“Dear Banker, I would like a MasterCard, please”

“Dear Banker, I would like a MasterCard, please”
Many industry commentators who attended MasterCard’s Worldwide Media and Analyst Symposium on September 23rd in Purchase, NY noted the confident tone of the company, the energetic and fired-up management team and how the firm views some of the major challenges for the industry (e.g. the Frank-Dodd act) as opportunities. However, I think one of the more subtle shifts in MasterCard’s priorities has attracted a lot less attention – the increased company’s focus on the end consumer. Of course, the schemes have always spent significant amounts on marketing (~3-5c per transaction) building up the brands and consumer awareness – Visa’s sponsorship of the Olympics or MasterCard’s “priceless” campaigns are a testimony to that. However, it would be fair to say that it was largely aimed at ensuring the consumers are comfortable at using the card once they have it. In order to ensure that more consumers actually have the cards, the schemes competed for the banks’ portfolios. Of course, banks continue to issue the cards, and therefore remain absolutely key for getting the cards into the hands of the consumers. However, it seems that in addition to a “push” from the schemes, MasterCard is trying to bolster the demand for its cards by creating a “pull” from consumers as well. MasterCard’s Marketplace (http://marketplace.mastercard.com) is a perfect example of such strategy. More features continue to be added, but it is already an impressive “Web 2.0”-style shopping experience with lots of clever personalisation and “social media” features transferred to the retailing world. The site is “open” – other payment methods are accepted for most purchases. However, some of the best offers, such as Overwhelming Offers (OO), are reserved only for MasterCard cardholders. OO’s often feature large discounts on branded merchandise, which is available in strictly limited quantities for a limited period of time. In fact, some of the more attractive offers sell out in a matter of seconds (e.g. 2o Yankees ALDS Post Season Tickets sold out in 4 seconds!). Sometimes customers can even choose themselves between different products to be featured as a next OO – for example, recently the shoppers had the opportunity to vote whether they wanted to get a large discount on a Sony Playstation 3 or Nintendo Wii (the Playstation won and sold out in 7 seconds). This is consumer engagement strategy at its best, creating a powerful rationale for the consumer to actually have a MasterCard in their wallet. American Express also has a similar proposition with its ‘daily wish’ offering (https://dailywish.amexnetwork.com), but for MasterCard, this certainly represents an interesting strategic development designed to get closer to the end consumers. So, a message to bankers – don’t be surprised if the next time your customer has strong views which card brand he or she prefers.

Who says there is no competition in the cards world?

Who says there is no competition in the cards world?
The European Commission has continuosly stressed the need for a pan-European card scheme as an alternative to Visa and MasterCard. The chief argument goes that the existing duopoly of the two giants limits competition and choices for the European banks. There was a time perhaps when the association status of both schemes used to colour their commercial judgement. I also remember their own messages at a time, which went along the lines “we are not competing against each other, we are both competing against cash”. Sure, cash remains an important target for both Visa and MasterCard, however, since their respective IPOs, I am seeing an increasingly fierce competition between these two firms. Both of them have been very active in staking the ground in contactless (Visa with payWave and MasterCard with PayPass) and mobile services. My UK bank has recently replaced my Maestro debit card with Visa debit – a clear sign that the competition between the two for bank accounts also remains strong. However, a number of recent announcements indicated that we might be entering a new phase in the “battle of giants”. It didn’t take long after Visa announced its intentions to strenghten its position in e-commerce with the acquisition of CyberSource, for MasterCard to follow with its own acquisition of Datacash, a European e-commerce service provider. And while MasterCard’s announcement on August 30th to partner with Borderlinx, a company that helps facilitate cross-border e-commerce, is still fresh in our minds, we should also note that Visa has done a similar deal with Borderlinx for its customers in the GCC region back in April 2010. Who says there is no competition in the cards world?

American Express customer in a small village? Lloyds TSB might have just the answer

American Express customer in a small village? Lloyds TSB might have just the answer
It was my wife’s birthday this last weekend, so as a special treat, I arranged a romantic getaway, just for the two of us, without the kids. On the way to our weekend destination, we stopped for lunch at a rural ‘gastropub’, a very nice place with some excellent if slightly exotic dishes (haggis cottage pie anyone?). At the end of our lunch, I wanted to pay with American Express. Now, I do have a few cards in my wallet, but my Amex card collects points with Nectar, one of the UK loyalty schemes, so I quite like using it when I can. However, the owner of the place who came to collect my payment said, “I am sorry sir, we don’t take Amex. They still charge us for taking their cards”. The fact he wasn’t accepting Amex was not too surprising – while the gap is narrowing, there are still quite a few more places accepting Visa or MasterCard than American Express, especially among the smaller merchants. What I did find interesting was the phrase “they still charge us”, as if it was something unique in the market. I challenged that he surely got charged by his acquirer for accepting other cards as well, but he said it was a lot less, and generally sounded as if he has fully accepted that charge as a cost of doing business. Given the occassion, I wasn’t in the mood for an impromptu market research on MSC rates across different schemes, so I just simply paid the bill with my Visa. Lloyds TSB, one of the top UK banks, have an interesting solution for situations such as this – Airmiles Duo Credit Card. Anyone signing up for this card gets in fact two cards – one American Express and one MasterCard. What’s interesting is that the rewards the customer gets from spending on Amex is five times better than the ones on the spend through MasterCard. In other words, the customer is incentivised to use his/ her Amex card wherever it is accepted, yet they have a MasterCard as a fall-back option in those places where it’s not. Both cards are linked to the same account, one credit limit and one statement. And both cards do earn rewards, albeit it at different rates. I might have to consider getting one myself next time.