Mastercard Q4 Continues Contactless, B2B Growth ‘Marathon’

Mastercard results released on Thursday (Jan. 31) morning showed continued gains in processed transactions, tied in part to holiday spending during the quarter that ended in December. In terms of headline numbers, $3.8 billion on the top line met Wall Street expectations, while earnings of $1.55 on an adjusted basis were two pennies better than expected.

Gross dollar volume was up 14 percent to $1.5 trillion, and switched transactions in the quarter stood at 20.1 billion, up 17 percent as measured year over year.

Breaking down the gross dollar volume trends, Mastercard said in supplemental materials filed with the earnings report that debit and prepaid transactions gained 12.2 percent to $762 billion, while credit transactions were up 6.6 percent to $787 billion. Going a bit further, the United States saw 10 percent growth to $466 billion, outpaced by the rest of the world at 16 percent to just over $1 trillion.

The company had 2.5 billion cards issued, with 7 percent growth, the bulk of which at more than 2 billion  were Mastercard cards. The remaining 496 million were Maestro cards.

The revenue trends showed that of the total $3.8 billion on the top line, transaction processing fees were $1.9 billion, up 17 percent on a currency-neutral basis. Cross-border dollar fees came in at $1.2 billion, up 16 percent on a currency-neutral basis.

Macro Takeaways

In commentary on the conference call with analysts, CEO Ajay Banga stated that macro trends showed “solid overall growth” that should continue, though they may moderate moving forward.

“Like others, we’re keeping a close eye on a number of items; increased trade tensions, rising interest rates, and other economic and political factors that could slow growth over the longer term,” Banga told analysts.

Within the United States, he said, spending and growth have held up “reasonably well” amid low unemployment and “still healthy” consumer confidence. In terms of international regions that bear watching, he mentioned declines in consumer confidence in countries like France, Spain and the Netherlands. Latin America bears watching as well, in the wake of elections in Brazil and Mexico.

“China has a limited impact to us directly,” Banga said on the call. “But given the size of the Chinese economy, it does impact the global economic picture.”

CFO Martina Hund-Mejean said on the call that international cross-border growth rates have moderated, in part, due to lapping cryptocurrency purchases.

A look at the supplemental materials showed that gross dollar volume growth across Europe was more than 19 percent, and more than 11 percent for Canada. The CFO noted that, overall, double-digit growth was seen for all regions, save for that of Latin America.

Banga also mentioned the continued “secular shift” toward electronic payments — where commercial card products such as Mastercard Track are finding traction, and which are driving double-digit volume and transaction growth across most markets for the company. He noted, too, that contactless payments are gaining ground, with roughly half of card-present transactions in the U.S. done using cards that were contactless-enabled. As for faster payments, he termed Mastercard’s efforts here as a “marathon.”

Mastercard has received commitments from issuers, representing approximately two-thirds of its total U.S. consumer volume, to issue contactless cards within the next two years. “This includes Citi, Capital One, KeyBanc, Santander, HSBC and others,” Banga said on the call. “We’re also working with leading processors like FIS to bring contactless to smaller issuers, and to credit unions.”

Later in the call, he said the company is gaining momentum in software and services, and “we believe that there are tons of opportunities coming along for infrastructure in a number of countries.”

B2B And Beyond

In discussing B2B, Banga stated that “we are continuing to see momentum in our core commercial card business,” as the company is developing a new fleet co-branded product that combines “U.S. Bank’s proprietary, closed-loop fleet product with our broad, open-loop acceptance footprint. We’re also making progress in the accounts payable space, taking the Mastercard B2B Hub model international through a new partnership, which I think is very exciting with MYOB in Australia and New Zealand.” That pact with MYOB, he said, allows for invoice capture, supplier payments and payroll solutions.

Hund-Mejean added, “We’ve talked about the overall B2B opportunity, which is [a] $120 trillion opportunity, and what we said is that we are going after very particular slices of that B2B opportunity. So, we’re not going to run after all of the $120 trillion. And some of the things that we’re already investing [in], like the B2B Hub, like Track, … over the next three … to seven years, we are going to expect that some of that will [manifest] itself in revenue growth.”

Through the four weeks of January, Hund-Mejean stated, the company has seen switched volume on a global basis of 15 percent, with 12 percent growth in the United States, and that tally standing at 17 percent growth outside the U.S. Through the same period, cross-border was 12 percent.

“For the year, we expect cross-border growth will be about mid-teen [percentage],” she said. “And this is contemplated in our thoughts for revenue growth for the year,” which should translate to a low-teens, compound annual net revenue growth rate over the next three years.