MasterCard is the payment processor behind many of the debit cards in Australia.

MasterCard is an American company that came into the Australian market at a relatively late stage.  It is quoted on the New York Stock Exchange, although for most of its life it’s actually been a membership organisation that was owned by the banks who issued the card, including many Australian banks.

Payment processors are the companies that allow payment s to travel between people banking different institutions.  Without payment processors debit card and credit card transactions would be far harder as shopkeepers would either have to turn away a large proportion of businesses or maintain accounts and payment systems for a very large number of banks.  Payment processors act as a clearing house which makes the system of card payment possible and means that banks can compete and surpass the specialist charge card providers such as American Express and Diners Club.

MasterCard started in California as a competitor to the predecessor of the Visa credit card, which was then being offered by Bank of America.  It was started by a number of banks including Wells Fargo, the Bank of California and Crocker National Bank, who decided to offer a common card and set up the Intercard Charge Association to maintain it.  This then expanded to New York when it first took the name Master Charge.  In 1979 it became the MasterCard.

In the 1980s MasterCard started offering credit cards through Australian banks and credit unions, competing with the then dominant Bankcard.  With Visa it soon surpassed Bankcard.  In the 1990s debit cards started appearing.

Debit cards are different from credit cards in that they do not have a separate bank account.  They are instead financed through annual fees and merchant charges, which is the fee that shop owners pay to have their credit card transactions processed.

MasterCard operates through the Banknet network.  This is an internet type of computer network that relies on peer to peer communication to connect the bank accounts of the consumer and vendor.  This is unlike the Visa network which is more centralised.  The flexible architecture of the MasterCard network means that it is more likely to stay in operation when there is a problem with the communications network.

There are two new developments which MasterCard has pioneered in the United States, which are likely to come to Australia soon.  Firstly there are contactless cards which do not need to be signed for and which speed up transactions.  There is also the MasterMoney account which aims to have the best features of both a credit and debit card, being tied to a current account while also being able to advance funds if there are not sufficient funds in the account for the transaction to go through.