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MasterCard CEO reveals mobile strategy during earnings call

During its first-quarter earnings call, MasterCard Inc. President/CEO Ajay Banga said that mobile is a fast-moving space for his company and that the financial giant hopes to create new revenue streams via the medium.

In the first-quarter of 2011, MasterCard made some strategic moves within the mobile space. For example, the company entered into an agreement with Airtel Africa and the Standard Chartered Banks to link subscribers’ mobile accounts to virtual MasterCard account numbers.

“Part of our strategy has been to build out new revenue streams, whether it be get back into competing in ecommerce for a fair share of growth in that booming area, or whether it be to get to play to define the mobile ecosystem,” Mr. Banga said during the earnings call.

Payments innovation
MasterCard has a 45-year history of innovation in payments.

The company is confident it will be at the center of delivering the next generation of mobile payments to customers and consumers around the world.

Thus far, MasterCard has partnered with mobile carriers, handset manufacturers and financial institutions globally to launch numerous NFC-payment trials, PayPass mobile payment tags, person-to-person money transfer services and iPhone/smartphone apps that are helping improve the mobile commerce experience for consumers.

“Mobile is a fast-moving space for us,” Mr. Banga said during the earnings call. “We look forward to bringing you more news, as we speak over the next few quarters.”

To demonstrate MasterCard’s commitment to the mobile space, Mr. Banga told listeners that the company has hired Rima Qureshi, formerly from Ericsson, who brings with her a “direct domain expertise in the mobile space.”

Three-fold strategy
During the questions and answers period, Timothy Willi of Wells Fargo Securities LLC asked a question around mobile.

Mr. Willi asked Mr. Banga to talk about the thinking between the actual consumer application of mobile and making a payment versus the impact of the terminalization of these emerging and growing markets.

He also asked Mr. Banga whether he feels like that curve of merchant acceptance has potentially moved to a steeper climb with all that has happened on mobile and the speed of the development there.

MasterCard’s Mr. Banga’s reply was that there are two angles to this answer.

“One angle is in the emerging markets, given the current absence of terminals that would accept something to do with the mobile phone, it’s not,” Mr. Banga said. “I’m not sure that the mobile payment system ecosystem in those markets was developed the same way, as it might in a somewhat more advantaged country that has better terminalization in place.

“Mind you, having said that, contactless terminalization is still relatively small, even in the United States and in developed countries,” he said.

“But whether mobile payments develop, and I’ve said this earlier, as a contactless-based system or the SMS-based money movement system or as a true mobile commerce-enabled system with the rapid deployment of smartphones in the world, I think that some version of all three will begin to develop.”

MasterCard is placing its bets on all three, Mr. Banga confirmed.

“Now what we are trying to do is to place bets in all three and to be partners with institutions, banks and phone companies and merchants in all three spaces,” he said.

Terminalization expansion?
Will this lead to a more rapid expansion of terminalization?

A few things need to happen first.

The cost of those terminals needs to become somewhat cheaper, per Mr. Banga.

“The fact that if you could find intelligent ways to make that terminal more easy for a small merchant to adapt to, that would help us out,” Mr. Banga said. “So there’s a lot of work to be done in this ecosystem yet.

“The one angle is to get the issuers and the phone companies and all of us aligned,” he said. “The other angle is to get terminalization so that the consumers can actually get their money out at the other end or use their phone sensibly at the other end.

“So I think you’ll see a lot of energy going into that space. But I don’t know that it’ll happen in six months or one year, compared to two years or three years. I don’t know the answer to that yet.”