Digital Transactions Authoritative, insightful and timely information for payments professionals
By John Stewart and Jim Daly
With products like its MasterPass digital wallet, MasterCard Inc. has stepped up its efforts to stake a claim in the emerging market for digital payments. But the company is loath to commit itself too soon to any particular technology, according to the card network’s chief executive, Ajay Banga. “There’s going to be lots of players playing in this space. We’re just keen to be a player playing in all of [the digital markets],” he said during the company’s second-quarter earnings call on Wednesday. “We’re placing bets by being relatively agnostic [about technology].”
As an example, MasterCard has decided to invest in twin approaches to process mobile payments, he said during the call with Wall Street analysts. In the face of internal discussion regarding whether to back either secure elements or host card emulation, Banga said he reacted by declaring, “We’re going to do both.”
Mobile payments may rely on a phone-based chip that can house sensitive payment credentials, but an alternative approach called host card emulation allows these credentials to be stored in a cloud configuration and delivered to the phone when needed.
This “agnostic” approach should benefit MasterCard in what is becoming an increasingly complex marketplace for payments, Banga said. “The digital world is a complicated one,” he told the analysts. “You’ve got to find a way to thread your needle through it.”
In other remarks, Banga touted the benefits of MasterCard’s acquisition strategy, pointing especially to the company’s February 2014 purchase of C-Sam, a mobile-payments technology startup. “That’s allowing us to accelerate the expansion of MasterPass” around the world, he said. With the Indian market now live on the platform, MasterPass is active in 24 geographic markets globally, Banga said, adding, “we are clearly seeing the benefits that come from acquisitions.” Separately, MasterCard announced Wednesday that MasterPass is now accepted by more than 250,000 merchants worldwide.
One other very recent acquisition is data-analytics firm Applied Predictive Technologies Inc., which MasterCard in April agreed to buy for $600 million.
While admitting that MasterCard is still seeing some effects from JPMorgan Chase & Co.’s decision to convert its card portfolio entirely to Visa, that “deconversion” will be over with by the end of this year, he said.
For the quarter, MasterCard posted 12 billion processed transactions worldwide, up 13% from 10.6 billion in the same quarter last year. Its U.S. gross dollar volume totaled $364 billion, a 7% rise from $339 billion. The volume breakdown is $192 billion for debit (up 8%) and $172 billion for credit (up 7%).
The company claims 2.19 billion cards worldwide, up 8% from 2.02 billion in 2014. This number includes 1.49 billion MasterCard-branded cards and 701 million Maestro cards.
Revenue totaled $2.39 billion, little changed from $2.37 billion a year ago. Net income dipped slightly to $921 million compared to $931 million in 2014.
Also Wednesday morning, processor Vantiv Inc. reported that merchant-services revenues increased 37% in the second quarter to $337.1 million from $245.6 million a year earlier, thanks mainly to double-digit increases in transactions and revenue per transaction. Vantiv, based in suburban Cincinnati, bought tech-oriented independent sales organization Mercury Payment Systems in 2014’s second quarter.
Merchant transactions totaled 4.74 billion, up 23% from 3.87 billion a year earlier, and revenue per merchant transaction averaged 7.12 cents, an increase of 12% from 6.35 cents last year.
