With NFC and mCommerce, Card Giants to See Revenues Multiply: Mastercard Inc (MA), Visa Inc (V), VeriFone Systems Inc (PAY)

How Visa and MasterCard make money?

Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) 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 Inc (NYSE:V) 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.

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 Inc (NYSE:MA)’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 Corporation (NASDAQ:INTC) 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.

Conclusion

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.

The article With NFC and mCommerce, Card Giants to See Revenues Multiply originally appeared on Fool.com and is written by Anindya Batabyal.

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