9Dec 10
Great move by both MasterCard and Travelex. This gives MA a global platform for prepaid, by which their exisiting bank customers can launch branded, multi currency, prepaid cards. Few banks today are able to compete with Citi’s pre-paid (http://www.citiprepaid.com/), a group that is seeing tremendous growth. Citi’s recent success here has certainly drawn attention. On the product front, Citi prepaid had its genesis in the 3/2007 acquisition of eCount. On the business side, Citi is hitting the ball out of the park with both governement and commercial disbursement, supporting new payment flows with existing customers and a high margin product.
The opportunities for MA growth are:
- Commercial – White Lable Processor for corporate disbursement (ie Citi Prepaid )
- Foreign currency card (Travelex Cash Passport). Important to note here that it is not just for travel, but also for cross border online transactions.
- G2P Payments
- Cross Border Remittance (Base of the pyramid).
- …etc
With respect to a consumer “travel card”, the challenge that MA faces is that bank processors (TSYS ,FIS Prepaid) currently have much broader PRODUCT capability in this area already. Fortunately (for MA) these processors are dependent on multiple issuers for branding and marketing. Travelex has excelled in the branding and marketing of its products. Consumers (and businesses) all over the world associate the Travelex name with global travel, currency and FX. Can MA extend its brand here as well? They certainly have the A+ team to do it with.. but it will require some of the major banks to also jump on board. As an issuer, you have multiple choices for this today.. from the large processors (TYS/FIS), and Citi, to small global program managers like hyperWALLET.
From the press release
According to a 2010 Boston Consulting Group study commissioned by MasterCard, prepaid is expected to reach more than $840 billion in global volume by 2017, a compound annual growth rate (CAGR) of 22 percent. This same study estimates that the prepaid open-loop market in the travel sector is expected to grow at a CAGR of 31 percent over the same period.
MasterCard expects the transaction to be $0.04 dilutive to its 2011 earnings per share due to amortization and one time transaction and integration costs. For 2012, MasterCard expects the transaction to be neutral and accretive beginning in 2013.