Earnings

Mastercard: X-Border Volume Up Mid-Teens In 2019

Mastercard

Mastercard’s results continued a string of double-digit gains in transaction count, growth in card count and, of particular note, continued traction in cross-border activity.

In terms of headline numbers, the company’s adjusted earnings per share of $1.78 were 12 cents higher than the Street had expected, while revenues were up 8 percent to $3.9 billion, better than the $3.8 billion that had been expected.

The company said gross dollar volumes were up 12 percent to nearly $1.5 trillion in the latest period, while processed transactions gained 18 percent to 23.8 trillion transactions.

Drilling down into the gross dollar volumes, the company said United States volume was up 8 percent to $451 billion, outpaced by international growth, which was up 13 percent to $1 trillion.

Mastercard also pointed to growth in cross-border transactions of 13 percent, as measured in local currency.

Switched transactions were up 17 percent, according to the Tuesday (April 30) results, to 19.2 billion, while the number of cards outstanding by the company was up 7 percent to 2.5 billion, marked by a quarter end tally of 2 billion Mastercard cards, and 471 million Maestro cards.

Supplemental materials by the company reveal that cross-border volume fees were up 15 percent on a currency-neutral basis to $1.2 trillion in the latest quarter. Management said on the conference call that double-digit volume growth has been seen in most markets, and cross-border growth stands in the mid-teens rate (where, for example, outbound spending from China amid travel-related activity remains strong). By way of example, according to Mastercard, GDV, as measured locally, saw 13.4 percent growth year over year in Latin America, and 17.5 percent in Europe.

Mastercard CEO Ajay Banga noted on the conference call with analysts that the macroeconomic backdrop remains solid in the United States amid a resilient jobs market and even in Europe, marked by Brexit uncertainty, spending continues.

“We continue to monitor the strength of the Chinese economy. But having said that, we’ve seen modest GDP growth in region overall and that’s underpinned by favorable monetary policies and generally stable labor market conditions,” Banga said. Separately, he said, Brazil and Chile have seen growth, while there has been some weakness in Mexico. Brazil in particular is converting 7 million private cards to Mastercard contactless co-branded cards.

He pointed to recently-announced initiatives such as those with Apple (on the tech giant’s credit card), and with Goldman Sachs, and said the company has been busy “expanding geographic footprint” for real-time payments. Banga said on the call that “we continue to make progress” in credit and debit offerings that go beyond cards, stating that beyond tangible cards, “we are equally focused on seamlessly delivering our products digitally.” He called out, in addition to the Goldman and Apple initiatives, the fact that Mastercard is the preferred vendor for T-Mobile’s new mobile-first checking account, T-Mobile Money.

On Commercial and B2B Efforts

Banga turned attention to Mastercard’s commercial efforts, and pointed to a pact where the firm is the network for Citibank’s cross-border B2B virtual card program in China, which has been allowing Chinese travel agencies to make payments to hotels and other businesses outside of that country. Separately, the acquisitions of Transfast and Ethoca remain in place.

Newly-installed CFO Sachin Mehra said in his own discussion on financials that through the first three weeks of April the company has seen global growth of 18 percent for its switch volume, where in the U.S. that tally was up 15 percent, and outside the U.S. it is 21 percent. The cross-border volume through the same April period is up 17 percent, and “for the year we expect our cross-border volume growth to be about mid-teens,” said Mehra.

Asked about the impact of mergers in the payments space, such as has been seen between First Data and Fiserv and FIS/Worldpay, Banga said that “the M&A does not change where we have teams working with them … they play an important part in the ecosystem for banks and credit unions of all sizes and they have to distribute our products and services.”

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