With NFC and mCommerce, Card Giants to See Revenues Multiply

Anindya is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

MasterCard (NYSE: MA) and Visa (NYSE: V) introduced their latest next-generation mobile payment initiatives at the Mobile World Congress few days back. Foraying into the innovative digital payment services space, MasterCard introduced MasterPass, which will facilitate customers a quicker, secured and relaxed mode of payments for their purchases. Card giant Visa also inked a deal with global electronic device maker Samsung. The parties will jointly steadfast mobile payments by functioning on near field communication (NFC) technology.

These are pathbreaking deals that are expected to revolutionize the rules of mCommerce in the coming months and years. And these deals are significant from investors’ point of view as well, because such game-changing mobile technologies like NFC would result in immense revenue gain for the card companies.

MasterCard teaming up with VeriFone Systems

MasterCard is teaming with VeriFone Systems (NYSE: PAY) to integrate its MasterPass digital payments platform as a cloud-based payment option with VeriFone's GlobalBay mobile point-of-sale and clienteling applications.

MasterPass will now allow smart and simple checkout services by using NFC to scan bar codes and pay through mobile devices, thereby making point of sale transactions much more easy and secure. MasterPass also offers other value-added services like account balance information, alerts on discount offers and loyalty programs.

MasterPass will simplify payments through any debit, credit or prepaid card or any device like smartphone, computer, laptop or tablet. VeriFone said its customer base includes 75% of the top 200 largest retailers in the U.S. The GlobalBay mobile POS application allows retail associates to use mobile devices to scan items, apply coupons and discounts, and complete transactions for shoppers from any location in a store.

The GlobalBay clienteling app enables associates to record consumer preferences and buying habits, and leverage customer data for promotions and cross-selling. The MasterPass integration will combine retailer data with purchase data for more targeted customer offers. 

Samsung smartphones to sport Visa payWave app

Samsung and Visa announced that Visa’s NFC-enabled mobile payment system will be built into future Samsung smartphones. Samsung has also agreed to load the Visa payWave app, which enables consumers to make contactless payments, onto its mobile devices featuring NFC technology.

Samsung's NFC-enabled mobile devices will now have a chip carrying the customer's bank account information. This information will be accessed through Visa Mobile Provisioning Service. The collaboration will result in enhanced security and faster checkout, with the convenience of a simple wave of the mobile device in front of a payment terminal.

How Visa and MasterCard make money?

Visa and MasterCard are technology companies providing global payment solutions to banks. Their payment product platforms are used by banks to develop credit and debit card programs for their customers. They do not issue credit cards or extend credit to consumers. Instead, they operate an “Open-loop payments Network” to manage the exchange of information between different financial institutions.

They make money from the transaction fees charged to merchants. Card companies make money on payment volumes, transaction processing, and value-added services.

Visa classifies banks as either Issuers or Acquirers. Issuers issue cards to the cardholders, whereas the Acquirers manage the relationship with the merchants. The diagram below explains what happens behind-the-scenes when a cardholder presents a card for payment to a merchant.

<img src="/media/images/user_14403/how-visa-works_large.png" />

Security and global expansion are key

These alliances will not only increase payment efficiencies, but also maintain security, thereby allowing consumers access to an authentic transaction and hardware-based display protection. 

  • They will provide cloud-based payment options to consumers, so that they can make payments from anywhere through their mobile devices.
  • Initially, MasterCard's MasterPass will be made available in the U.S., Canada, the U.K. and Australia. Subsequently, the services will be accessible globally.
  • Further expanding its digital payment services, MasterCard collaborated with Orange and TIM to boost mCommerce in Spain and Brazil, respectively.
  • Visa teamed up with Intel in 2012 to blend its proficiencies in payment processing and account holder authentication with the latter's high-grade innovative technologies.
  • Visa announced its collaboration with Paris-based Ingenico SA's ROAM -- a leading mCommerce provider -- to reach out to merchants and retailers with easy and secure payment initiatives from various mobile devices.


Overall, the alliances elucidate the rapid progression in the NFC and mCommerce spaces. Hence, the card giants are promptly initiating various digital payment services to tap this opportunity. With increasing volume of financial transactions on mobile, card companies will see revenues multiply with time.

Anindya7 has no position in any stocks mentioned. The Motley Fool recommends Visa. The Motley Fool owns shares of MasterCard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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