Mastercard Sees Cross-Border Volumes Up 19 Percent

Mastercard results released on Thursday (July 26) showed growth in international transactions, where double-digit percentage gains outpaced other metrics such as gross dollar volumes, which also showed healthy growth.

All in, revenue growth was 20 percent in the quarter, which in part reflected the benefit of acquisitions and revenue recognition changes. Those factors gave four percentage points of tailwind to the total top line. The tally of $3.7 billion bested Street estimates by just about $20 million, while earnings as reported on an adjusted basis came in at $1.66, which was 13 cents better than consensus.

As had been seen with Visa on Wednesday (July 25), the company also took reserves tied to litigation ongoing in the United States and the U.K. (focused on swipe fees), and that amount in the quarter came to $225 million, with almost all of that, at $210 million, allocated to U.S. merchants.

Drilling down a bit, gross dollar volumes were up 14 percent to $1.5 trillion. Of that, credit transactions edged debit, to a respective $757 billion and $718 billion. The United States showed 9 percent overall growth, and that rate was handily outpaced by the 16 percent seen in the rest of the world. Adjusted growth in switched transactions (adjusted for deconsolidation of Venezuelan operations) showed 17 percent gains to 18.1 billion transactions. On a similarly adjusted basis, cards in the field showed 7 percent growth to 2.4 billion. The vast bulk of that tally came from Mastercard-branded cards, at 1.9 billion cards; the remainder were Maestro cards.

Mastercard said in supplemental earnings materials that the cross-border volume fees, on a currency-neutral basis, were up 19 percent year over year, with volumes up 19 percent. Overall transaction processing fees were up 20 percent.

Speaking a bit granularly to certain markets, management stated on the call that Europe has been a relative outperformer, where dollar volume of transactions grew by nearly 22 percent.

The company set aside $225 million during the quarter for litigation costs with merchants in the U.S. and the U.K.; Mastercard said that $210 million of the money it set aside was for U.S. merchants.

CEO Ajay Banga and CFO Martina Hund-Mejean stated on the conference call with analysts that transaction growth had been in line with expectations and that trends remain in place for similar growth measured through the beginning of this week, and post-second quarter. As measured against last year, switched transactions are up 15 percent, according to commentary on the call, where the respective rates are 11 percent in the United States and 19 percent beyond those domestic borders. Not much has changed, said Banga, as “economic trends are generally positive.”

Turning to Vocalink, the U.K.-based payment systems company that was acquired by Mastercard last year, Banga told analysts that his firm remains “happy with the underlying trend” and opportunity that have presented – and are still presenting themselves – through moving money from card to card and account to account. Through those conduits, said the executive, Mastercard is able to reach roughly three billion bank accounts in 100 countries.