MasterCard is planning to use the power that comes with its status as a powerhouse in global payment market to make paying with PayPal less enticing should the payment processor fail to dance to its tune.
The payment company has revealed plans to take action against intermediated payment processors who fail to share transaction details with it, by increasing prices on them. This action, if proceeded with, will target eBay’s PayPal and other digital wallets like Google Wallet.
- What’s the Fuss about? You may wonder why MasterCard is planning to take punitive actions, in terms of prices, against intermediated payment processors that chose to prevent it from having access to transaction details. It is simple. Having access to such important data will enable the payment company have an idea of consumer behavior, helping to better shape its marketing strategy to enable it reap better earnings.
- Possible Impact of Price Increase. Increased fee by MasterCard could negatively affect eBay’s earnings by about $0.04 per share a year, based on the almost $145 billion conducted in transactions on PayPal last year. In the event of Visa deciding to take similar actions, eBay investor earnings could be worse for it by an additional $0.08 per year, approximately. While one may conclude that the potential impact of a fee increase does not appear significant, there is no telling to what action could be taken on a growing digital wallet like PayPal by MasterCard and Visa, which control about 90 percent of the payment market globally.
- Still to Expect. With the price increase by MasterCard expected to kick in by June, Visa has yet to reveal plans to tread similar path as its rival. It should not come as a surprise though if Visa decided to follow suit after its CEO described a fee hike as being appropriate.
EBay has a forecast of enabling $300 billion in global transactions by 2015, representing an improvement of 71 percent from last year. This should cause revenue to jump 50 percent, with around half expected to come from PayPal. Future fee hikes by MasterCard and Visa are not out of the picture with PayPal making its way up the ladder, except the eBay company agrees to share transaction information.