MasterCard and McDonald's Go 'Beyond the Core of Payments'

McDonald's has been at the fore of many new digital initiatives around the world, and it has played a significant role in demonstrating how MasterCard can flex its international scale to build new services and avoid being disrupted.

During Thursday morning's first-quarter earnings conference call, MasterCard President and CEO Ajay Banga spotlighted a pilot at McDonald's that arguably has little to do with point of sale execution — but it serves as a clear example of how the Purchase, N.Y.-based card network's technology investment and corporate acquisition strategy are playing out.

McDonald's locations in the Middle East and South Africa are using services from Applied Predictive Technologies, an Arlington, Va-based business intelligence company MasterCard acquired in 2015 for $600 million. In addition to more traditional MasterCard products like MasterPass, McDonald's is using APT’s cloud-delivered analytics to measure business and product performance.

"They're going beyond the core of payments and are using the software to analyze new food items," Banga said.

Investments like APT allow the card network to capture more of McDonald's relationship than just payments, Banga said. "They're deciding what items should go on their menu," he said, adding Sunoco in the U.S. and KFC in Europe are also using APT's technology.

Mobile commerce startups that offer discount services and alternative payment methods are challenging long-established payment companies such as the card networks, merchant acquirers, banks and processors. But incumbents like MasterCard have the advantage of international scale and an existing client base. Western Union, for example, is taking advantage of its vast network to offer business-to-business payments and eventually other merchant services as a way to compete with the growing number of blockchain-driven startups pursuing remittance and other cross-border payments.

During the earnings call, Banga highlighted the card brand's other digital advances.

MasterCard expects to soon announce the banks using a service that allows automatic enrollment in MasterPass, which is closing in on 270,000 merchant supporters. "We're running a marathon with MasterPass and are making progress," Banga said.

Banga also noted MasterCard's "selfie pay" pilot with BMO and an extension of its partnership with Facebook as examples of how the network is broadening its reach beyond plastic card payments.

"People can make purchases without leaving the Facebook app," Banga said.

For the quarter ending March 31, income fell 6% to $959 million, or $0.86 per share, from $1.02 billion, or $0.89 per share a year older. That beat the average estimate of $0.85 per share from 32 analysts surveyed by Bloomberg. The card network has been investing in technology in international markets to offset pressure from lower gas prices, Banga said, adding foreign exchange headwinds are starting to abate, which will aid cross-border payment volume. MasterCard gets about 60% of its revenue from outside the U.S.

"The global economy is unchanged," Banga said, adding the U.S. economy is strong while Europe and other regions remain mixed. "Asia has been hurt by the slowdown in China…and in Latin America, Brazil is in a major recession and Venezuela is deteriorating."