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MasterCard Rides Global Debit Wave

By    |   Thursday, 04 Aug 2011 12:09 PM

MasterCard (MA) continues to rely on the power of plastic amid an ongoing trend toward paperless commerce, pushing beyond its credit card business into debit cards and other types of transactional services in the United States and around the world.

"We remain focused on displacing the 85 percent of transactions across the globe that are conducted using cash and checks," Ajay Banga, president and chief executive officer of MasterCard, said on the company's second quarter conference call.

MasterCard, headquartered in Purchase, N.Y., reported Aug. 3 that its net income grew to $1.2 billion in the first half of the year, up 28.2 percent from the same period last year. Net revenue in the January to June period increased to $3.2 billion this year, up 18.5 percent from last year.

Most analysts who were following MasterCard in early August recommended buying its shares despite doubts about the economic strength of the United States and Europe.

"At this point, growth remains relatively strong in Latin America and in Asia-Pacific, the Middle East, and Africa," Banga said on the Aug. 3 call. "There is economic instability, particularly in the United States and Europe, that we need to keep a close eye on."

Annual growth of MasterCard's net revenue has been steady in recent years, rising 8.6 percent in 2010 to $5.53 billion. MasterCard earned net income of $1.84 billion last year, a 26 percent increase from 2009, after incurring a net loss of $254 million in 2008.

Credit versus debit


The dollar volume of cardholder transactions in MasterCard's credit and charge programs totaled $1.77 trillion in 2010, up 8.1 percent from 2009. Transaction volume outside the United States grew 12.9 percent, year over year, while the domestic volume declined by 2 percent.

MasterCard debit programs generated $957 billion of cardholder transactions last year, an increase of 15.9 percent from 2009. Annual growth last year in the dollar volume of debit transactions was 32.8 percent outside the United States and 1.7 percent inside.

MasterCard faces formidable competition in the domestic debit card market from publicly held rival Visa (V). But "we remain confident that we can increase our share in the U.S. debit category," Banga said on the second-quarter conference call.

A study sponsored by the Federal Reserve, the nation's central bank, confirms a long-term U.S. trend toward paperless transactions. The authors of the study released in April found that "since 2006, the debit card has eclipsed the check as the most-used non-cash instrument." The company next reports on or about Nov. 2.

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MasterCard (MA) continues to rely on the power of plastic amid an ongoing trend toward paperless commerce, pushing beyond its credit card business into debit cards and other types of transactional services in the United States and around the world. We remain focused on...
MasterCard,MA,credit,stocks
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2011-09-04
Thursday, 04 Aug 2011 12:09 PM
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