Mastercard Sees 17 Pct X-Border Volume Growth; B2B A Key Market

Mastercard posted results Tuesday (Oct. 29) that showed continued traction in new payment flows, especially B2B, core debit and credit spending.

In terms of headline statistics, the firm reported adjusted earnings of $2.15, which topped the estimates of $2.01, while net revenue of $4.45 billion, up 15 percent year on year, was better than consensus of $4.41 billion.

Management said on the conference call with analysts that acquisitions were responsible for 1 percentage point of that growth.

Drilling down into supplemental materials provided by the company alongside the earnings announcement, the company said total gross dollar volumes were up 14 percent worldwide to $1.6 trillion, where the United States saw those transactions up by 12 percent to a total of $494 billion and the rest of the world saw 16 percent growth to the remaining $1.1 trillion.

Switched transactions grew by 20 percent to 22.9 billion, and Mastercard increased its card count 6 percent to 2.6 billion in the latest period.

Cross-border volumes were up 17 percent year on year, according to the company, reflected in a revenue contribution that grew 16 percent on an FX-neutral basis to $1.5 billion.

Mastercard CEO Ajay Banga said on the earnings call that growth was underpinned by a macro environment that remains unchanged, where consumer spending remains relatively strong “with some moderation vs. 2018.” He said geopolitical factors that include trade disputes in Asia are weighing on business sentiment, while uncertainty tied to Brexit in Europe (which still showed growth) continues. Latin America offered a mixed picture, where some weakness was seen in Mexico and Argentina.

Yet double-digit volume growth continued for Mastercard across most of the firm’s markets, Banga said, with renewals in core payments flows including credit, debit and commercial.

In one example, he said the company had extended its global agreement with Citigroup for an additional five years to 2029, and will remain the bank’s exclusive partner for Citi branded credit and debit business. He also noted that efforts continue to build out Citi’s trade and treasury offerings for corporate clients, which in turn should help spur continued traction within the B2B space.

Commercial Card Pacts and Click to Pay

In another example, he said Mastercard had renewed its pacts with Bank of America across several business lines including small business credit and travel cards in the United States. Bank of America has also committed to Mastercard Track B2B Hub, part of an expansion of the trade platform launched last year, an effort that will bring “enhanced accounts payable capabilities to its clients in the United States,” Banga said. Other efforts to expand the ecosystem of partners include relationships with telcos in Latin America and consumer credit programs in India with the country’s largest airline.

He noted, too, that Click to Pay is now live in the U.S., “aiming at enabling a faster, more secure checkout experience,” as Banga told analysts, “across web and mobile sites, mobile phone apps and connected devices.” He said merchants would benefit from access to machine learning and artificial intelligence offerings that provide added layers of security.

The movement toward digital first and new payment flows, he said, further the drive to operate as a “one-stop shop” for products delivered across multiple rails — including real-time payments.

“In the meantime, we are progressing with B2B initiatives,” Banga told analysts. “We are addressing business payments comprehensively, both through accounts payable and accounts receivables.”

That comes through the relatively rich payments data and information on offer through Mastercard Track, he said, through a single connection linking multiple payments and rails. As an example of B2B focus he shone a spotlight on the announcement earlier this month of Payment on Delivery, which lets drivers delivering physical goods to a store get paid electronically in real time.

CFO Sachin Mehra said the cross-border volume growth was in line with expectations and was driven by double-digit growth across most regions.

In response to analyst questions about cross-border growth, Mehra said mid-teens growth is likely to be in place through the full year 2019. “What we are seeing is that U.S. inbound and outbound cross-border volumes are very much in line,” he said. “China cross-border growth also appears to be stable in the low double-digit range.” He said cross-border growth has been driven in part by commercial travel programs.

Through Oct. 21, global growth in switched transactions was up 15 percent, he said, and in the U.S. switched transactions were up 11 percent. Switched volumes outside the U.S. were up 19 percent, he said. Cross-border volumes were up 16 percent globally. For forward guidance, the company expects revenues to grow in the high-teens percentage rate.