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Mastercard (MA) Tie-up to Aid Indian MSMEs' Digital Capabilities

Mastercard Incorporated MA recently collaborated with the India-based payments solution provider, Razorpay, in a bid to accelerate digitization of operations for micro, small and medium enterprises (MSMEs) in the country.

The tie-up has enabled integration of the payment processing capabilities of Razorpay with secured digital banking solutions and card services of Mastercard. The joint capabilities intend to devise hassle-free onboarding solutions for bill payments, digital content platforms and other subscription services, with an eye on enhancing the accessibility of recurring payments for businesses and consumers.

By working together, both Mastercard and Razorpay intend to help MSMEs, which have been striving hard to offer in-demand contactless transactions through a strong digital foothold. Notably, the coronavirus outbreak accelerated the growing popularity of contactless payments, since people not only in India but across the globe prefer them as such payments minimize contact and thereby reduces chances of the virus spread. Through the collaboration, Mastercard seems to be banking on the growing digital payments space in India by bridging the gap between merchants, consumers, acquirers and fintech companies.

Moreover, the latest move is in line with Mastercard’s efforts for helping SMEs and startups that have been grappling with several pandemic-induced financial uncertainties. The recent tie-up is a testament to the company’s efforts, as it is likely to ensure continuation of business amid operational difficulties inflicted by the pandemic. Time and again, the company has made several investments to roll out cost-effective solutions for assisting small businesses to adopt digital means.

Shares of Mastercard have gained 3% in the past six months compared with the industry’s 3.1% rally.

Other companies in the same space such as Visa Inc. V, Green Dot Corporation GDOT and The Western Union Company WU have rallied 4.4%, 3% and 0.5%, respectively, in the past six months.

Furthermore, the partnership with Razorpay highlights Mastercard’s endeavour to expand footprint in the Indian market. In November 2020, the company joined forces with India’s leading credit card issuer, SBI Cards & Payment Services Ltd, to launch contactless payments on the SBI Card app. Also, the company’s collaborations with BOB Financial Solutions Ltd. ("BFSL") and SBM Bank India in 2020 are testament to the relentless efforts it has been making to strengthen presence in India.

The primary reason that can be cited for Mastercard’s intensified focus on the growing e-commerce market in India is that the market is anticipated to witness a 27% CAGR over the 2019-2024 period, per India Brand Equity Foundation. With an evolving consumer behavior of preferring online shopping, there is a clear-cut indication that this trend will prevail even beyond the pandemic. As a result, several tech giants have made investments in the digital payments space in India and Mastercard is no exception to the trend. Also, elevated internet usage and increased smartphone usage — as indicated by enhanced smartphone shipments in India — have been providing an added impetus to the country’s e-commerce market growth.

This Zacks Rank #3 (Hold) company remains well positioned for upgrading digital payments in the Indian market on the back of innovative technologies and persistent tie-ups. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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