MasterCard is the company that processes many of Canada’s credit and debit cards. Payment processors like MasterCard allow money s to travel between a consumer with one bank and a seller with another bank.
Credit cards would be far less usable without the card processors, as vendors would turn away much of their businesses unless they were prepared to maintain payment systems with an impractically large set of banks. Payment processors are the clearing house making credit card payment possible. Banks can now compete with specialist card providers like American Express.
MasterCard was originally a co-operative of the card issuing banks, including the Canadian banks that issued the card, but it floated on the NYSE, New York Stock Exchange, in 2006. It is still quoted on the NYSE today and is now run as a profit making company.
MasterCard came into Canada in 1973, and it was the first international expansion of MasterCard. It was first offered by the Bank of Montreal, one of Canada’s “Big Five” banks. MasterCard started to expand worldwide in 1979. In 1993 it opened its Canadian office.
MasterCard originally started in California. It was a competitor to the card offered by Bank of America which eventually became the VISA credit card.
Debit cards also started being offered by MasterCard. Unlike credit cards they do not have a separate account and so cannot build up debt (and the card issuer cannot therefore charge interest). Instead the cards make money through annual or monthly fees and the merchant charge, the fee – between 1% and 2% of the transaction value – that shop owners pay so that their card transactions are processed.
MasterCard terminals are plugged into MasterCard’s proprietary Banknet network. This is a system where the terminals are connected by an internet type of network that is sometimes known as peer to peer. This flexible structure means that the network is very resilient should there be a problem with the telephone network. MasterCard’s arch-rivals VISA has a more centralised network that is criticised as being less able to cope in an emergency.
MasterCard has pioneered contactless cards. The system, which was introduced in 2004, is called PayPass and it communicates with the credit card terminal using radio waves. These do not need to have a pin number or signature and this can speed up transactions.
A new development from MasterCard which is likely to come to Canada soon is the MasterMoney account. This has been pioneered in the United States. The aim is to have the features of a credit and debit card, being tied to a current account and also being able to add funds to the account if they are not sufficient for the transaction to go through.
MasterCard has been a big sponsor of sporting events, especially in golf and ice hockey – having been the major sponsor of the Canadian Hockey League since 1999. It is also a big supporter of the Big Brothers Little Sisters charity.