Mastercard Volumes Beginning To Show Some Stabilization after Sharp Drop-Off

Mastercard Inc. managed to remain profitable in the first quarter as the Covid-19 pandemic began to sweep the world, and its volume and transaction data for April indicate a possible bottoming out of the steep decline in consumer and business spending.

U.S. dollar volume switched over Mastercard’s network in the week ending April 21 was off 15% from the year-earlier week, an improvement from the 26% year-over-year plunge for the week ending April 14 and the 22% decline in the week ending April 7, Mastercard reported Wednesday. Similarly, worldwide switched volume excluding the U.S. for the April 21 week was down 25% year-over-year compared with 33% for the April 14 week and 28% the week before.

Cross-border volume, closely linked to international travel and pan-country purchasing, is still deeply in the tank, though showing some signs of improvement. It is off 49% for the week ending April 21 compared with a 55% year-over-year drop for the week of April 14, and about the same as the 48% declines posted in each of the two earlier weeks.

Total worldwide switched transactions had increased 13% year-over-year in the first quarter and 18% in the first two weeks of March. Transactions slipped 2% in the week ending March 21, and then dived 20% in the week ending March 28. More recently, transactions are off 20% year-over-year for the April 21 week, up somewhat from the 24% declines in the two earlier weeks.

On a conference call with analysts Wednesday morning, Mastercard executives said they didn’t have crystal balls to say when volumes might return to the heady days before Covid-19.

“As social-distancing measures are relaxed, we expect that some of the sectors that have been hardest hit will begin to show signs of normalization,” chief financial officer Sachin Mehra said. “Early signals will include spending on gas as people return to work, and spending on deferred needs such as health and personal care. We expect some sectors, particularly where there is pent-up demand such as clothing, home improvement, and domestic and intra-regional travel, to normalize earlier. Other areas will take longer to respond, for instance, long-haul travel spending and mass entertainment.”

Mastercard predicts the moves toward e-commerce and contactless point-of-sale payments will continue in the post-Covid world. As other processors have reported, Mastercard said its e-commerce volumes are booming—now slightly over 50% of total volume versus 40% a year ago—as consumers transfer purchases online because they can’t go to closed stores. And company president Michael Miebach, who will replace Ajay Banga as chief executive when Banga retires at year’s end, said “we’ve seen over 40% growth in contactless transactions worldwide in the first quarter.”

“The attitude toward cash will be more negative than what it was before,” Miebach said later on the call.

For the first quarter, Mastercard reported total U.S. purchase volume of $419 billion, up 7% from a year earlier. Credit card purchase volume grew 6.6% to $217 billion and debit purchases increased 7.5% to $203 billion.

Mastercard reported net income of $1.69 billion for the quarter, down 7% on a currency-neutral basis from $1.86 billion a year earlier, on net revenues of $4 billion, up 5% from $3.89 billion, also on a currency-neutral basis.