) announced a five-year strategic alliance with the UK's most
dominant communications company, Everything Everywhere. The card
processing giant took this step in order to expand its digital
payment platform across the Atlantic.
This collaboration will allow MasterCard to enhance mobile
commerce (m-commerce) and other digital payments services in the
extensive UK market, where, at present Everything Everywhere enjoys
a client base of more than 27 million customers.
Accordingly, the two entities intend to launch a co-branded
prepaid mobile payment solution that will function on near field
communication (NFC) process. This will enhance swiftness and
security payments, thereby easing the customer's mobile experience
as it includes person-to-person money transfers along with online
or offline shopping.
Subsequently, the service is also expected to aid the small
business customers, while empowering over 100,000 retailers with
contactless payments in UK.
Meanwhile, MasterCard and Everything Everywhere are already
associated with the first NFC-based payment service in UK - Orange
QuickTap, launched three years back and Orange Cash pre-paid card,
which was initiated last year.
We believe the collaborated initiative is expected to be a
valued advancement in the rapidly growing e-commerce arena.
Additionally, it will also help the two entities explore newer
markets apart from enhancing the services of the existing ones.
Given the regulatory challenges being faced by the credit and
debit cards, the move of MasterCard to re-direct its synergies in
the e-commerce space appears to be a viable option. This is due to
the fact that mobile users are increasingly becoming more adept at
mobile banking these days.
Based on this, in March this year, MasterCard also joined with
UK-based Vincento in a five-year partnership, in an attempt to
expand prepaid card opportunities in the European market.
We believe ease of access and the less time consuming nature of
mobile banking would make it very popular among mobile subscribers.
There lies ample scope of development in this field in the
Hence, through the rapidly growing e-commerce and m-commerce
technologies, card giants such as MasterCard,
American Express Co.
) are consistently establishing an alternative to the traditional
banking model. The new technologies are also aiding the company to
channelize their resources in order to adapt to the changing market
dynamics and better penetrate the global markets.
Beginning this month, MasterCard reported its second-quarter
2012 operating earnings per share of $5.65, which modestly
surpassed the Zacks Consensus Estimate of $5.56. This also outpaced
the year-ago quarter's earnings of $4.76 per share.
The better-than-expected results were primarily due to the
outcome of better pricing, increased number of processed
transactions, strong gross dollar value (GDV) growth and lower tax
rate. The positives also drove the operating cash flow and retained
earnings. However, higher-than-expected operating expenses
partially limited the margins' upside.
Meanwhile, the Zacks Consensus Estimate for the third quarter of
2012 earnings is currently pegged at $5.92, which is about 5% above
the prior-year quarter's earnings results. Of the 27 firms covering
the stock, 3 revised their estimates upward in the last 30 days,
while 22 downward revisions were witnessed.
The higher number of downward revisions reflects the litigation
settlement and other expenses that MasterCard is expected to incur
in the second half of 2012 amid the sluggish economic environment.
For 2012, earnings are expected to jump about 17% year over year to
$21.83 a share.
MasterCard carries a Zacks Rank #3, which implies a near-term
Hold rating, while our long-term recommendation remains
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