Everything that isn’t ‘priceless’ can be bought with MasterCard, or so the adverts tell us. Perhaps an exaggeration, but there’s no denying MasterCard is a giant of payment processing. Accepted in more countries and territories (210) than the UN recognises (206), MasterCard technology powers payments all over the world. But, what is MasterCard, where did it come from, and how does it make money?
History of MasterCard
The history of MasterCard owes much to its main rival in the world of payment processing, Visa, and the regulatory environment that existed in the United States at its inception.
Visa, formerly BankAmericard, was the brainchild of California-based Bank of America. The McFadden Act (1927) prevented Bank of America issuing cards beyond state lines, but the competitive edge it offered in their home territory was huge. So despite licencing it elsewhere in the US, Bank of America remained the sole issuer in California.
Rivals banks soon sought to develop an alternative, and in 1966 (eight years after BankAmericard trialled), they formed the Interbank Card Association (ICA) and started issuing Master Charge cards.
By 1972, Master Charge cards were accepted from New York to California in the US, and across Europe via an alliance with Eurocard and Access (UK).
As international expansion continued, ICA replaced Master Charge with the now familiar MasterCard brand (retaining the overlapping red and orange circles motif).
MasterCard continued to grow and expand its partner network and is now accepted by over 30 million merchants worldwide. It remains at the forefront of card technology and security development, helping pioneer holograms, Chip & Pin, contactless, and secure online payments.
What is Maestro?
MasterCard founded Maestro in 1992 as a vehicle for debit/prepaid card payments. So, wherever you can use MasterCard you can use Maestro.
Unlike MasterCard credit card products, Maestro cards do not enable the cardholder to access a line of credit (and in the UK, users do not gain the benefits of Section 75). Nevertheless, these cards can be preferable as the interchange charged to merchants is lower than that charged on credit card purchases. As such, many airlines, that charge customers additional fees for credit card payments, do not charge additional fees to Maestro users.
How does MasterCard make money?
Although MasterCard is a highly diverse organisation with a number of different operations, its primary source of income comes from payment processing.
When a MasterCard card is used to make a payment, the company receives a small share of the value of the transaction. This is called the 'interchange fee' and is common to all payment processors, in varying amounts. Foreign transaction fees are also charged on payments made overseas (outside the cards country of origin).
Where can I use MasterCard?
MasterCard and Visa are the standard bearers for card payment acceptance. Each reports the number of merchants who accept them in a slightly different way (and there is no third party verification of their claims), so there is no way to determine which is more widely accepted. Nevertheless, where one is accepted the other is almost universally also accepted, so both have payment networks amounting to over 30 million merchants.
Characteristics of MasterCard
Although numerous banks and credit card issuers offer MasterCard products, and they all vary in graphical design. However, there are some common traits amongst all MasterCard cards.
Each and every card which uses MasterCard to facilitate payments, features the MasterCard logo (in accordance with MasterCard's Artwork for Cards guidelines).
Many MasterCard cards issued in Europe also feature the Eurocard logo, which formed the basis of MasterCard's European operations, when they merged with it in 2002.
MasterCard cards all start with the number 5, which they share with Diners Club cards, numbers they were allocated by the American Bankers Association. Maestro cards start with either 5 or 6 (also used by China UnionPay and Discover Card).
All MasterCard cards are now the same dimension 85.60 x 53.98 mm, with corners rounded to a radius from 2.88 to 3.48 mm, as set by the ISO/IEC 7810 for identification cards.
The UK credit card brand 'Mint' did issue a non-standard shape MasterCard card in the UK in early 2000. It quickly gained popularity due to its novel shape, but was withdrawn when customers discovered it could not be accepted in all card processing machines.
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