Mastercard came out ahead of Wall Street’s forecasts when its Q3 earnings report hit the wires before the markets opened yesterday – notching a beat on both earnings and revenue, with significant growth in transaction volume and global market share. Markets rewarded the good news with a 1.8 percent increase in share price during premarket trading.
There were some concerns raised by a potential regulatory fine from the European Commission over its inter-regional interchange fees. In an SEC filing, Mastercard noted they could not, at this time, offer an estimate of what a potential fine might look like – but did note that it could potentially exceed $1 billion, "based upon recent interactions" Mastercard has had with the Commission.
Potential regulatory uncertainty aside, however, Mastercard CEO Ajay Banga was upbeat about the results – and what’s next, particularly as it relates to securing an increasingly digital commerce-based world.
"We are executing well on our strategy and are pleased to deliver another quarter of record results," said Banga. "As the world becomes more connected, we remain very focused on security. Our investments in technologies like biometrics, tokens, encryption and artificial intelligence are redefining the way both consumers and transactions are protected."
By The Numbers
Net income in Q3 was up $1.43 billion, from 1.18 billion at the same time last year. Revenue came in at $3.4 billion, up from $2.8 billion a year ago, and beating analyst expectations of $3.2 billion. Earnings per share came in at $1.34 per share, up from $1.08 a year ago and beating analyst estimates of $1.23.
As of Sept. 30, the company's customers had issued 2.4 billion Mastercard and Maestro-branded cards worldwide. Gross dollar volume picked up 10 percent during the quarter, while purchase volume was up 11 percent.
“In the U.S., we continue to see steady economic growth, low unemployment and inflation,” said Banga on a post-earnings call. “Consumer sentiment is favorable.”
Security, Partnerships And Pushing For A More Digital World
Noting that the improved situation in worldwide markets – from the EU to Asia Pacific to Latin America – had contributed to “double-digit volume and transaction growth across most of our markets,” Banga told investors the focus is now on continuing to execute and expand its global payment digitization strategy.
He also noted the firm’s recent push to forge partnerships, particularly with PayPal, which has seen the implementation of Masterpass through Braintree to “broaden our digital acceptance footprint.” Banga also praised Mastercard’s same-day ACH system that is now up and running in the U.K. through its VocaLink acquisition, and coming soon to the U.S. market.
“We've just gone live yesterday, in fact, in the U.K. with a new image-based clearing system for the check and credit clearing company, which basically helps to speed up the traditional approach by digitizing that process,” Banga noted.
He also announced additional upcoming partnerships, including one with Costco, which will utilize Mastercard as its exclusive co-brand partner in Japan starting early next year. Banga also noted a new comprehensive agreement with Uber that “goes beyond acceptance to include activation and usage campaigns." The new partnership will also see Masterpass integrations in “select markets.”
Push payments got a rare call-out during Banga’s remarks as well. He noted that Mastercard’s push payment’s solution, Mastercard Send, is now capable of reaching “pretty much all debit cards in the U.S.” as well as other locations like physical cash-out points, mobile wallets and banks accounts in over 100 global markets. Users of the service have included the American Red Cross, which used Mastercard Send to push disbursements to consumer cards in hurricane-ravaged parts of Florida and Texas.
Another example Banga pointed out is its partnership with Western Union, whose U.S. customers will now have the option to receive funds from other family members and relatives in the U.S. directly to their debit cards.
Security was also a starring player, as some analysts were curious about how Banga felt the Equifax breach has impacted the card business. Banga noted that while he thought it would be a mistake to immediately equate all instances of fraud increases with Equifax, security remains top of mind for the company.
He further noted that the firm recently added an early detection system that alerts card issuers to the risk of future fraudulent activities, and has expanded tokenization for consumer card information that companies keep stored. Those tokenized card credentials are essentially unusable if stolen, lessening the chances that card credentials can be fraudulently used should a retailer’s database be hacked, Banga said. Mastercard noted that Netflix is the first company to have signed on to use its service.
"It's no secret right now that protection of consumer data is a hot topic," he said. "Safety and security is a key priority."
The Five Killer Stats
$3.8 trillion: Total value of transactions processed in 2017 so far (gross dollar volume)
$1.35 trillion: Total GDV for Q3
$406 billion: Total U.S. GDV for Q3 (30 percent of the total)
$908 billion: Total Global purchase volume
2.4 billion: Mastercard and Maestro-branded cards in circulation worldwide