Quarter after quarter, MasterCard has made its digital intentions clear: it wants to be leading the conversations.
Besides the evolution of its MasterPass digital wallet — which is now in 29 countries — CEO Ajay Banga had plenty to share about what he envisions for the payments industry in terms of delivering the types of technology and innovations that consumers actually want.
Admitting that it’s a busy space to be in, Banga also spoke optimistically about how there’s still plenty of space for major digital commerce players to take over — particularly since one solution hasn’t seemed to dominate the market. Specifically, he spoke about the popularity of browser versus in-app payments.
“There’s some interesting new developments you’ve seen with contactless payments and in-app payments. I don’t know yet that browser-based payments will go anywhere with that bunch of digital giants. But remember, browser is the largest portion of digital payments today. And frankly — out three to four years, it still will be overwhelmingly the large percentage of digital payments,” Banga said.
“I do think that the biggest conversation that is going in digital is the safety of security of those transactions. And a lot of our effort and energy has therefore gone into tokenization — not just for MasterPass, but for our banks and merchants. Not just for new transactions, but even for cards on file,” he continued.
Banga spoke toward his belief that digital is “going through the cycle” of what he would expect out of the evolution of services. What he was referencing was the conversations that started four or five years ago about mobile operators being able to create their own payment systems based on the fact that they were already connecting with millions and billions of consumers through their services.
But overtime? A lot more players around the world joined and the conversations shifted. And Apple, Samsung and Google joined the conversation (among plenty of other smaller players), making the stakes even higher.
“My general sense is that the mobile-operated payment system for person to merchant has yet to prove itself in scale in any marketplace at all,” Banga said. “For person-to-person payments, there’s a little more going on. I think that’s a bit of a challenge where they are going.”
As mentioned above, Banga spoke about the security conversations surrounding digital, especially with all the concerns about post-EMV migration fraud that’s shifting fraud online. This is one of the reasons, he said, that the industry agreed on one standard for tokenization.
“[Fraud is] going to migrate to online. And that’s what’s happened in every country around the world. So our focus here is not just on solving Band-Aids with EMV, it’s on making the whole payment system more secure over time. That’s why tokenization is key, and a large amount of our investment and those of our competitors is going into that space,” Banga said.
That means ensuring there isn’t friction between banks and the merchants they work with to implement those standards.
“So you’re going to see a lot of energy and effort in that space. And I think the other piece that will come into digital will be the intelligence that will drive the capability of banks and merchants to drive better transactions, better relationships with their consumers,” he continued. “That’s what I think about digital. But 85 percent of the world’s transactions are still in cash. There’s a lot of space out here.”
MasterCard’s Q4 Results
MasterCard posted a solid quarter with net income of $890 million, an 11 percent increase from the year prior. This was on a revenue of $2.5 billion, a 4 percent increase from the year prior. Overall transactions were up 12 percent to 13 billion. Cross-border payments volume saw a 12 percent increase. Worldwide purchase volume during the quarter was up 12 percent from 2014’s Q4 to $883 billion.
For the full year 2015, MasterCard saw an operating income of $3.9 billion, an 8 percent increase. Net revenue for 2015 was $9.7 billion, an increase of 2 percent. Transaction processing growth was 12 percent and cross-border volume growth was 16 percent, which MasterCard said contributed to the net revenue growth in the full-year period.
And as of Dec. 31, 2015, MasterCard has 2.3 billion MasterCard and Maestro-branded cards.
“Despite a challenging economy, we were able to deliver solid results for the quarter and the full year in 2015,” Banga wrote in the prepared earnings release. “Entering 2016, while uncertainty in the global economy persists, the fundamentals of our business and our approach remain unchanged. We continue to be laser focused on our strategy to lead payment innovation in an increasingly digital world with solutions such as MasterPass, while growing the use of electronic payments through our products, partnerships and increased acceptance at the point-of-sale.”