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Financial analysts gave MasterCard Inc. and Visa Inc. credit for leading a New York Stock Exchange rally Thursday as higher consumer spending on payment cards boosted the networks’ revenues. And processor Vantiv Inc. reported a 42% increase in merchant-processing revenues in the wake of its June acquisition of Mercury Payment Systems Inc.
MasterCard this morning reported third-quarter U.S. payment volume of $288 billion, up 8.2% from $267 billion a year earlier. Debit led the way, with purchase volume increasing 9.1% to $133 billion on 3.44 billion transactions, up 7.7%. Credit card purchase volume grew 7.4% to $155 billion on 1.72 billion transactions, up 4.7%.
MasterCard’s debit charge-volume growth outpaced Visa’s nearly 5% increase in the quarter ending Sept. 30 while Visa, which reported earnings after the market closed Wednesday, led in credit, up 12.7%. Visa posted total U.S. credit and debit card payment volume of $631 billion in its fourth quarter of fiscal 2014, an increase of 9.8%, on 12.3 billion transactions, up 7.9%.
While respectable, MasterCard’s volume growth would have been higher had not JPMorgan Chase & Co.’s conversion of most of its MasterCard consumer cards to the Visa brand begun in earnest in the quarter. The conversion will continue into 2015, MasterCard chief financial officer Martina Hund-Mejean told analysts during a conference call. Some of Chase’s cobranded card portfolios and corporate cards will remain MasterCard-branded.
Net income at MasterCard grew 15.5% over 2013’s third quarter to $1.02 billion on $2.5 billion in net revenues, up 12.8%. Viewed somewhat by analysts as proxies for consumers’ financial well-being, the networks enjoyed a reward on Wall Street today. MasterCard’s share price closed Thursday up 9.4% from Wednesday’s close while investors pushed Visa’s stock up 10.2%.
On the digital front, MasterCard chief executive Ajay Banga indicated that Apple Inc.’s Oct. 20 launch of its Apple Pay service will help boost MasterCard’s mobile-payment volumes, but he didn’t say by how much. On Wednesday, Visa chief executive Charles Scharf said that of the 1 million-plus cards Apple CEO Tim Cook said had been loaded into Apple Pay’s digital wallet, 600,000 were Visa-branded.
“The recent launch of Apple Pay will only help with the convergence of the physical and digital worlds,” Banga said during the call, adding that MasterCard worked with Apple for two years. Much of that work involved tokenization—technology to mask card numbers for securing transactions. (Banga confirmed that like Visa, MasterCard will put a freeze on its new tokenization fees through 2015.) But Banga said Apple Pay isn’t the only game in town, and that MasterCard will work on mobile-pay initiatives around the world.
“There are many other elements of mobile payments, and we’re working with all of them,” he said.
Meanwhile, suburban Cincinnati payment processor Vantiv reported this morning that third-quarter net revenue in its Merchant Services segment jumped 42% to $297.7 million compared with $209.7 million in the prior-year period. The revenue boost came on the heels of a 31% increase in transactions—4.4 billion versus 3.35 billion a year earlier—and an 8% increase in net revenue per transaction.
Vantiv in June completed its $1.65 billion acquisition of Durango, Colo.-based based Mercury Payment Systems, the leader in so-called integrated payment services that combine business-management software with merchant processing for small and medium-sized businesses.
Vantiv also processed 962 million transactions for card issuers in the third quarter, up 4% from 921 million a year earlier. The company reported total revenues increased 31% to $697.1 million, while net income fell 16% to $30 million.
