MasterCard ploughs into daily deals

Enabling bank and merchant partners to offer deals to cardholders

MasterCard is wading into the daily deals space, enabling its bank and merchant partners to offer deals to cardholders, as interest around the space continues, despite ongoing concerns regarding its long-term sustainability. MasterCard’s service will be powered by daily deals aggregator Local Offer Network, and will be distributed through mobile, social networks and what the firm describes as “traditional shopping channels”. MasterCard’s emerging payments SVP, Mario Shiliashki, claims that the targeted offers are designed to enable its clients to build stronger relationships with customers. The move is similar to American Express’ decision to enter the market last year, as credit card providers attempt to add more value to their services amid the availability of new forms of payment.

The service, due to launch towards the end of Q2, will bolster MasterCard’s offerings and could flourish in conjunction with its PayPass contactless payment service, which now serves more than 92 million customers globally. With mobile payment adoption in its infancy, MasterCard product VP, Mike Cowen, told StrategyEye earlier this month that big-name brands are likely to play a central role in winning consumer trust over the coming year, and the process could be accelerated by companies offering deals to MasterCard customers.

MasterCard’s launch is also illustrative of the crowded daily deals market at a time when many analysts were predicting consolidation. With large players such as MasterCard entering the daily deals market, firms will find it increasingly difficult to gain traction with so many options available to consumers. Even market leader Groupon, which has come in for sustained criticism in recent months, is unlikely to welcome yet more entrants to the market. For many established businesses seeking an additional revenue stream, there are few barriers to entry to develop a daily deals service, putting increasing pressure on the firms that are solely focussed on the sector.

As a result, Groupon is actively building out its core daily deals offering, most recently snapping up the team behind social recommendations startup, Ditto.me, as it attempts to differentiate itself from the pack. Despite this, concerns remain regarding the firm’s business, particularly after it revised its first quarterly results as a public company, adding USD22.6m to its previously reported USD42.7m loss. The company’s stock also fell nearly 10% in January after research from Susquehanna Financial Group and Yipit emerged, claiming that more than half of merchants offering daily deals through group-buying services such as Groupon and rival LivingSocial do not intend to continue doing so in the next six months.

The concerns surrounding Groupon are indicative of the attention surrounding the wider market, with research from Daily Deal Media in January claiming that nearly 800 companies disappeared during the second half of 2011, with North American and Asia experiencing the biggest drop. The findings highlight the volatile nature of the space and hinting at significant consolidation to come, after the near year-long boom that saw firms such as Groupon briefly become investor and analyst darlings.

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