KBW Issues Report Around Mobile Payments Alliance Between Mastercard and NetsUnion

February 27, 2019         By: Steven Anderson

Even casual observers of the mobile payments space know, and know full well, that China is a big deal in the mobile payments market. Its combination of massive population with a cultural predisposition against credit cards and plenty of potential use cases—even the beggars have mobile payments access—have made for fertile ground for the technology. Now, Keefe, Bruyette & Woods (KBW) recently sent word our way about a new connection between Mastercard and NetsUnion which should mean an even bigger advance for the mobile payments giant.

For those not familiar, NetsUnion is China’s state-owned clearinghouse, which is a big part of the mobile payments environment in the region. The new connection between NetsUnion and Mastercard will ultimately create a yuan bank card clearing company, 51 percent of which will be owned by Mastercard and 49 percent will be owned by NetsUnion.

KBW regards this as a “nice win for Mastercard,” if the reports turn out to be completely correct. It would also serve as an excellent toehold into the region and help give Mastercard a better case for being able to process transactions in China, which as we’re all quite aware, is one massive pot of transactions. With early approval already in hand, according to reports, the chances of this all going according to plan are pretty high. Thanks to this move, among others, Mastercard now has a target price of $242 per share.

The interesting part here, though, is that such news would also spark Visa to make a better push on the Chinese market, since it literally can’t let Mastercard seize any of that market without Visa going after at least a piece of the pie. Such moves will also put a wider gap between Visa and Mastercard and the rest of the market; Visa and Mastercard already hold the top two slots by a wide margin, and if Visa and Mastercard are the only two US credit card issuers processing Chinese payments, the gap will only grow.

Still, this is a great move for number two Mastercard, and only time will tell how Visa responds to that to hold onto its number one slot.