Given that Mastercard does business in 210 countries, few companies have greater exposure to — and insight on — the global economy and the consumer and business spending trends that drive it.
In delivering its third-quarter results Thursday (Oct 28) for the three months ending Sept. 30, the New York-based payments network and technology firm said its revenues rose 30% thanks to a 20% increase in gross dollar volumes to $2 trillion, led by a 52% jump in cross-border volumes.
“We delivered strong revenue and earnings growth this quarter, we are seeing continued strength in domestic spending in most markets, while overall cross border volumes are back to 2019 levels,” Mastercard CEO Michael Miebach told analysts and investors on the company’s conference call, adding that “there remains significant room for growth in cross border travel.”
The Travel Barometer
Miebach said Mastercard’s results reflect a continued uptrend in discretionary spending, noting that travel levels have risen from 48% of pre-pandemic 2019 levels in Q2, to 72% through the end of September.
“Now in the first three weeks of October, travel is tracking more like 77%,” he said, “and what that signals to us very clearly is, if people can travel, they will travel and I think that’s really, really important to recognize.”
Miebach pointed to a mix of factors for the rebound, particularly given a spate of recent announcements surrounding the reopening of borders, including action taken by the U.S., and Europe, as well as signals from the U.K. and some promising developments in Asia too, including less burdensome quarantine requirements.
“We’re starting to see corridors between Singapore and Australia, Singapore and India, these corridors are all starting to open up and are all encouraging signs for us from a cross border travel standpoint,” he said.
One example he pointed to is the increase in airline bookings, which he said was further proof that people want to — and will — move about the world again once restrictions are lifted.
“So we remain optimistic on this front. I can’t really tell you specifically which day or which month [travel] is going to reach 100% of 2019 levels, but generally the trend is moving in the right direction,” Miebach said.
As far as how that plays out between consumers’ growing bias for debit over credit, CFO Sachin Mehra told investors that the company’s view on this trend remains the same as it has for the past year.
“We maintain that we think that there will be a reversion to the mean as economies come back and as discretionary spending picks up and that is exactly what you’re seeing right now,” Mehra said. “As people are spending more on discretionary categories — lodging, travel, restaurants — credit is definitely coming back to top of wallet,” he added, predicting the reversion will on credit will play out over the near to medium term.
Installments and Other Areas of Note
As much as Mastercard enjoyed solid growth in its core metrics, the company also flagged the fact that its “other revenues” increased 37%, thanks in part to a series of acquisitions, as well as growth in its Cyber & Intelligence and Data & Services units.
In discussing the company’s recently launched endeavor into the fast-growing buy now, pay later (BPPL) space, Miebach said the “Mastercard Installments” program was already enjoying a strong initial flow of new partners in the U.S. and abroad.
“[MasterCard installments] is a proposition that we have built into our network that is delivered with no hassles for merchants or for lenders at the point of sale, so the reaction from banks is strong,” he said, recounting a recent conversation he had with a banking partner in Italy.
“[They were saying] ‘wow, this makes a lot of sense.’ It’s really avoiding significant headaches for us and gets us into a space that we all believe is important from a consumer perspective,” he said.
Crypto and Open Banking Growth
Mastercard’s management also made a point of highlighting its “expanding crypto services portfolio,” coming less than a month after its acquisition of CipherTrace, which it called a security and fraud monitoring company with expertise, technology and insights into more than 900 cryptocurrencies, as well as its recently announced agreements with Bakkt.
“Our crypto program is based on the same principles of engagement, and allows consumers to easily buy crypto assets with their MasterCard, spend their crypto balances wherever MasterCard is accepted, cash out their proceeds with MasterCard Send, and earn rewards in the form of crypto or even NFTs,” Miebach said. “We see a growing services opportunities in this space,” he added, while also holding out hope for new contributions from its planned acquisition of open banking tech firm Aiia which it announced last month.