From artificial intelligence to acquisitions, MasterCard's recent expansion efforts will give investors a wealth of developments to scrutinize during Friday's quarterly earnings report.
Analysts are forecasting both top and bottom-line growth as the Purchase, N.Y.-based card network benefits from a deal withPayPal (PYPL) - Get Report , the acquisitions of payments company VocaLink and cloud-based analytics provider Applied Predictive Technologies (APT) - Get Report , as well as new partnerships abroad.
Such steps, as well as this week's introduction of a chatbot for banks called "MasterCard KAI" that uses artificial intelligence to respond to customer queries via text messages, are integral parts of CEO Ajay Banga's strategy of leveraging technological development to expand the $113 billion company beyond traditional card-based transactions.
Both companies are "ahead of the curve in application of data analytics to fraud detection," and will be able earn money by sharing data through "differentiated offerings to issuer/merchant clients, that could ultimately drive higher yields," according to analysts at Morgan Stanley, who raised their 12-month price target on MasterCard to $120 from $111.
These "advantages should support the sustainability of long-term double digit revenue growth expectations," Morgan Stanley analysts said.
MasterCard is expected to report adjusted earnings of 98 cents a share for the three months through September, the average of analysts' estimates in a FactSet survey, compared with 86 cents a share a year earlier. Revenue will be $2.74 billion, the analysts projected, an increase of 8.3% from the same period in 2015.
In September, MasterCard announced an agreement under which it would become a clear payment option on PayPal's platform, and the online payments firm's customers could move money from their accounts to a MasterCard debit card. PayPal also said it would stop "steering" customers toward funding its services directly from checking or savings accounts rather than with credit or debit cards.
Just months earlier, in July, MasterCard agreed to purchase 92.4% of London-based payments company, VocaLink for £700 million (approximately $920 million). The company also recently announced a partnership with Commercial Bank of Ethiopia that will provide nearly 100 million people in the country with remittance services as MasterCard expands in Africa.
Still, third-quarter profit may be curbed by the loss of a card portfolio that USAA bank moved to Visa, as well as potentially higher rebates and incentives related to renewed branded-card agreements with American Airlines (AAL) - Get Report , Bed Bath and Beyond (BBBY) - Get Report and Wal-Mart (WMT) - Get Report in Canada.
And beyond that, the MasterCard is grappling with legal issues overseas. Executives have estimated a settlement with U.K. retailers who claimed the company's cross-border interchange fees were "anticompetitive" will cost $270 million, while consumers in the country are seeking £19 billion ($24.6 billion) in damages in a separate class-action lawsuit.
In the U.S., meanwhile, a federal appeals court overturned an antitrust settlement of $7.25 billion with both Visa and MasterCard, opening the door for potentially higher damages, as retailers claimed the companies were unlawfully fixing their processing fees.