MasterCard raises technology focus

MasterCard will on Thursday announce the launch of a newly created division dedicated to bringing products to market faster, the latest sign that the world’s second-largest payments network is trying to become more nimble as it competes against newer groups such as PayPal.

MasterCard plans to invest tens of millions of dollars in the new division – called MasterCard Labs – which will be staffed globally by technology engineers and business development executives.

“The secular trend of moving from cash and cheques to other forms of payments will accelerate, especially in countries other than the US,” said Ajay Banga, MasterCard’s new chief executive. “To stay ahead of that curve, we’ve got to create the right partnership and team work.”

The new division will be headed by Gary Lyons, who had served as chief of Orbiscom, a payment technology company that MasterCard acquired in 2008.

While at Orbiscom, Mr Lyons developed a system called inControl, which gives credit card users more of a say in how their payments are made. Accounts can be set up so that certain payments are made by debit and others on credit.

Parents who give their children credit cards can also block their use in certain stores. The system also allows customers to set up limits that prevent them from spending more than a certain amount each month in a certain place.

Mr Banga said the goal of the new lab was to churn out more products such as inControl, as well as others that MasterCard has recently introduced. These include MoneySend – which allows customers to transfer money from one MasterCard to another via ATM machines, the internet or mobile phones – and a partnership unveiled last week with Next Jump, an internet data tracking company, which will create an online shopping mall tailored to cardholders’ likely shopping habits. Visa, the largest payments network, and American Express, the number three, are also stepping up their product development pipelines.

In November, American Express bought Revolution Money, an online payment processor, and Visa has told investors that it plans to increase spending on research and development.

“There is a healthy paranoia that you don’t want to be eclipsed by some new method of payment,” said Barclays analyst Bruce Harting.

Like Visa, MasterCard’s strength has historically been in processing large numbers of payments for commercial customers, rather than in making loans or developing niche markets. “In the past, we may have missed some opportunities, because we weren’t necessarily as good at taking an idea and building it into a prototype,” said Josh Peirez, who heads its business development unit.