Mastercard Incorporated, a global technology company, is at the forefront of connecting and empowering an inclusive digital economy. Its primary focus lies in facilitating payment processing between merchants’ banks and the card-issuing banks or credit unions of purchasers who utilize Mastercard-brand debit, credit, and prepaid cards for their transactions.
Early Challenges and Growth:
The roots of modern credit cards can be traced back to the issuance of the first credit card by the Franklin National Bank (now European American Bank) in 1951. However, initial adoption was limited due to the geographical restrictions and low customer volume. It was Bank of America, later known as Visa, that took a leap in 1958 by creating an extensive network of licensee banks throughout the United States, facilitating card acceptance by merchants.
Formation of Interbank Card Association (ICA):
In contrast, a group of American bankers formed the Interbank Card Association (ICA) in 1966, giving birth to what would later become MasterCard. Unlike Visa, the ICA was governed by consensus among its member banks rather than being dominated by a single bank. This structure allowed the ICA to enter the international market quickly and form ties with banks in Mexico, Europe, and Japan.
Technological Advancements and Rebranding:
ICA continued to evolve, introducing INAS, a centralized computer network, in 1973, and making the magnetic strip an international standard in 1974 to enhance authorization and reduce fraud. In 1979, the association changed its name and trademark to MasterCard, reflecting its expanding range of services.
Challenges and Leadership Change:
However, despite its success, MasterCard faced challenges in competing with Visa. Visa had already established a strong international identity, while MasterCard’s identity was fragmented by affiliates and joint ventures in different regions. Moreover, Visa’s advanced electronic communications network posed a significant hurdle for MasterCard. In 1980, Russell E. Hogg was appointed as the new president of Interbank, tasked with implementing changes to make MasterCard more competitive. Hogg introduced sweeping organizational changes, developed new products like the Gold MasterCard and MasterCard Travelers Cheques, and worked on improving the authorization system.
Global Expansion and Efforts to Compete:
To keep up with Visa’s success with affinity cards in Japan, MasterCard introduced the MasterCard BusinessCard for the international market in 1985, reaching over 120 million cardholders worldwide. Acquiring Cirrus, the largest ATM network, and expanding into new regions like China and the Soviet Union further strengthened MasterCard’s global presence. However, internal disagreements and competing interests within the board of directors led to Hogg’s resignation in 1988.
New Leadership and Growth Strategies:
Alex W. Hart took over as the new CEO, and under his leadership, MasterCard focused on solving management problems by establishing regional boards of directors in different continents. MasterCard’s efforts continued, introducing the Maestro debit system in 1991 to compete with Visa’s Interlink system. The company engaged in an aggressive advertising campaign and sponsored major events like the World Cup in 1994 to increase brand recognition and gain a larger share of credit card billings worldwide.
Challenges and Future Prospects:
Though MasterCard had prepared well for the future, the saturated credit card market in the United States and the intense competition with Visa meant new cardholders would be harder to acquire. Despite the challenges, MasterCard’s improved marketing strategy and global expansion have positioned it as a strong competitor in the credit card industry.
Here are some of the company’s key statistics:
- Revenue: $2,224 billion (2022)
- Net income: $6.2 billion (2022)
- Market capitalization: $367.1 billion (2023)
- Employees: 18,000+
- Headquarters: Purchase, New York, United States
- CEO: Michael Miebach
