Mastercard’s latest earnings showed solid growth to end the year

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Mastercard, the second largest US card network, posted $3.8 billion in net revenue in Q4 2018, marking a 15% year-over-year (YoY) increase driven by expanded transaction volume, according to the firm’s earnings release. That marks a deceleration from the 20% YoY revenue growth Mastercard saw in Q4 2017.

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Mastercard CEO Ajay Banga highlighted that Mastercard “had a very strong end to the year bringing 2018 to a record close,” in the company’s earnings call.

Mastercard processed $1.55 trillion in worldwide gross dollar volume (GDV) in Q4 2018. That represents 14% annual growth on a local currency basis, marking a slight acceleration from Q4 2017, when Mastercard’s worldwide GDV grew 13% YoY to $1.4 billion. US and international markets grew 10% and 16% respectively, and Banga highlighted low unemployment rates and “overall still healthy consumer confidence” as drivers of growth in US volume. Mastercard’s growth can also be attributed to several international and domestic efforts: It formed partnerships with Cardstream and PPROto accelerate Masterpass and Pay by Bank adoption in the UK, partnered with Grab to issue virtual prepaid cards in Southeast Asia, and began deploying its ATM Cash Pick-Up service in the US, with plans to expand it throughout 2019.
Mastercard has a worldwide network of 5 billion cards in circulation. Mastercard-branded cards grew by 210 million YoY, while Maestro cards declined by 99 million. That represents a 5% YoY increase in total cards added — which is flat with 5% annual growth in cards during Q4 2017, but a 7% increase when accounting for “Venezuelan deconsolidation.” Partnerships on cobrands and consumers’ appetite for cards likely contributed to this growth.

Mastercard has also begun several moves to propel growth across segments going forward:

Mastercard’s partners plan to issue contactless cards over the next two years.Banga said that the firm received commitments from issuers — including Capital One, Citi, Santander, HSBC, and FIS for credit unions, among others — reaching “two-thirds of [Mastercard’s] total US consumer volume” to issue contactless cards over the next two years. During Q4 2018, Mastercard eliminated the requirement for signatures on the back of credit and debit cards because it was unnecessary in preventing card fraud. Mainstream issuance of contactless cards can be another way for Mastercard to bolster security on its network and boost overall volume as contactless payments become more popular worldwide and begin to mainstream in the US.
And the firm is reportedly bolstering its cross-border offerings.Mastercard recently outbid Visa — with a $305 million offer compared with Visa’s $250.6 million offer — in an attempt to acquire Earthport, a UK-based firm that streamlines cross-border transfers for banks and remittance firms through an application programming interface (API). Warren Kneeshaw, the executive vice president of investor relations at Mastercard, acknowledged the acquisition in the firm’s earnings call, but declined to comment further on the deal, which isn’t yet closed. Mastercard’s cross-border volume grew 17% annually in Q4 2018, and the acquisition could ultimately accelerate that growth and give Mastercard a quick advantage in the cross-border payments space.

Source: Business Insider