Mastercard Reckons With a Cap One Impact As Its Crypto Investment Grows

The payments industry may soon be wrestling with the fallout from the upcoming $35-billion merger of Capital One Financial Corp. and Discover Financial Services, and one key question emerging from the deal is how it will affect Mastercard, the network for Cap One’s credit and debit cards.

Early on Thursday, Mastercard gave its answer. ”We expect to continue to have a strong relationship with Capital One,” Sachin Mehra, the card network’s chief financial officer, said during a conference call to discuss first-quarter results. “We’ll keep you updated.” In the combination, expected to close May 18, Cap One has said it expects to migrate all of its debit cards and at least some of its credit cards to the Discover Network following the deal’s consummation.

Capital One’s credit card volume totaled $157.9 billion in the March quarter, while Mastercard’s U.S. credit card volume in the quarter, as reported Thursday, came to $386 billion. The bank has not reported a specific number for its debit card volume. Mastercard reported first-quarter U.S. debit volume of $378 billion.

“I think you’re aware about the fact that those debit volumes are primarily on the Mastercard network. And we built in our best assumptions both from a timing and a migration pace standpoint into the full-year thoughts that I’ve shared with you today. So, again, things might move around, and they likely will just because ours is a forecast. There’s no predictability,” Mehra said during the conference call, though he added, “we’ll keep you updated.”

Meanwhile, as cryptocurrency slowly gains a toehold in payments, Mastercard and other networks have begun investing in platforms that could handle increasing payment volumes in digital currency. “Crypto is a very interesting space where we’ve been investing,” noted Michael Miebach, Mastercard’s chief executive, during the earnings call.

Stablecoins, in particular, have captured interest at Mastercard and other networks, as they are tied to a national currency like the dollar and so are not subject to wild swings in value day to day. Miebach indeed called attention during the call to a venture to enable stablecoin settlement on its network, working with the Canada-based processor Nuvei Corp.

But Miebach called for further development of crypto’s underlying technology and more guidance from regulators. This is needed before payments networks can move more quickly, he said. “There isn’t sufficient regulatory clarity,” he said.

For the quarter, Mastercard reported gross dollar volume of $764 billion in the U.S. market, up 7% year-over-year. Worldwide, volume totaled $2.42 billion, a 9% increase. Net revenue grew 17% to $7.25 billion, while adjusted net income increased 13% to $3.41 billion.