By Andrew R. Johnson Of DOW JONES NEWSWIRESNEW YORK (Dow Jones)--MasterCard Inc. (MA) is emphasizing products aimed at affluent consumers as well as emerging categories like prepaid cards and mobile payments to drive growth, executives said Thursday.
The Purchase, N.Y., credit card company is trying to convert more of the world's transactions from cash and checks to electronic payments and capture a larger share of those transactions, President and Chief Executive Ajay Banga told analysts on a conference call for investors.
Eighty-five percent of retail transactions worldwide are made with cash or check, providing MasterCard with a big opportunity to capture more volume with its credit, debit and prepaid cards, Banga said. The company makes money by processing transactions made with its branded payments cards, which are issued by partner banks.
The company has been putting a bigger marketing effort behind its World Elite program, a rewards program offered to affluent consumers, Tim Murphy, MasterCard's chief product officer, said. The company also this summer launched its Priceless Cities program, which will allow MasterCard customers to gain access to special events using their cards. The first market for the program is New York.
"It's a wide-ranging campaign that goes from television advertising to print to outdoor to make sure that consumers that live in New York and want to enjoy what is available here can really get access to it," said Alfredo Gangotena, chief marketing officer at MasterCard said.
MasterCard hopes such efforts can blunt the effects of new restrictions on debit-card fees that begin taking effect in October. The rules, which were part of the Dodd-Frank Act signed into law in 2010, were finalized by the Federal Reserve Board in June and cut in half the fees banks can charge merchants when a customer swipes a debit card.
The rules also require that banks provide multiple network routing options on their debit cards, which MasterCard executives have said could help it steal share from competitor Visa Inc. (V), which dominates the debit card market.
The additional revenue MasterCard is able to generate by expanding its debit processing services will be incremental but also "high margin, and it will be profitable," said Chris McWilton said, the president of U.S. markets at MasterCard.
Despite recent turmoil in the financial markets and persistent unemployment, MasterCard said its customers are spending.
The volume of U.S. credit card transactions that MasterCard processed in July and August grew 6.5% from a year earlier, compared with a 5.9% increase in the second quarter. The volume of processed U.S. debit card transactions grew 20.1% in July and August, compared with a 16.8% increase in the second quarter.
"While consumer confidence is low, consumers are spending, there's no doubt about it," McWilton said.
MasterCard also is pushing its prepaid card business to spur growth.
Prepaid cards, which traditionally have been offered to low-income or "underbanked" consumers, are also a focus.
Increasingly, interest in prepaid cards "will be driven by banked consumers looking" to divide up and budget their spending, Murphy said.
Earlier this year the company formed a partnership with Wal-Mart Stores Inc. (WMT) to sell versions of the discount retailer's prepaid MoneyCard carrying the MasterCard brand. Wal-Mart also sells versions carrying the brand of MasterCard competitor Visa Inc. (V)
MasterCard's shares were up 1.5% at $342.54 in recent trading.