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MasterCard (MA) Files for Blockchain Patents, Introduces AI

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“Blockchain is an emerging technology and at Mastercard we believe that there is a role for blockchain in the future of commerce.” – MasterCard Inc., Nov 18, 2016.

Barely weeks after announcing two experimental blockchain APIs, MasterCard Inc. (MA - Free Report) yet gain affirmed its focus on the underlying technology backing digital currency, Bitcoin. The Purchase, NY-based payment processing giant has filed for four Blockchain patents.

According to the patent application that was published recently by The U.S. Patent and Trademark Office, Steven Charles Davis and Ashish Raghavendra Tetali have been named as inventors of these applications.

Blockchain Buzz

Blockchain or “digital ledger” has gained popularity for its significant potential to revamp the extensive and complex network of bank payments and other financial settlements. Blockchain is a type of distributed ledger that maintains digitally recorded data with a decentralized network, removing the need for a third party. While Bitcoin was one of the first cryptographic currencies that drew attention in 2009, several other cryptographic currencies are now available.

MasterCard’s Efforts

In the publication, MasterCard noted that the current payment networks and payment processing systems that use conventional currency are not only designed for safe storage and protection of consumer and merchant information but are configured to run other complex tasks including calculations and risk assessments.  

It also highlighted the increasing usage of blockchain currencies over traditional currencies driven by consumers focus on confidentiality and security. MasterCard, however, believes that the storage and processing of transactions that use blockchain currencies need improvement.  

The patents look for ways and systems to handle authorization, security and processing of blockchain-based transactions. MasterCard is mulling on integrating blockchain-based transactions in its own infrastructures.

The company noted, “Accordingly, the use of traditional payment networks and payment systems technologies in combination with blockchain currencies may provide consumers and merchants the benefits of the decentralized blockchain while still maintaining security of account information and provide a strong defense against fraud and theft.”

Introduces AI to Lower Instances of False Declines

In another move, MasterCard launched artificial intelligence (AI) across its global network offering “a comprehensive decision and fraud detection service.” The service will aid financial institutions improve accuracy of real-time approvals of actual transactions of credit card and cut down false declines.

Ajay Bhalla, president of enterprise risk and security at MasterCard stated, “We are solving a major consumer pain point of being falsely declined when trying to make a purchase.”

Essentially, the AI service promises improved consumer experience while preventing banks and retailers from losing sales.

Bottom Line

As digitization and technology continue to evolve and shape market dynamics, MasterCard is keeping no stone unturned to undertake strategies and innovation to maintain its leading position in the industry. The company remains well positioned for growth, given its continued expansion & digital initiatives. The secular shift to electronic payments from paper-based forms, undoubtedly promises top-line growth for the company.
MasterCard shares have gained 5% year to date, underperforming the 5.9% growth for the Zacks categorized Financial Transaction Services industry.  However, estimates for its current year were revised upward by 2.7% over the last 30 days. Given its progress on the fundamentals, the stock should perform well in the quarters ahead.




Currently, MasterCard carries a Zacks Rank #2 (Buy).

Stocks to Consider

Bats Global Markets : The Zacks Consensus Estimate for 2016 moved up 3.6% to $1.43 for 2016 and 6.5% to $1.64 for 2017 over the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Compass Diversified Holdings LLC (CODI - Free Report) : The Zacks Consensus Estimate for 2016 has moved up 1.4% to $1.43 for 2016 and 1.7% to $1.78 for 2017 in the last 30 days. The company flaunts a Zacks Rank #1.

LPL Financial Holdings Inc. (LPLA - Free Report) : Over the last 30 days, the Zacks Consensus Estimate for the current year increased 10% to $2.03 and 5.3% to $1.98 for 2017. The company carries a Zacks Rank #2.

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