of chips for electronic cash cards, were acquired. In Jacobs' words, "Our key priorities include building brand awareness and acceptance, enhancing our technologies to support the network, introducing the chip platform, and securing transactions in cyberspace."
In 1997 MasterCard launched a new advertising campaign, "Priceless." The campaign supported MasterCard's positioning of its cards. Also in 1997, MasterCard entered into new sponsorship agreements, signing a four-year deal with Major League Baseball, and adding the Jordan Grand Prix Formula One Racing Team and PGA and PGA TOUR golf to its existing programs.
Much of MasterCard's history has been marked by rapid expansion into new markets beyond the United States, particularly in developing regions such as Asia and Latin America. It also proudly lists a number of products introduced by the company, such as the first "gold card" and the first laser hologram on cards to prevent fraud. MasterCard has also been extremely successful at targeting a "middle market" not reached as successfully by its rival Visa or by other card companies such as American Express. As a result, it has seen steady growth into the late 1990s, with revenues surpassing $1 billion in 1997.
FAST FACTS: About MasterCard International Inc.
Ownership: MasterCard is a privately owned company.
Officers: Norman J. Tice, Chmn.; Robert W. Selander, Pres. & CEO
Employees: 2,357 (1997)
Chief Competitors: MasterCard's principal competitors are: American Express; Citicorp; and Visa International.
At the same time, MasterCard has had more than its share of management turmoil. In 1980 its president, John Reynolds, and the board had major disagreements. He resigned and was replaced by Russell Hogg, who reorganized the company and propelled it into strong international growth through the 1980s. However, he, too, eventually disagreed with the board, and was replaced by Alex Hart, who led the company into the 1990s. He was president when the Maestro debit card was introduced in 1991, a product that has never met expectations. The Europay partnership in Europe also was shaky. It was no surprise that Hart retired in 1994. He in turn was replaced by Eugene Lockhart, who threatened to end the partnership with Europay if its performance did not improve. By 1997 Europay was indeed more profitable; but Lockhart, too, resigned—ironically, to join BankAmerica Corporation, where Visa had been born. He was succeeded by Robert Selander, who had been in charge of MasterCard's global operations in Europe, the Middle East, Africa, and Canada.
In the late 1990s MasterCard announced that it was a key player in building "the future of money"—creating a world in which cash would no longer be necessary. As described on its web site, there would instead be "ubiquitous payment products that transcend national borders, time zones, and, with the Internet, even physical space. Plastic or 'virtual' money, credit, debit, and electronic cash products, inevitably will displace cash and checks as the money of the future." To move toward this new world, MasterCard placed increasing emphasis on its global operations, and on developing electronic payment systems technology, including "smart cards," refillable debit cards, and secure Internet payment systems.
In 1998, MasterCard formed a marketing alliance with the Excite Shopping Channel to encourage consumers to shop on the World Wide Web. The alliance's goals were to assure consumers that Web shopping is safe, fast, and easy; raise awareness of the Excite Shopping Channel; and promote MasterCard as the preferred method for purchasing products and services on the Web.
New products introduced by MasterCard in the late 1990s were designed to enhance its image as a global enterprise. In 1996 it introduced MasterCard Global Service, which it claimed was the first of its kind in the payments industry. The service includes a package of emergency services for cardholders: lost and stolen card reporting; emergency card replacement; emergency cash advances; directory assistance to help cardholders contact the banks that issued their cards; third party service provider transfer, representatives who would help cardholders to obtain services unique to their card issuers; and information on the location of MasterCard/Cirrus ATMs.
MasterCard also focused on developing products to protect against fraudulent use of cards. It had been the first card company to place holograms on its cards, to prevent use of counterfeit cards in 1983. In 1996 a new three-dimensional hologram was introduced as an additional protection. With the growth of purchases over the Internet, MasterCard and other card companies became increasingly concerned about the security of online transactions. In early 1996 MasterCard and Visa joined forces, along with other companies such as Microsoft, IBM, and Netscape, to establish a technical standard for these transactions, called the Secure Electronic Transactions (SET) standard. This was quickly put together and introduced at a conference in July 1997.
MasterCard was 1 of 4 main sponsors of the 1997 Microcredit Summit in Washington, D.C. This conference was aimed at finding ways to provide credit for self-employment and other business activities in very poor countries. Many microcredit loans are for amounts as small as $25, often going to women who are trying to support themselves and their children. MasterCard has been a sponsor of microcredit programs, most notably in the Dominican Republic.
MasterCard teamed up with the U.S. Office of Consumer Affairs in 1997, to produce a guidebook for children called Kids, Cash, Plastic and You. This free book gives adults guidance on how to teach children basic money management skills, such as how to save and spend money wisely.
CHRONOLOGY: Key Dates for MasterCard International Inc.
Interbank Card Association (ICA) is formed by cooperating banks accepting one another's credit cards
ICA makes the magnetic strip an international standard on all its cards
ICA changes the Master Charge brand to MasterCard
MasterCard purchases Cirrus ATM network
Issues its first debit card
MasterCard forms a marketing alliance with Excite Shopping Channel to encourage web shopping with MasterCard
In the mid-1990s MasterCard set out to establish itself as the foremost global payment system. Worldwide acceptance of its credit cards, debit cards, and ATM network grew almost 10 percent in 1995, translating into the opening of over 3,000 new locations per day. The Asian and Pacific markets were particularly promising, along with those in Latin America. In Europe, MasterCard's partnership with Europay to market the Maestro global debit card, while initially troubled, led to growth particularly in Austria, Belgium, Iceland, Italy, Russia, and Turkey. Business also was booming in the Middle East and Africa.
In 1996 MasterCard conducted over 6 billion transactions worldwide. This huge enterprise began with an association with Banco National in Mexico in 1968, followed by one with Eurocard and the first Japanese members. By the 1980s, MasterCard had spread into Africa, Australia, Asia, and Latin America. In 1987 MasterCard was the first credit card issued in the People's Republic of China. Within six years, China had become the company's second largest country in sales volume. MasterCard also issued its first card in the Soviet Union in 1988, well before its breakup into independent and more capitalistic republics. By 1997 MasterCard had more than 30 offices around the world, with transactions taking place in 220 countries.
In 1998 MasterCard's president and CEO, Robert W. Selander, urged the payments industry to ensure that credit, debit, and electronic cash cards were available to everyone worldwide. He cited MasterCard's MULTOS, the industry's only open, global operating system for smart cards. The system would enable cardholders to tailor smart cards with specific applications that suit individual needs.
SOURCES OF INFORMATION
"MasterCard International Inc." Hoover's Online, 29 May 1998. Available at http://www.hoovers.com.
MasterCard International Inc. Annual Report. Purchase, NY: MasterCard International Inc., 1996.
MasterCard International Inc. Annual Report, 1997, 29 May 1998. Available at http://www.mastercard.com.
"MasterCard: Selander Urges Industry to Adopt Single Chip Platform to Power Smart Cards." CBS MarketWatch, 15 May 1998. Available at http://www.marketwatch.newsalert.com/.
For an annual report:
on the Internet at: http://www.mastercard.comor write: MasterCard International, 2000 Purchase St., Purchase, NY, 10577
For additional industry research:
Investigate companies by their Standard Industrial Classification Codes, also known as SICs. MasterCard International, Inc.'s primary SICs are:
6099 Functions Related to Deposit Banking
7389 Business Services, NEC