Mastercard Reports Strong Volume Growth, but Is Keeping an Eye on the Coronavirus

Mastercard Inc. on Wednesday reported double-digit growth in fourth-quarter purchase volume and transactions, but reduced economic activity from the Coronavirus that originated in China could put a crimp on growth early this year.

“We’ll take this as it comes, one step at a time,” Mastercard chief executive Ajay Banga said on a morning conference call with analysts. “That’s the only way to look at it.”

Airlines have cut flights to and from China as the respiratory virus spreads worldwide, according to news reports, which means fewer Chinese tourists and business travelers spending money abroad. Mastercard chief financial officer Sachin Mehra said on the call that “a decent portion” of Mastercard’s Chinese inbound and outbound cross-border volume comes from e-commerce, “so it provides some level of a hedge. We’ll continue to monitor the environment; it’s too early to tell at this point in time how this thing plays out.”

U.S. payments companies still don’t have much of a presence within China itself thanks to long-standing government restrictions, but that’s beginning to change, especially with a recently announced trade deal between the two countries.

Mastercard reported $1.28 trillion in worldwide purchase volume in the fourth quarter, a 12.5% increase from $1.15 trillion a year earlier when adjusted on a local-currency basis. Global purchase transactions on Mastercard’s network jumped 18.8% to 29.4 billion while transactions switched by Mastercard rose 19% to 23.8 billion. 

In the United States, Mastercard posted combined credit and debit purchase volume of $449 billion, up 10% from $408 billion in 2018’s fourth quarter. Credit card purchase volume rose 11.5% to $244 billion while debit volume increased 8.2% to $205 billion.

Banga reported Mastercard renewed and extended its agreement with one of its largest U.S. issuers, Capital One Financial Corp. He also said credit and debit cards enabled for contactless transactions are continuing to penetrate Mastercard’s U.S. market, with 70% of the card base expected to be reissued as contactless cards in the next 12 to 14 months.

Meanwhile, after an active year of acquisitions, Mastercard will continue to hunt for more deals as it works to broaden its base of payment-processing and ancillary services in data security and other niches, according to Banga. “We look at 40, 50, 60 deals in a year.”

Mastercard expects its pending $3.2 billion acquisition of the account-to-account businesses of Danish processor Nets Group to close in the second quarter. The company says the deal will enhance its real-time payment and bill-pay services.

Mastercard reported fourth-quarter net income of $2.1 billion, a 134% increase from $899 million a year earlier. Net revenues came in at $4.41 billion, up nearly 16% from $3.81 billion in the 2018 period.