Mastercard Results Show Impact Of Cross-Border Spending (And Travel) Slump

Mastercard Results Show Impact Of Cross-Border Spending (And Travel) Slump

For Mastercard: Decent debit trends. Domestic spending remains positive in the U.S. But the pandemic has pressured international activity — and, for the time being, results.

To that end, Mastercard reported third-quarter results that missed expectations as cross-border transactions plummeted in the wake of the pandemic and travel ground to a halt.

In terms of headline numbers, adjusted earnings per share missed consensus by six pennies. Revenues of $3.8 billion were down by 14 percent, missing the Street projection of $3.9 billion.

Delving into the additional materials that accompanied earnings, the company said gross dollar volumes were up 1.2 percent to $1.6 trillion. Purchase volume was up 2.3 percent to $1.2 trillion.

Drilling down a bit into regional activity, the company said the U.S. saw 4 percent growth in gross dollar volume. Within the U.S., debit was up 20 percent to $299 million, while credit was down a bit more than 12 percent to $214 million in the most recent quarter. Switched transactions, overall, grew by 5 percent to 23.8 billion.

While domestic spending, according to CEO Ajay Banga, was “encouraging,” travel spending — namely, cross-border activity — remains a “challenge.” Through the quarter, cross-border volumes were down 36 percent globally.

With some granularity into trends after the September quarter’s close, the company has seen some continuation of those trends.

For instance, according to the supplementals, during the week that ended Oct. 21, switched volumes overall were up 5 percent, but cross-border volumes were down 30 percent.

Banja said on the conference call with analysts that travel within the EU  has been improving but “cross border travel outside the EU has shown only limited recovery.”

But at a high level, he told analysts, the company is “positioning itself for the future by driving the accelerated shift towards electronic payments.” Mastercard’s own research, he said, indicates that 7 in 10 people surveyed think the shift will be permanent.

Contactless penetration reached 41 percent of in person transactions globally compared to 37 percent in the second quarter — and 13 percent a year ago.

Tokenization has also been gaining ground, noted Banga, who said those transactions were 8 percent of overall switched transactions.

“At the infrastructure level, we continue to make good progress with our build-outs and have a strong position in all major geographic regions, including key markets like the US, the UK, Nordics and Saudi Arabia building off our strong position and infrastructure, but also making good progress and application there utilizing our multi rail capability,” he said.

CFO Sachin Mehra said on the earnings call that cross-border spending volumes have been healthy across clothing and home improvement, which are discretionary, while grocery spend has been positive as well. Card-not-present spending was up between 20 to 30 percent into the weeks subsequent to the end of the quarter, while card present activity slumped close to 80 percent, supplemental materials showed.

But with a nod to overall cross-border spend, Banga said it will take time for consumers to build the confidence needed to travel.

Mastercard shares were off roughly 6 percent in intraday trading.

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