In March, Mastercard announced it would purchase Transfast, a global cross border payments network provider with more than 800 employees, serving over 125 countries. That acquisition closed in July and Mastercard is working to integrate Transfast's employees and its products into its global distribution network.
Cross border payments is a growing category within the payments sector, which is also generally growing. Growth is being fueled by a few factors. First, increasing global travel means more consumers spending money outside their home markets. For business customers, globalization and the transformation of cash and checks to electronic forms of payment also contribute to the growth in cross border payments.
"Cross border payments is a space we find very attractive, and we're looking to broaden and deepen our capabilities across the value chain," said Paul Stoddart, Mastercard's president of new payment platforms.
Mastercard's interest in cross border payments is part of a general growth strategy that expands payments away from cards to include non-card payments. Stoddart, who joined Mastercard in 2016 as part of its acquisition of Vocalink, heads a business unit that's looking at expansion into the larger set of payment flows, including ACH, real time payments and cross border payments.
"The acquisition of Vocalink was the tip of the spear for Mastercard to expand into non-card payment flows," he said.
As fintech players like TransferWise entered the market, many chose to focus on the consumer side of the business. International business payments, then, remained a relatively inefficient payment flow, requiring multiple partners to collaborate on a payment.
"Transfast has helped drive efficiency, transparency, and certainty about when and what its customers get paid," said Stoddart.
In addition to Vocalink, Stoddart's business unit also manages applications, like bill pay, P2P and disbursements, and services, which includes consulting and advisory, analytics, fraud, and risk management.
Before the Transfast acquisition, Mastercard had made an earlier investment in HomeSend, a cross border payments firm. While it didn't pursue an acquisition, the HomeSend experience gave Mastercard 'a toe in the door' into the market, Stoddart said.
"It made it clear that we wanted to play in a more substantive way," he said.
Mastercard also pursues a partnership model as part of its go to market strategy, looking for ways to leverage its network of banks and bank accounts around the world.
"With Transfast, we recognized that it made sense to own the entire value chain of a cross border payment, from the customer experience to managing transactions and risk," he said. "There were so many areas with strong alignment to our current business today."
Mastercard has a fairly standard methodology for integrating businesses, which includes bringing new employees and physical locations into the Mastercard organization within 18 to 24 months.
The payments company pursues both organic and inorganic growth strategies when it comes to pursuing cross border capabilities.
"I wouldn’t be surprised if next year we start looking at acquiring for further product and market penetrations," Stoddart said. "I expect we’ll look at other assets to complement and accelerate our strategy."
When the time comes to make another acquisition, Mastercard uses a 5 step system to test for compatibility for its cross border business partners or acquisition candidates.
- Global network: First, Mastercard has a network of millions of businesses and tens of thousands of banks globally. This gives it strong distribution capabilities for new products and services.
- Compliance standards: Next, Mastercard's compliance, governance and risk management uses AI-based technology to identify nefarious actors on its network. Ensuring compliance helps build trust with new partners.
- Treasury management: Being able to manage treasury -- specifically with FX and liquidity -- is similarly a key component to success in cross border.
- Scale: Mastercard also brings the ability to handle transactions at scale, helping new acquisitions grow further out of their existing markets and expand their products.
- Licensing: Lastly, Mastercard has licenses for a majority fo US states and many counties outside the US, enabling it to move money within a strong regulatory regime.
"This is our recipe for success — with the capabilities we have today, we can reach about 90% of world population," Stoddart said.