Mastercard Drives Profit through Non-Card Based Business

by Sarah Grotta 0

Last week Visa had a better than anticipated quarterly earnings report, and this week, it was Mastercard’s turn to offer some positive news.  What was interesting about Mastercard’s announcement, as covered by Bloomberg, is that a large contributor to profits was not a result of card – based payments, but emanated from their acquisition of VocaLink.  VocaLink has, among other capabilities, developed real time payments platforms in other countries and is working with The Clearing House to do the same in the U.S. market:

Contributions from the acquisition helped fuel an 18 percent increase in revenue for the payments network in the third quarter, exceeding analysts’ estimates.

The VocaLink deal has given Mastercard a foothold in the burgeoning person-to-person and business-to-business payments markets, areas still dominated by cash, check and direct bank transfers. The $920 million purchase, completed in April, also offers the firm an edge over larger rival Visa Inc., which has been slower to capitalize on those markets.

VocaLink is working with an association of the biggest U.S. banks including JPMorgan Chase & Co. and Bank of America Corp. — known as the Clearing House — to debut a real-time payments service later this year that would give consumers, businesses and government agencies the ability to send and receive money instantly. Of the $25 trillion annual business-to-business payments in North America, just $1 trillion are processed on cards, Mastercard estimates

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

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