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Eileen AJ Connelly

MasterCard, Western Union teaming up on prepaid

MasterCard Inc. is teaming up with Western Union Co. in the fast-growing market for prepaid cards, seeking to make it easier and more convenient to use the reloadable cards globally.

AP Photo/MasterCard, Jon Simon-Feature Photo Service

MasterCard Inc. is teaming up with Western Union Co. in the fast-growing market for prepaid cards, seeking to make it easier and more convenient to use the reloadable cards globally.

MasterCard Inc. is teaming up with Western Union Co. in the fast-growing market for prepaid cards, seeking to make it easier and more convenient to use the reloadable cards globally.

A year after Western Union began issuing prepaid cards bearing the MasterCard logo in the United States, the companies say they will begin offering the cards in other countries, with the goal of making it possible for consumers worldwide to use prepaid cards to transfer and spend money.

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As of Sept. 30, Western Union, based in Englewood, Colo., had more than 1.2 million prepaid cards activated in the United States, nearly double the number from a year earlier. Customers loaded roughly $120 million on those cards during the third quarter.

Overall, the prepaid market has swelled in the past five years. In 2010, US consumers alone loaded $40.85 billion onto prepaid cards, which function as debit cards, often using them for direct deposit of paychecks and government benefits. That was up from just $2.7 billion in 2005, according to Mercator Advisory Group.

As in the United States, the companies expect that prepaid will appeal to customers who don’t use traditional bank accounts.

The alliance will involve linking MasterCard’s processing network and Western Union’s distribution network, which includes 485,000 agents worldwide. Eventually, consumers in more than 200 countries will be able to combine loading money into prepaid card accounts and wiring that money around the world, and in many places use prepaid cards for purchases.

In developing countries, “there are no ATMs,’’ said Western Union chief executive Hikmet Ersek. That fact makes his company’s network of agents important players in spreading electronic payments to countries where business is done almost entirely in cash.

That focus matches MasterCard chief executive Ajay Banga’s oft-stated target for growth: the 85 percent of the world’s transactions that still take place in cash. The Western Union network will help address one big challenge in developing markets, Banga said, because there are often few places that handle cards for payments or cash advances in remote locations.

While the eventual goal is global, Ersek said one of the fastest-growing markets for Western Union is money transfers within the United States. Even within cities like New York, it can be more convenient for a customer to add money to a prepaid card account in one part of the city and allow someone to use the card or withdraw cash in another part of town.

Eileen AJ Connelly writes for the Associated Press.
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