Card company prepares to launch products in Brazil which will drive the switch from cards to mobile phones

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4 Master without Cards Card company prepares to launch products in Brazil which will drive the switch from cards to mobile phones By Márcio Kroehn, from Purchase (USA) Ajay Banga, MasterCard global president, originally from India, showed his smart phone during a breakfast meeting at the company's headquarters in Purchase, 70 km from New York. Initially, there was nothing special about the device. However, Banga removed the cover and pointed out a detail. On the back of the device there is a blue sticker, vaguely similar to a refrigerator magnet carrying both Citibank and MasterCard logos. The blue sticker means the device is not a conventional smartphone (which allows people to talk and access the Internet), but also contains the executive s debit and credit cards. Transmitting information by radio frequency, the sticker means that Banga can pay his bills using his mobile phone. The sticker is an exception. The card company included credit, debit and prepaid card functions in US mobile phones at least three years ago. This new feature is set to arrive in Brazil in the first quarter of "We need to create different ways for people to use electronic payments and I believe in the future of the telephone as a payment method", Banga told DINHEIRO, during his first interview with a Brazilian publication. Through its partnership with Redecard, Itaú Unibanco and Vivo, MasterCard will allow users to install an application on their mobile phones. The telephone will operate as a personalized user terminal. By activating the program with the company logo, the user will be able to choose between the credit, debit or prepaid options after the purchase payment information appears. The password ensures that the user accepts the conditions and then confirms the transaction. Everything is carried out online, with similar security levels to conventional card transactions. "In the world of cards, we need to look ahead. The past is a good benchmark, but this industry is going to radically change within five years and we want to be leading the industry through innovation", said Gilberto Caldart, president of MasterCard Brazil. Caldart said that the end of terminal exclusivity will increase card penetration for payments in general. "New segments, like health, education, major wholesalers and small stores will start accepting cards, and we need more technology to deal with the additional competition", he said. Another to MasterCard technologies will also be arriving here. At the beginning of 2011, Brazilians will have access to incontrol, an electronic system which provides alerts to control spending and identify e- commerce offers -- in the USA, Citibank customers are using the system.

5 The next step, scheduled for the end of next year, is to authorize MoneySend, a cash transfer service which competes with companies like Western Union. These product launches demonstrate Brazil's importance to MasterCard. Brazil will be receiving technologies which have already been tested elsewhere, which is a good sign. In general, new technologies are tested beforehand on smaller and less important markets. If they don't work, there is less harm caused. In Brazil, payments via mobile phone have already been tested in 25 pilot projects around the world. Only after the system has been fine tuned will the company deploy it in Brazil, which is now one of its main markets. "MasterCard works very hard in Latin America, especially in Brazil, because of the low level of card penetration and the large number of people without access to banks", said Moshe Katri, director of management at US market research company Cowen and Company LLA. Katri reveals that growth through mobile transactions offers greater potential than traditional avenues. MasterCard's migration to payment methods beyond plastic is a move to keep up with a changing market. In the last 50 years, the only payment methods have been cash, checks and cards. However, in the last decade, people have become more closely attached to their mobile phones, which has whetted MasterCard's appetite. According to figures released by the company, the global volume of mobile payments will reach $250 billion. In five years, 4.6 billion people will have mobile phones, 10% of which will be smartphones. "Mobile phone penetration is higher than the population with access to banking services in many countries", said Walt MacNee, president of international markets at MasterCard. "Product diversification means reaching new consumers." The lack of access to banking services means that bank notes and coins still dominate transactions. According to MasterCard, 85% of global payments are still made in cash (the percentage in Brazil is lower, around 60%, with checks gradually losing ground to cards). It was no accident that when he became company president in July, Banga switched strategies. Instead of targeting the competition, he declared war on cash. After three months heading up MasterCard, he says he is aiming for Visa s top spot on the global market. Banga has massive experience with cards in Asia and could help MasterCard grow outside the USA", says Katri. There are no official figures, but an estimated 55% of international transactions on the card market are carried out by Visa and 45% by MasterCard, with the remaining brands holding an insignificant market share. In Brazil, MasterCard has an estimated market share of a little over 40%. The companies find themselves in a comfortable position; however Banga wants to muscle in on cash payments. As a show of intent, he banned cash payments at the restaurant located at the company's headquarters. "We cannot have our main competitor in house."