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MasterCard Purchases Travelex

14 December 2010 by

MasterCard Purchases Travelex

It has been confirmed that MasterCard is set to purchase Travelex, the pre-paid cash card company, for $459 million. MasterCard has been working on extending their business in countries other than the United States, and this purchase is seen to be a part of that effort.

Travelex differs from other prepaid cards in so much as it concentrates mainly in specializing in “cash passports” which are preloaded cash cards with the main aim being at foreign travel. There has been a great success by Travelex in this market, and many consumers who prefer using cards rather than traveler’s checks are subsequently targeted.

While many travelers have no option but to deal with a fluctuating currency rate when they are withdrawing funds for traveling use, the Travelex prepaid cash card is unique because it enables card holders to choose which currency rate they want to lock into prior to withdrawing money.

Even though MasterCard has stated that it has no immediate plans to change the way Travelex operates in the United States, and will continue with partnerships already existing with worldwide prepaid credit card companies, NetSpend Holdings Inc and Green Dot Corp, there are possibly future plans to use it in order to extend their market overseas.

Approximately half of the world’s population is currently unbanked, according to the Financial Access Initiative (FAI), who performed a study on the statistics, but of that number there is only 8% of the American population unbanked. This figure is seen by Master Card as a great opportunity for them to target customers who are without a bank account in emerging markets.

Ajay Banga, MasterCard’s Chief Executive, has stated to share holders that the coming deal is “an important driver for our growth in the whole prepaid arena.”

MasterCard forecasts have indicated that by 2017 the total volume would hit $840 billion, and that the prepaid credit card is showing a strengthening force. Prepaid credit cards are definitely one of the quickest major growing areas of the payments industry, and it also has the distinct advantage of not being required to follow the usual standard rules that have been enforced on regular credit cards by the Credit Card Act.

In times of uncertain financial economy in many countries around the world, MasterCard purchasing Travelex could be great news for those consumers and card holders who have a need to travel, whether it is for business or pleasure.

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