Mastercard Gains B2B Payments Traction, Sees Double-Digit Growth

Strength in global consumer spending — along with double-digit cross-border gains and traction in B2B payments — marked third-quarter Mastercard results released Tuesday (Oct. 30), as management eyes digital checkout and other high-tech payments initiatives in the U.S. and beyond.

In terms of headline numbers, Mastercard’s revenues of $3.9 billion, up more than 14.7 percent year on year, edged analysts’ estimates slightly, though management noted that revenue on a currency-neutral basis, and excluding items, was up 17 percent.

Earnings of $1.82 topped estimates of $1.68.

Results By The (Double) Digits

The company said that gross dollar volume, which is the total dollar volume of transactions processed, reached $1.4 trillion, gaining 13 percent. Breaking that down a bit, debit and prepaid transactions stood at $720 billion, up from $642 billion last year. Credit transactions were $748 billion in the quarter, which was up from $705 billion last year.

Regionally speaking, the United States saw 9 percent growth year on year to $442 billion in gross dollar volume, while the rest of the world saw faster growth, at 15 percent to just over $1 trillion.

Switched transactions were up 16 percent, adjusted for the Venezuelan deconsolidation, at 18.8 billion transactions, or up 11.7 percent on a reported basis. Cards at the end of the quarter stood at 2.4 billion, up from last year’s 2.3 billion.

Cross-border dollar volume fees were $1.3 billion, up 18 percent on a currency-neutral basis.

Transaction processing fees were $1.9 billion, up 17 percent.

The Macro Picture

In remarks during the conference call following the release, and in terms of the bigger macroeconomic picture, CEO Ajay Banga stated that “we continue to see solid overall growth, although just like others, we are keeping an eye out for potential impacts related to fiscal stimulus reductions, rising interest rates and possibly increased trade barriers, which could slow global economic growth. In addition, we are monitoring the impact of a stronger U.S. dollar on cross-border flows and the economic weakness in some emerging market countries.”

Conditions in the U.S. remain stable, and Banga said the firm estimated that retail sales were strong in the third quarter, up more than 5 percent (excluding automobile and gas-related activity).

In response to analyst questions, reflecting on trends into the current quarter in terms of macro signs, Banga said that through the three weeks ending Oct. 21, “you’ll find that consumer spending remains kind of robust, or even a little better in some cases.”

Touching on cross-border activity, CFO Martina Hund-Mejean stated that “cross border has continued to be very strong,” though she noted that with inbound activity into the U.S., on the heels of the strengthening dollar, “the growth rate has been declining versus what we saw in 2Q.”

Digital Efforts And B2B Via Mastercard Track

With a specific nod to digital efforts, the CEO recounted that last week, the company was linked with FinTech Grab, a digital wallet provider and ridesharing service in Southeast Asia. As of the announcement of the partnership, the app had been downloaded onto more than 110 million mobile devices in the region.

Banga also said that “on the B2B front, we are really excited about the launch of Mastercard Track,” which is billed as a global trade platform, one that was developed in collaboration with Microsoft, embracing 150 million firms across 75 countries. “Track basically solves key challenges in the procure-to-pay process, including managing supply chain risk and creating more transparency in the B2B payments process,” he told analysts. “We’re going to deploy the platform through a phased rollout. The first phase is focused on helping corporations with the cumbersome process of compliance screening of new and existing suppliers.”

Hund-Mejean said of B2B transactions, “we said in the past that it is about 11 percent of our total volume in this point in time, and that it is growing in the mid to high teens depending on how you look at it.” The opportunity worldwide is $120 trillion, she added.

Banga recounted the debut earlier this month of Mastercard Bill Pay Exchange as part of faster payments endeavors, enabling U.S. consumers to view, manage and pay bills instantly from bank accounts, done in tandem with a community of more than 100,000 billers and built on the firm’s existing bill pay network.

SRC, Too

In efforts to boost the consumer experience in eCommerce, Banga pointed to the expectation that the firm will begin the rollout of SRC — a push toward a standardized, secure experience at the point of sale – during the second half of next year.

“I’m pretty confident that the issuing and acquiring and merchant community will see a lot of value out of SRC,” he told analysts, stating that “it’s just harder for a merchant or an issuing bank or an acquiring bank to have to handle multiple checkout options for the purposes of digital and online purchases. And so both of those are appealing to the entire community, and that appeal is what we’re hearing back from them.”

As for a timeframe, he stated that “it’s going to be a run. It’s not going to be something that’s going to end in a 100-yard dash. We’ve got to get it out, get the standards, get all the work done to get it launched out there, get issuing, acquiring and merchant systems to accept these new standards, work with them and then allow us to roll that out over three, four years,” he told analysts.