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MasterCard Incorporated (MA - Analyst Report) announced a partnership with NTT DOCOMO, Inc. (DCM) to expand their contactless payment services to new markets. Per the deal, users of DOCOMO’s iD mobile credit payments will be able to make contactless payments in any part of the world where MasterCard’s PayPass contactless payment network is present. Currently, users can only employ iD for contactless payments within Japan, using DOCOMO’s domestic payment network.

The partnership should be beneficial for both the companies. While MasterCard’s PayPass users will have one more option for contactless payment, DOCOMO’s 17 million iD users will not be restricted from using the service by geographical boundaries. MasterCard has merchant locations in 41 countries, including the US, Korea and Taiwan, which are popular with Japanese tourists. This should expand the usage of the iD mobile payment solution.

The contactless payment business has immense scope for growth in the upcoming years. According to a senior MasterCard official, the worldwide network of near-field communication (NFC)-ready point-of-sale terminals is estimated to expand to 43.4m units by 2017, as per independent industry growth projections.

However, the partnership is expected to become active in the first half of Japanese fiscal year 2013 (The Japanese fiscal year 2013 runs from April 1, 2013 to March 31, 2014). Thereafter, DOCOMO’s customers who use iD with an NFC compatible DOCOMO smartphone will be able to use PayPass for contactless payment in all 500,000 merchant locations where PayPass is accepted. These customers will also be able to use MasterCard’s Tap & Go feature to make payments through their mobile phones. Moreover, the alliance will add two DOCOMO smartphones to MasterCard’s list of Mobile PayPass compatible devices, which currently comprises about 70 phone models.

MasterCard currently carries a Zacks #3 Rank (Short term Hold). We maintain a long-term ‘Neutral’ recommendation on the stock. Meanwhile, DOCOMO carries a Zacks #4 Rank (Sell).

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