MasterCard International Inc.'s investment in IT is paying dividends.
MasterCard International Inc.s investment in IT is paying dividends, particularly in the companys race with archrival Visa International Service Association.
"What [MasterCard is] trying to do is turn a cost center into a profit center. Thats a good thing to do considering what theyve spent on IT," said Avivah Litan, an analyst with Gartner Inc., in Stamford, Conn.
"The true measure of success is how theyre beating Visa in terms of number of cards issued," Litan said, adding that MasterCard was once a distant second in the U.S. credit card market prior to the IT push headed by Jerry McElhatton, MasterCards president of global technology and operations.
"Theyve been successful in eating into Visas market share, and they couldnt do that without rebuilding the IT infrastructure," said Litan. According to a Gartner study that has just been completed, Litan said Visa, headquartered in San Francisco, is still in the lead, with 140.6 million cards in circulation in the United States, compared with MasterCards 114.8 million. Litan said MasterCards total surged 15 percent from 2001 to 2002, while Visas grew only 1.5 percent in that same time span.
Market figures vary, however. According to The Nilson Report numbers for last year, MasterCard, with corporate headquarters in Purchase, N.Y., surpassed Visa in U.S.-issued cards, with 96.2 million compared with Visas 95.1 million.
In terms of transaction volumes, however, The Nilson Report said Visa reigned supreme with 6.3 billion compared with MasterCards 4.6 billion. Visa also retained the lead in dollar revenue, with $609 billion versus MasterCards $486 billion, according to The Nilson Report.
John Gould, an analyst at Tower Group, in Needham Mass., a research company specializing in the financial services industry, said MasterCards surge is due in large part to winning over large card issuers. Sears, Roebuck and Co., which issues its 23 million cards only through MasterCard, has contributed mightily since 2000.
Another move that continues to reap rewards for MasterCard was its conversion of Citigroup, the worlds largest card issuer, from Visa, following a spat between the two about five years ago, Gould said. That has meant an upsurge in transactions the new IT system needs to handle.
"If they didnt overhaul their IT and put in a new center, they couldnt handle the growth," said Litan. She also said, "It helps when youre courting these companies [such as Citibank] to show them the latest, state-of-the-art facilities, along with reporting, analytics, research and consulting."
The IT thrust is part of a strategic direction at MasterCard, said Litan. "They dont want to just be a processor anymore."