Earnings

Contactless, Digital Drive Mastercard Q2 Earnings

Contactless, Digital Drive Mastercard Q2 Earnings

Mastercard reported Q2 earnings results on Thursday (July 30) that in many ways mirrored what rival Visa reported the day before. Like Visa, Mastercard delivered better-than-expected second-quarter results, despite sharply reduced consumer spending during the pandemic. And the company said it’s ready for the new world of greater digital and contactless shopping.

“Our platform uniquely positions us to support the shift to digital across consumer and business payments that has been accelerated by the COVID-19 pandemic – including an increase in consumers’ preference for contactless payments,” CEO AJ Banga said in the company’s earnings call with analysts. “We're focused on managing the business for the long term, and we are focused on investing in key strategic priorities in areas like open banking, real-time payments [and] cyber intelligence solutions.

“The crisis has driven an acceleration in the use of electronic forms of payments, with much greater adoption of digital and contactless solutions,” he continued. “And we believe those will be sustained beyond the pandemic – and we are very well-positioned to capitalize on them.”

Michael Miebach, Mastercard’s president and CEO-elect, said contactless transactions represented 37 percent of those made in-person during the quarter, up from 28 percent a year earlier.

Miebach added that changes to the commerce ecosystem are looking more and more likely to become permanent. He cited data indicating that some 70 percent of consumers plan to continue or increase their online purchasing in a post-pandemic world, while 60 percent expect to use less cash even after COVID-19 subsides.

“We are providing digital-first solutions that leverage our tokenization and other digital technologies to meet these changing needs,” Meibach said.

On the downside, Mastercard’s revenue, TPV and earnings all fell year over year during the latest quarter.

The company posted net income of $1.4 billion ($1.41 a share), down from $2.05 billion ($2 a share) in the year-prior quarter. Adjusted earnings per share likewise dropped to $1.36 from $1.89, while analysts surveyed by FactSet had been expecting $1.16.

Total payments volume also lost 10 percent during the latest quarter, while cross-border volume plummeted a dramatic 45 percent. However, Miebach noted that cross-border volume will likely see least some recovery in the near term.

He said that travel restrictions in Europe are easing and consumers are starting to venture forth, albeit by car rather than plane. “Once border restrictions are lifted, we will see some increase there,” he noted.

Mastercard also reported that net revenues declined to $3.34 billion from $4.11 billion a year before – a notable fall-off, but still ahead of the $3.25 billion analysts were predicting.

Some of that loss was also balanced out by what Mastercard refers to as its “other revenue” line – cybersecurity tools, data analytics and other services offered. Those revenues rose 14 percent on a constant-currency basis, driven mainly by what Chief Financial Officer Sachin Mehra referred to as “booming” demand for those services as consumers and businesses worldwide reconfigured their lives around digital interaction.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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