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Mastercard Inc. executives are paying close attention to a new proposal in the U.S. Congress that could alter merchant choice in routing credit card payments. Concurrently, its earnings are riding the crest of a wave that includes consumer spending and the resurgence in travel.
A bipartisan bill sponsored by senators Richard Durbin, D-Ill., and Roger Marshall, R-Kan., that might arrive yet this week could enable merchant choice in routing their credit card transactions over networks other than those controlled by Mastercard or its rival Visa Inc. More than 10 years ago, a similar measure, sometimes called the Durbin Amendment, went into effect for routing debit card transactions. The new bill could be introduced this week, The Wall Street Journal reported.
“We read the same article,” Michael Miebach, Mastercard chief executive, responded to an analyst question during a Thursday conference call on its second-quarter results. “Clearly, it’s early because we haven’t seen the bill.”
Acknowledging that it’s speculative to discuss what the bill might include, Miebach said Mastercard believes in competition and participating in a “level playing field.” It has a focus on consumer choice by offering a variety of payment methods. “We are going to look at this proposed bill through this lens,” he said.
Questions about the practicalities of implementing this type of routing change abound, he added, while noting that Mastercard has made investments in ensuring the security of transaction processing. Technical aspects and the degree of similar investments by other providers are unknown.
Regulators also are eyeing buy now, pay later services. Mastercard Installments, its BNPL service, debuted in 2021. The Consumer Financial Protection Bureau launched in December an inquiry among a small group of BNPL providers into their practices. Miebach said Mastercard is “well positioned” because it ensures participating lenders are following responsible rules.
Among these lenders are new U.S. participants Cross River Bank, Evolve Bank & Trust, Live Oak Bank, and WebBank. Mastercard Installments undergirds the upcoming Apple Pay Later service from Apple Inc., expected this fall.
Overall, Mastercard reported $5.6 billion in second quarter revenue, up 22.2% from $4.5 billion in the 2021 second quarter. Net income of $2.3 billion increased 9.5% from $2.1 billion. Its switched transaction volume for the quarter of 30.4 million was up 11.8% from 27.2 million in the same quarter a year ago.
Cross-border volume was up 64% in the quarter from the 2021 second quarter. Rebounding travel activity has spurred this growth, and it’s a part of the business Mastercard expects will continue to be strong. “If people can travel, they will continue to travel as they did before Covid,” Miebach says.
