Consistent with the recent market trend of making payments through mobile phones, Mastercard Incorporated ( MA - Analyst Report ) recently entered into a partnership with Deutsche Telekom, under which the European customers of Deutsche Telekom will be able to make payments via their mobile phones.

Per the agreement, ClickandBuy, an operating subsidiary of Deutsche Telekom, will be responsible for issuing and marketing Mastercard products under the Deutsche Telekom banner. These services will initially be available in Poland and will commence in late 2012.

By June next year, consumers in Germany will be provided with “mobile wallet” services comprising mobile phone tags and cards on a trial basis and subsequently, will be made available to various financial institutions and partners. Consequently, the services will be extended to other European countries.

The deal will not only mutually benefit the companies but also provide an impetus to the mobile payment industry.

Mastercard remains focused on fulfilling the needs of its customers and continue to add value amid a challenging economic environment through an array of products, which are user-friendly and flexible. Mobile banking is rapidly developing and changing the card industry dynamics, and hence the combined market for all forms of mobile payments is expected to double from the current levels to more than $600 billion globally by 2013, according to Juniper Research.

Apart from partnering with telecom providers to expand its mobile payment services, Mastercard is also set to launch its PayPass Digital Wallet in the third quarter of 2012 to tap the latest technology and complement the market demand, while simultaneously offering a wider, consumer-friendly and secure fund transfer platform through the near field communication (NFC)-enabled smartphones and other devices using the internet. We believe that such long-term growth strategies are also crucial for countering competitive pressures.

The company’s position in the industry is threatened by its close competitors Visa, Inc. ( V - Analyst Report ) and American Express Company ( AXP - Analyst Report ) who are also on the lookout for opportunities related to this technology. AmEx collaborated with Isis Mobile to provide Isis Mobile Wallet to its customers in Utah and Texas later this year whereas Visa entered into an agreement with Obopay Disbursements to pay out electronic funds to a prepaid card.

Mastercard currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We retain our long-term Neutral recommendation on its shares.