Mastercard’s Digital-First Initiatives Increase Card Spend by 10%

“The headline,” Mastercard CEO Michael Miebach said, “is that consumer spending is resilient and cross-border travel continues to recover.”

During the payment network’s third quarter earnings call on Thursday (Oct. 27), Miebach took note of the foundations of that resilience: Unemployment remains low, wages are rising, and, he added “consumer savings remain elevated and credit is readily accessible.”

And amid the great reopening, the spending itself is shifting a bit, away from the home-centric categories of furnishings and appliances and towards experiences and gatherings. Cross-border travel-related spending has reached 124% of 2019’s third quarter levels.

Overall, gross dollar volumes (GDV) surged 11% to $2 trillion. Debit and prepaid spending globally was flat at $1 trillion, while credit GDV was up 8.6% to $993 billion.

Card counts grew 5% to 3 billion.

Supplemental materials detailed a business update through Friday (Oct. 21): Month to date, switched volumes were up 17% from the same period last year, decelerating a point from the third quarter’s gains; cross-border volumes through Friday were up 36%, decelerating from September’s 44% gains.

CFO Sachin Mehra said that “we continue to believe there is more room to grow as several travel corridors, particularly in Asia, still remain restricted and airline industry capacity continues to build back up. We remain well positioned to capitalize on this growth.”

Another shift — the shift to digital — remains firmly in place.

During the call, management detailed that its digital-first initiative — where consumers acquire and then can use cards in near-real time — has lifted approval rates on average by two percentage points, reduced fraud on average by four basis points and increased spend for active accounts on average by 10%.

And, as Miebach noted, “the preference for contactless payments that grew over the last two years continues.” More than half of in-person transactions are “tapped,” up from a third pre-pandemic.

Open Banking and B2B’s ‘Huge Opportunity’

Touching on open banking, Miebach stated that “while it is early in the game, open banking is a tremendous opportunity…and we are the partner that brings what’s needed to scale and instill confidence in this space” as a provider of consumer-permissioned data.

During the question-and-answer session with analysts, and in discussion of revenue diversification, Miebach said Mastercard is targeting new payment flows. That includes crypto, where the network is deploying its payment capabilities to enable consumers to spend their crypto holdings on card and cash out their crypto wallets with Mastercard Send.

Separately, B2B represents a “huge opportunity” from a volume perspective. Miebach told analysts that “we continue to target B2B accounts payable flows by expanding access and reach, leveraging our virtual card capabilities,” pointing to the company’s recent deal with Marqeta to leverage virtual cards and instant payments to speed up supplier transactions.

The larger opportunity also includes commercial POS, a $14 trillion opportunity that lies, in Miebach’s words, “between B2B and small business…it’s a huge space with a lot of cash and checks. We don’t need to build a lot,” to capture that opportunity, he said, and “it’s a space that we have not penetrated significantly in the past.”

Analysts also asked the newly-announced Federal Reserve’s rules mandating that there be at least two payment networks in place to process debit transactions might impact the firm. Miebach said that “we have some time, but we’ll be ready” for the mid-2023 deadline.

“We’ll just continue to compete with all the assets we have in debit,” Miebach said. “I’m not really sure what this will do to the market, but we’ll certainly be there leveraging our technology to win more debit in the United States.”