Mastercard posted fourth-quarter results that show at least some recovery in consumer spending amid the pandemic – but much depends on border reopenings and continued vaccine rollouts.
As has been seen in earnings reports that came earlier this year from big banks, debit spending outpaced credit trends. Mastercard said cross-border transactions were down 29 percent on a local currency basis. The company’s non-GAAP earnings came in at $1.64, better than the consensus by 12 cents. Revenues of $4.1 billion were down by 6.6 percent, better than the Street by about $100 million.
The company said its gross dollar volumes were $1.7 trillion, measured in local currency, up 1 percent year over year. With a bit more granular detail, the company said in its supplemental presentation materials that debit gross dollar spending was up about 8.5 percent to $950 billion year on year, while credit was off by nearly 7 percent to $796 billion. Within that segment, U.S. debit volume was up about 15 percent.
Switched transactions grew to 24.8 billion, up from 23.8 billion last year. Total cards saw 6 percent growth to 2.8 billion.
Updates to business activity subsequent to the end of the quarter showed that switched volumes are up in the low single digits through the weeks that ended Jan. 21, measured worldwide. But in the U.S., that tally has been up in the low double-digit percentages. Cross-border volumes continue to be down roughly 30 percent through the last few weeks.
CEO Michael Miebach said on the call that domestic spending levels are improving, and in some markets are moving toward growth, while also improving quarter over quarter. He added that cross-border travel improvements remain “limited,” but should get a boost from the gradual easing of travel restrictions and vaccine rollouts. But CFO Sachin Mehra noted on the call that the company would not be giving forward guidance, due in part to limited visibility into social distancing and border reopenings.
Management said on the call that card-not-present volumes accounted for 45 percent of switched transactions in 2020, up from 40 percent in 2019. The discussion also touched on the fact that the company continues to engage with central banks across the globe as various governments explore digital currencies.
As Miebach said, in response to analyst queries on the call, the company is helping to determine “is this the right tool for the job? … I would also say that you will find situations where real-time payments is better because it has to exist already, and it lives in existing financial infrastructure.” Generally speaking, he said, the private sector will help determine the use cases of digital fiat, and Mastercard will be able to bring its acceptance network to help bring those use cases to reality.
Management spotlighted the multi-rail nature of the Mastercard network on the call, with Mehra noting that among banks and FinTechs alike, “we’ve become more of a partnership discussion than a vendor relationship.” He added that the “opportunity from a B2B standpoint” remains on track for the company through its Mastercard Send and Fast Track offerings.
“We are rolling those out nicely. We are building scale, we are building capabilities as we go down that path,” said Mehra. Miebach stated that the past year (and the pandemic) has illuminated the fact that digitizing B2B functions enables firms to change suppliers in a more flexible way, in a sizable market where suppliers make up $110 trillion of global flows.
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