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MasterCard’s Latest Product Demonstrates Apple Pay’s Threat to Credit Cards

  • MasterCard is testing a new credit card that contains a built-in fingerprint sensor.
  •  The new card is designed to counter the threat posed by solutions like Apple Pay.
  •  Credit card companies are worried about all the new payment options out there.
  •  That worry might be unjustified because card companies’ revenue is increasing.
  • MasterCard is concerned that consumers will prefer the higher level of security offered by Apple Pay.


It looks like MasterCard (NYSE: MA) is worried about the potential threat posed to its business by payment apps such as Apple’s (NASDAQ: AAPL) Apple Pay. The credit card giant is testing a new card that contains a built-in fingerprint scanner in Norway.

The Zwipe MasterCard will allow customers to make payments without using pins or passwords. The card developed by a privately held Norwegian company called Zwipe will be made available to MasterCard customers in the United Kingdom next year. It contains a miniature biometric scanner that matches a customer’s fingerprint to one on file.

master card

Zwipe founder and CEO Kim Humborstad claimed that the card had been well received by customers of the Norwegian bank Sparebanken DIN, who were testing it. Retailers also liked using the card, Humborstad reported.

There are currently no plans to bring out the Zwipe in the United States. It might appear next year when JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) begin offering so-called smartcards like those already used in Europe and Canada. These cards, or EMVs, contain a built-in chip that matches the card to the pin number or signature.

MasterCard Worried about Security

The Zwipe experiment shows that MasterCard is worried about security, in particular high profile data thefts like those at Target (NYSE: TGT) and Home Depot (NYSE: HD). The card provider is scared that customers will prefer the higher level of security offered by Apple Pay, which can be secured by a fingerprint scanner.

Another concern is that customers will prefer the greater convenience of Apple Pay to credit or debit cards. After all, you do not have to remember a pin number or password with those devices. Nor do you have to go through all the hassle of regularly changing pins and passwords to maintain security.

By bringing out Zwipe, MasterCard is moving to counter Apple Pay and to head off similar offerings from Google and perhaps an independent PayPal in the near future. It also faces the prospect of direct payment apps being offered by banks and other financial institutions in the near future. Since these devices will be right on your phone, they will be more convenient than the cards in your wallet or purse.

What Does MasterCard Have to Worry About?

The interesting thing is that MasterCard seems to have little or nothing to worry about right now. It has been posting tremendous revenue growth for the past few years.

In June 2012 MasterCard reported a TTM revenue figure of $7.12 billion; that figure grew to $7.81 billion in June 2013 and $8.898 billion in June 2014. Nor is MasterCard the only credit card provider racking up revenue growth in recent years.

Its arch rival Visa (NYSE: V) reported a TTM revenue figure of $10.07 billion June 2012 that grew to $11.54 billion in June 2013 and $12.45 billion in June 2014. American Express (NYSE: AXP) reported a TTM revenue figure of $30.86 billion in June 2012 that grew to $32.13 billion in June 2013 and $33.73 billion in June 2014. Even Discover Financial (NYSE: DFS) reported a TTM revenue figure of $7.461 billion in August 2013; that grew to $8.039 billion in September 2013 and $8.569 billion in September 2014.

Credit card companies are thriving right now. The question we need to ask is, will this revenue growth continue in the face of aggressive competitors such as Apple?

My answer is yes; because of human behavior, people are used to using credit and debit cards. Most of us have used those instruments for all of our adult lives, and we’ll continue to do so. Plastic has many advantages that most of us are well aware of: it is convenient, easy to use, easy to carry, and more secure than cash.

Companies like Apple are going to face an uphill battle convincing people to abandon credit cards. Ironically enough, their best allies in that battle are probably hackers because it is security concerns that will drive customers to alternatives. One reason why people choose credit cards over cash is that a stolen credit card can be cancelled, while stolen cash cannot.

If credit card companies can successfully roll out products like the Zwipe and combine them with online payment solutions, they should be able to counter the threat posed by Apple Pay. More importantly, their revenues should keep rising for years to come.