Mastercard Outlines a Strong Quarter As It Pursues Strategies in Crypto, 5G, And Open Banking

As they have for rival Visa Inc., transaction volumes are continuing to improve for Mastercard Inc. as world commerce stages its recovery from the impact of the pandemic. “The strong momentum we started the year with accelerated this quarter,” chief executive Michael Miebach said Thursday morning during a session with equity analysts to discuss the company’s second-quarter performance.

The improvement comes as domestic spending recovers in many of Mastercard’s global markets and cross-border card-not-present volume remains strong, Miebach said. And, as business travelers and consumers feel more confident about boarding airplanes and staying in hotels, “we are in position to capitalize on a return to travel,” he added. Contactless technology, meanwhile, accounted for 45% of in-person transactions globally in the quarter, up from 37% a year ago. 

Miebach outlined an optimistic outlook for a wide variety of recently introduced initiatives expected to add momentum in coming years, including cryptocurrency, 5G connectivity, and open banking. And for now, Mastercard’s boss foresees a continuing tailwind from consumers’ return to spending. “The pent-up demand at some point is going to level out, but there’s still some pent-up demand to go,” he noted.

One potential cloud on the horizon, he acknowledged, is a renewed discussion in the industry, and particularly a growing movement among merchants, regarding changes to the 11-year-old Durbin Amendment. Merchants want to gain more control over debit card acceptance costs, while some argue cost controls should extend to credit cards.

“We have built a very positive relationship with the administration, and with lawmakers on the Hill,” Miebach said. “We’re monitoring this very closely.”

Miebach argued that the history of Durbin has proved that “costs have gone up and benefits have been reduced” for the debit card industry overall. He added the company has been providing data on that result to lawmakers. If extended to credit cards, he told the analysts, the card market “will be impacted, and not in a positive way.” The law currently requires issuers to offer network choice to merchants and caps debit interchange pricing on cards issued by financial institutions with $10 billion or more in assets.

The company is notably optimistic about its move toward ultimately processing stablecoins—digital currency whose value is tied to national fiat currencies like the dollar—directly on its platform. The network outlined last week a pilot to test converting crypto coins to stablecoins for acceptance of crypto-backed cards on the network.

But while the network is moving toward stablecoins, Miebach said he is less enthusiastic about cryptocurrency whose valuation fluctuates, in some cases with wild swings. “We won’t be enabling that as a settlement currency on our network,” he said.

With the closing in November of Mastercard’s acquisition of Finicity Corp., Miebach said the company has added a key element to its strategy in open banking. “I see a lot of momentum in engaging with banks,” he said. He added Mastercard is working on “expanding the product set” offered by Finicity.

Companies like Finicity enable links between fintechs and consumers’ bank accounts to verify account ownership and funds availability. The market has heated up in the past year as both Visa and Mastercard have sought to acquire open-banking assets. Visa recently agreed to pay $2.15 billion to acquire Europe’s Tink AB in a move that followed the network’s withdrawal of a $5.3-billion offer for Plaid Inc. amid objections from federal antitrust authorities.

For the second quarter, gross dollar volume globally for Mastercard came to $1.9 trillion, up 33% year-over-year. Debit and prepaid volume accounted for 55% of that total. In the U.S. market, volume totaled $619 million, up 34%, with debit and prepaid making up 56% of that number. Total cards, including Mastercard and Maestro cards, came to 2.85 billion worldwide, up 8%. Revenue for the quarter was $4.53 billion, a 36% increase.