Mastercard Inc.’s top executives early Thursday underscored a strategy for the company involving a diversity of payment flows and new network opportunities such as open banking and cryptocurrency. At the same time, the company’s leadership made plain the company will compete for debit volume in the wake of a Federal Reserve ruling on debit card transaction routing.
“There is always something in debit routing,” Mastercard chief executive Michael Miebach said jocularly during a call to discuss the company’s third-quarter results. “We will continue to compete [for debit volume] with all the assets we have. We will have the technology to win debit in the United States.”
The Fed’s ruling —released this fall after years of complaints by merchant groups that card issuers were evading the 2011 Durbin Amendment’s requirement that merchants have a choice of at least two unrelated networks for debit card payments—clarifies that issuers must abide by the law and enable alternative networks for online as well as in-store transactions. The rule takes effect July 1 next year. “The Fed clarifies the rule applies to online as well as in-store transactions. It takes effect mid-’23 so we have some time,” Miebach said, referring to the company’s preparations for compliance.
Miebach took a more upbeat approach to Mastercard’s strategies for new payment flows. He pointed especially to the company’s efforts in commercial point-of-sale payments, open banking, and crypto. As for open banking, “it’s early in the game but it is a tremendous opportunity,” he said. Open banking enables payments providers to view user accounts to verify funds availability and account ownership before enabling funds transfers. Both Mastercard and its rival, Visa Inc., have jumped into open banking in recent years by means of acquisitions. “We are the partner needed to bring things to scale,” Miebach said.
In the crypto market, Miebach reminded the analysts that “our strategy is to … enable consumers to spend [cryptocurrency] on their cards and cash out [in fiat currency] in their wallets.” While digital currencies have had a rough year as values have see-sawed, Miebach stressed a longer-term view, underscoring what he sees as the importance of diversifying payment flows on Mastercard’s network. “Diversification is the name of the game,” he said.
Another such opportunity for diversification, Miebach added, lies in commercial payments, a business that lies parallel to Mastercard’s traditional concentration in consumer transactions. Business-to-business transactions, he said, amount to a “14-trillion-dollar opportunity. This is a huge opportunity, and we’re going to go after it.”
Crypto transactions, he added, create platforms for Mastercard Send, the company’s real-time payments network. The network, he said, fulfills a need for crypto users who want to cash out of their digital wallets. But Send “has to have ubiquity, so we’re looking at all regions and partnering with large global firms,” he said. One such recent deal, he said, involves an agreement with Airbnb, the online property-rental service.
Despite Mastercard’s decision early this year to shut down its operations in Russia, where Send was “a huge success,” the service is still growing globally, Miebach added.
For the quarter, Mastercard handled $6.04 trillion in total volume, up 7.7% year-over-year. For the U.S. market, volume totaled $1.98 trillion, an 11% increase. Net revenue came to $5.8 billion, up 23% on a currency-neutral basis.