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MasterCard 

“Market Cap $88.77 B As of May 2014

At a Glance

  • Industry: Consumer Financial Services
  • Founded: 1966
  • Country: United States
  • CEO: Ajay Banga
  • Website: www.mastercard.com
  • Employees: 8,200
  • Sales: $8.34 B
  • Headquarters: Purchase, New York

Forbes Lists

#506 Global 2000

  • #1123 in Sales
  • #202 in Profit
  • #1372 in Assets
  • #89 in Market value

#67 World’s Most Valuable Brands

Profile

MasterCard, Inc. is a technology company, which is engaged in the global payments industry. The company connects consumers, financial institutions, merchants, governments and businesses worldwide, enabling them to use electronic forms of payment instead of cash and checks. It offers a wide range of payment solutions that enables the development and implementation of credit, debit, prepaid, commercial and related payment programs and solutions for consumers and merchants. The company’s customers include financial institutions and other entities that act as issuers and acquirers, merchants, governments, telecommunications companies and other businesses. MasterCard was founded in May 2001 and is headquartered in Purchase, NY.

“MasterCard History

The original banks behind MasterCard were United California Bank (later First Interstate Bank and subsequently merged into Wells Fargo Bank), Wells Fargo, Crocker National Bank (also subsequently merged into Wells Fargo), and the Bank of California (subsequently merged into the Union Bank of California). Robert Leavelle, Senior Vice President of Farmer’s & Merchants Bank of Long Beach, California, along with his son Martin Leavelle, created the graphic image based on the two overlapping circles with the Master Charge title overlaid in the center of the logo. This was part of an effort by The Independent Banker’s Association.

In 1966, the aforementioned group of California banks formed the Interbank Card Association (ICA). With the help of New York’s Marine Midland Bank, now HSBC Bank USA, these banks joined with the ICA to create “Master Charge: The Interbank Card”. The card was given a significant boost in 1969, when First National City Bank joined, merging its proprietary Everything Card with Master Charge.

In 1968, MasterCard International and Eurocard started a strategic alliance, which effectively allowed MasterCard access to the European market, and for Eurocard to be accepted on the MasterCard network. The Access card system from the United Kingdom joined the MasterCard/Eurocard alliance in 1972.

In 1979, “Master Charge: The Interbank Card” was renamed simply “MasterCard“. In the early 1990s MasterCard then bought the BritishAccess card and the Access name was dropped. In 2002, MasterCard International merged with Europay International SA, another large credit-card issuer association, which for many years issued cards under the name Eurocard (payment card).

In 2006, MasterCard International underwent another name change to MasterCard Worldwide. This was done in order to suggest a more global scale of operations. In addition, the company introduced a new corporate logo adding a third circle to the two that had been used in the past (the familiar card logo, resembling a Venn diagram, remains unchanged). A new corporate tagline was introduced at the same time: “The Heart of Commerce”.

In 2010, MasterCard expanded its e-commerce offering with the acquisition of DataCash, a UK-based payment processing and fraud/risk management provider.

In 2012, MasterCard announced the expansion of its mobile contactless payments program, including markets across the Middle East.

In 2014, MasterCard acquired Australian leading rewards program manager company Pinpoint for an undisclosed amount.

IPO

The company, which had been organized as a cooperative of banks, had an initial public offering on May 25, 2006 at 39.00 USD. The stock is traded on the NYSE under the symbol MA.

Litigation

Anti-trust lawsuit by ATM operators

MasterCard, along with Visa, has been sued in a class action by ATM operators that claims the credit card networks’ rules effectively fix ATM access fees. The suit claims that this is a restraint on trade in violation of federal law. The lawsuit was filed by the National ATM Council and independent operators of automated teller machines. More specifically, it is alleged that MasterCard’s and Visa’s network rules prohibit ATM operators from offering lower prices for transactions over PIN-debit networks that are not affiliated with Visa or MasterCard. The suit says that this price fixing artificially raises the price that consumers pay using ATMs, limits the revenue that ATM-operators earn, and violates the Sherman Act’s prohibition against unreasonable restraints of trade. Johnathan Rubin, an attorney for the plaintiffs said, “Visa and MasterCard are the ringleaders, organizers, and enforcers of a conspiracy among U.S. banks to fix the price of ATM access fees in order to keep the competition at bay.” 

Debit card swipe fee price fixing

Both MasterCard and Visa have paid approximately $3 billion in damages resulting from a class-action lawsuit filed by Hagens Berman in January 1996. The litigation cites several retail giants as plaintiffs, including Wal-Mart, Sears, Roebuck & Co., and Safeway.

Antitrust settlement with U.S. Justice Department

In October 2010, Visa and MasterCard reached a settlement with the U.S. Justice Department in another antitrust case. The companies agreed to allow merchants displaying their logos to decline certain types of cards (because interchange fees differ), or to offer consumers discounts for using cheaper cards.

Payment Card Interchange Fee and Merchant Discount Antitrust Litigation

On 27 November 2012, a federal judge entered an order granting preliminary approval to a proposed settlement to a class-action lawsuit filed in 2005 by merchants and trade associations against MasterCard, Visa, and many credit card issuers. The suit was filed due to price fixing and other anti-competitive trade practices employed by MasterCard and Visa. A majority of named-class plaintiffs have objected and vowed to opt out of the settlement. Opponents object to provisions that would bar future lawsuits and even prevent merchants from opting out of significant portions of the proposed settlement. Stephen Neuwirth, a lawyer representing Home Depot, said, “It’s so obvious Visa and MasterCard were prepared to make a large payment because of the scope of the releases being given. It’s all one quid pro quo and merchants like the Home Depot are being denied the chance to opt out of that quid pro quo and say this is a bad deal.” 

Plaintiffs allege that Visa, MasterCard, and major credit card issuers engaged in a conspiracy to fix interchange fees, also known as swipe fees, that are charged to merchants for the privilege of accepting payment cards at artificially high levels. In their complaint, the plaintiffs also alleged that the defendants unfairly interfere with merchants from encouraging customers to use less expensive forms of payment such as lower-cost cards, cash, and checks.

The settlement provides for the cash equivalent of a 10 basis-point reduction (0.1 percent) of swipe fees charged to merchants for a period of eight months. This eight-month period would probably begin in the middle of 2013. The total value of the settlement will be about $7.25 billion.”

*Information from Forbes.com and Wikipedia.org

**Video published on YouTube by “MasterCardWorldwide