Magazine article American Banker

MasterCard Puts Up $50M to Invest in E-Payments Firms

Magazine article American Banker

MasterCard Puts Up $50M to Invest in E-Payments Firms

Article excerpt

MIAMI -

MasterCard International has started a $50 million internal fund to invest in technology companies working on new types of payment systems, the company said Wednesday.

The fund -- which will make its first investments this month -- plans to bankroll start-ups or existing companies that seem to offer MasterCard a strategic partnership and significant financial returns, the card association said.

The fund is to focus on emerging payment technologies including micropayments, online consumer-to-consumer payments, stored value systems, and recurring payments such as phone and utility bills. Some industry analysts have warned that unless banks work closely with the companies developing these products they risk losing customers.

"We looked at how technology was evolving and understood that we needed to take equity positions in our partners to strengthen those relations," said Linda Batson, senior vice president of new markets and investments at MasterCard and head of the fund. "It gives us access to new ways and places our cards will be used."

"The hype is that (new payment technologies) could be bad for banks, but we feel there's a new paradigm in the business," Ms. Batson said. "MasterCard can not only shift share but gain share from cash and checks."

One example that has ruffled feathers in the banking community is the possibility of telephone companies' enabling cellular phone users to make purchases by phone and charge them to their phone bills. If banks get involved with mobile commerce early, telephone bills could be paid directly through a credit card account, thus averting the risk of disintermediation, Ms. Batson said.

MasterCard has said that backing emerging technologies is a way it can gain market share from Visa International. But MasterCard is still playing catch-up.

Visa has been investing in technology start-ups since 1994 and can boast of big names such as Yahoo and Trintech, the electronic wallet developer, as its prescient picks. …

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