Zacks_Analysts' Blog : MasterCard in mCommerce Tie - Analyst Blog

In an attempt to expand its mobile commerce (mCommerce) platform, yesterday, MasterCard Inc. (MA) announced a global strategic alliance with mFoundry. The latter is a well-positioned mobile banking solutions provider in the US with seven years of experience.

Besides the collaboration, MasterCard also agreed upon being a leading investor in mFoundry to strengthen the combined mCommerce initiative. However, the terms of the deal remain undisclosed.

As a result of the alliance, mFoundry’s mobile banking software solutions will align with MasterCard’s Tap & Go PayPass technology, which functions on near field communication (NFC) process. This will enhance and ease the customer’s mobile experience.

The consumers can now make secure payments and transfer funds through the NFC-oriented PayPass terminal at any of MasterCard’s merchants and mFoundry’s over 560 banks and credit unions, wherein the latter provides its mobile applications. mFoundry’s clientele includes Citigroup Inc. (C), Bank of America Corp. (BAC), PNC Bank of PNC Financial Services Group Inc. (PNC) and Zions Bank of Zions Bancorp. (ZION) among others, whose customers have been frequently using these applications.

Hence, the collaborated initiative is expected to be a valued advancement in the rapidly growing mCommerce arena. Additionally, it will also help the two entities explore newer markets while enhancing the services of the existing ones.

Given the regulatory challenges facing credit and debit cards, the move of MasterCard to re-direct its synergies in the mCommerce space appears to be a viable option. Mobile users are increasingly becoming more adept at mobile banking these days. According to research firm – comScore – about 32.5 million people accessed mobile banking during the third quarter of 2011 in the US, surging 21% from 2010-end, while over 14% of all US mobile users have been using mobile banking.

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 future. Hence, most of the card processing companies, such as MasterCard, Visa Inc. (V) and American Express Co. (AXP), are also channelizing their technology and resources to adapt to changing market dynamics and better penetrate the global markets. 

Given the growth catalysts in the near term, MasterCard holds a Zacks Rank #2, implying a near-term Buy, while the long-term stance remains Neutral.