Can Anything Slow MasterCard’s Roll?

MasterCard showed sizable second-quarter gains, with net revenue up 13 percent driven by significant transaction growth on both the consumer and commercial credit side. It has plans to roll out MasterPass over the next few years to the markets that drive 75 percent of its volume. Yet when discussing the quarter with analysts, President Ajay Banga cautioned against anticipating continued similar improvements. Why?

MasterCard this week reported double-digit gains in both company revenue and in much of its product performance. And while the improved U.S. economy is helping spark the increases, the network’s president acknowledged the economy’s fragile state could pose challenges ahead.

“Overall we think the current U.S. economic recovery is very much a work in progress,” Ajay Banga said on a July 31 earnings call with analysts. “We see some favorable indicators that continue improvement in consumer confidence levels. There are, in fact, early indications for July retail sales (not including auto deals) that are showing further improvement over the second quarter.”

But there are factors that could weaken the recovery, such as the slowing recovery in housing and the improvement in unemployment coming partially from an upswing in part-time workers rather than full-time positions, he noted.

That said, MasterCard’s improved second-quarter performance was helped particularly by stronger growth in consumer credit volume and a continued build up in commercial credit, Banga said. Growth also was particularly strong outside the U.S. as well, especially in the Asia Pacific/Middle East/Africa and parts of Europe, such as Italy and Sweden, he said.

Moreover, MasterCard continued to expand the presence of its MasterPass digital wallet. Bang said he expects MasterPass to be in all markets that represent 75 percent of MasterCard volume over the next few years. 

Russia issues

Also on the call, Banga said MasterCard continues to work with Russian authorities as that country implements new foreign-processor laws, which includes finding domestic switching partners in order to operate there. Despite the turmoil, however, MasterCard just renewed its business agreement with Alfa-Bank, Russia’s largest private bank.

“And that should help us expand our existing partnership in issuing affluent cards and accelerating the growth of contactless technology in the Russian market,” Banga said.

Earlier this week, both MasterCard and Visa said new rounds of sanctions by the U.S. government should not negatively affect their operations in Russia. “As we continue to work through the challenges there, our business continues to move forward,” Banga said on the call.

Q2, by the numbers

MasterCard’s worldwide sales volume for all cards totaled  $821 billion, up 11.9 percent from $734. Global transaction volume was 10.3 percent, to 12.8 billion from $11.6 billion.

For U.S. credit and charge programs, second-quarter purchase volume totaled $155 billion, up 9.9 percent from $141 billion during the same period last year. Payments transaction volume totaled 1.7 billion, up 6.3 percent from 1.6 billion. Cash volume remained unchanged at $6 billion, while cash transaction volume at 6 billion dropped 14.3 percent from 7 million.

Through June 30, there were 146 million U.S. credit and charge card accounts, up 2.8 percent from 142 million a year earlier. Total U.S. credit cards were 178 million, up 1.1 percent from 176 million.

For International credit programs, payments volume totaled $412 billion, up 11.1 percent from $371 billion. Payments transaction volume totaled 5 billion, up 13.6 percent from $4.4 billion. Cash volume at $49 billion was down 3.9 percent from $51 billion. Cash transaction volume rose 0.5 percent, to 211 million from 210 million.

Through June 30 31, there were 500 million non-U.S. credit card accounts, up 7.5 percent from 465 million a year earlier. Total non-U.S. credit cards were 565 million, up 5 percent from 538 million.

For U.S. debit programs, payments volume totaled $134 billion, up 9.8 percent from $122 billion. Payments transaction volume totaled 3.4 billion, up 9.7 percent from 3.1 billion. Cash volume totaled $43 billion, up 4.9 percent from $41 billion. Cash transaction volume rose 2.6 percent, to 318 million from 310 million.

Through June 30, there were 162 million U.S. debit card accounts, up 15.7 percent from 140 million a year earlier. Total U.S. debit cards were 166 million, up 15.3 percent from 144 million.

For non-U.S. debit programs, payments volume totaled $120 billion, up 18.8 percent from $101 billion. Payments transaction volume totaled 2.6 billion, up 30 percent from 2 billion. Cash volume totaled $204 billion, up 15.9 percent from $176 billion. Cash transaction volume rose 23.1 percent, to 1.6 billion from 1.3 million.

Through June 30 , there were 419 million non-U.S. U.S. debit card accounts, up 30.1 percent from 322 million a year earlier. Total non-U.S. debit cards were 430 million, up 29.9 percent from 331 million.

Processed transactions for the quarter were up 8.9 percent, to 10.61 billion from $9.48 billion, while cross-border volume rose 16 percent, MasterCard said.

As a company, MasterCard earned net revenue of $2.38 billion, up 13.3 percent from $2.1 billion. Net income grew 9.8 percent, to $931 million from $848 million.


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