MasterCard shortchanged on currency conversions; extolls Paypass as cash substitute
19 July 2006 | 5667 views | 0
MasterCard chief Robert Selander says the newly-independent card association has set aside $89 million to settle a currency conversion lawsuit, but cautions that other pending run-ins with merchants and rival card issuers will likely prove more intractable.
Speaking at the company's first shareholder meeting since going public in a $3 billion IPO float, Selander welcomed seven new non-bank directors to the board and said the company's new status was proving helpful in resolving outstanding legal difficulties.
"I think it clearly eliminates previous speculation that something untoward was taking place when all those bankers were sitting around the table," he told reporters. "Now it will be transparent. I think that's to our advantage."
At the time of its float, MasterCard set aside $650 million cash to cover legal expenses and possible charges pending from multiple law suits in the US. Selander says the earmarking of $89 million to cover complaints made about the way in which the company charged cardholders for currency conversions sends a clear signal that this issue will soon be resolved.
But he warns that the company will not throw shareholder money at other outstanding suits. Mastercard is currently being pursued in the US by rival card firms Discover and American Express over alleged anti-competitive practices, and by merchant groups complaining about interchange fees.
In a hearing before the Senate Judiciary Committee Wednesday, retailer representatives urged Congress to charge Visa and MasterCard with violating anti-trust laws over the $26.3 billion in credit card interchange fees collected each year.
MasterCard is also embroiled in a war of words with EU anti-trust authorities over the setting of interchange fees in European markets.
On other issues, MasterCard has been extolling the virtues of its PayPass contactless payment system, which is being used by about 10 million US consumers. Overall, Mastercard reports a 36% increase in usage per account and a 45% increase in total transactions per account. The company says the system is meeting the objective of providing a consumer-friendly alternative to notes and coins.
Cathleen Conforti, global PayPass product manager, MasterCard Worldwide, says: "The fact that almost half of all MasterCard PayPass transactions are made for small purchases, totaling less than $10, shows that consumers continue to move away from using cash."