Taking a proactive expansion step, last week MasterCard Inc. (MA - Analyst Report) announced an agreement with Myanmar’s Co-Operative Bank Limited to issue its credit cards. The alliance will witness the first international payment network’s entry into the Myanmar markets, marking it as a revolutionary step for the country’s economic development.
The country had observed over five decades of military rule but now the shift toward democracy has prompted the need to be a part of the globalization, in order to enhance its future economic growth. Hence, diving into an untapped economy raises ample growth prospects for MasterCard.
Meanwhile, MasterCard will issue its branded cards including MasterCard, Maestro and Cirrus cards by ATMs within the country. This is most complemented by Co-Operative Bank’s huge expanse, since it is well-equipped as a commercial bank in Myanmar with the largest ATM network in the country. Accordingly, the cards issued by MasterCard, like others, will be accepted globally and are expected to accelerate Myanmar’s economy, which is anticipated to grow by 5.2% in 2012–2013, as per the Economist Intelligence Unit.
While tourism is a significant revenue driver for Myanmar, it has seen momentous growth in air travels, surging 63% in 2009–2010 and 32% in 2010–2011. This raises scope for the need and future growth opportunities for an international payment processor giant like MasterCard.
We believe that the penetration into Myanmar also validates the company’s strategic growth policy of exploring growth opportunities and ensuring safe and user-friendly payment solutions across the developing economies in the Asia-Pacific, Middle East and African regions. Such growth strategies also help gaining competitive edge over arch-rivals such as Visa Inc. (V - Analyst Report) and American Express Co. (AXP - Analyst Report).
MasterCard to Acquire Truaxis
In order to enhance its brand loyalty from customers, MasterCard also acquired Silicon Valley-based Truaxis Inc. last week, for undisclosed amount and terms.
Truaxis makes various discounts and incentive offers available to the targeted customers on debit and credit cards automatically, thereby generating brand loyalty for a card payment processor. Such lucrative offers also create an enticing customers’ shopping experience over a flexible and secure payments platform.
Moreover, Truaxis is closer to the merchants and consumers as it provides such directed and relevant offers. This helps the company and will eventually help MasterCard strengthen market relationships and seek escalated market recognition, while also gaining operating efficiencies.
We believe that MasterCard’s consistent business development efforts open the company towards ample organic and inorganic opportunities, thereby deploying its cash flow efficiently for long-term growth. Furthermore, such efforts are projected to enhance MasterCard’s operating and competitive leverage in the upcoming quarters.
MasterCard carries a Zacks Rank #3, implying a short-term Hold rating and long-term Neutral recommendation.