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Mastercard Inc. reported Thursday that its switched transaction volume grew 17% in the second quarter. Meanwhile, Discover Financial Services’ Pulse debit network saw volume jump 15% after growing slightly in the first quarter following a long period of decline.
Purchase, N.Y.-based Mastercard said its transaction count hit 16 billion versus 13.7 billion in 2016’s second quarter. As such, Mastercard’s growth rate surpassed the 13% rate of larger rival Visa Inc., which processed 28.5 billion transactions in the quarter ending June 30, when normalized for Visa’s acquisition last year of Visa Europe.
“So we continue to execute well against our strategy,” Mastercard chief executive Ajay Banga told analysts Thursday morning.
Most of Mastercard’s growth is coming from outside the mature U.S. payments market, where total credit and debit card purchase volume grew 3.8% year-over-year to $348 billion on 6.25 billion transactions, up 1.4%. U.S. credit purchase volume increased 6.2% to $187 billion while debit volume edged up just 1.2% to $160 billion.
More credit card volume will be coming soon. Mastercard announced that The Kroger Co., the largest stand-alone grocery chain, will be switching its U.S. Bank-issued 1-2-3 Rewards Visa cobranded credit card portfolio to the Mastercard brand. Minneapolis-based U.S. bank will remain the issuer.
The new Mastercard cards will hit the market next spring.
The switch marks a return to Mastercard by Kroger following the conversion of its cobranded card to Visa at least eight years ago, Banga noted.
The companies did not disclose the size of the Kroger portfolio, but Mastercard’s win with the grocery-store chain partially avenges some recent losses to Visa, especially the conversion by long-time Mastercard stalwart USAA of its credit and debit files to Visa last year. Both Visa and Mastercard are now spending more than $1 billion each quarter to lure banks around the world to issue cards with their brands, and for merchants to promote their acceptance. A Mastercard line item for rebates and incentives lists $1.38 billion in the second quarter, up 22% from a year earlier.
Such expenses didn’t prevent Mastercard from posting strong earnings. The company reported net income of $1.18 billion in the second quarter, up nearly 20%, on net revenues of $3.05 billion, up 14% when normalized for currency fluctuations.
Late Wednesday, Riverwoods, Ill.-based Discover reported that Pulse processed $38.8 billion in volume in the second quarter, up 15% from $33.9 billion in the year-earlier quarter, on 961 million transactions, up 13% from 853 million.
The numbers marked a turnaround from 2015 and 2016. In 2015, Pulse’s transaction and volume both declined by 9%. Transactions fell 11% in 2016 to 3.46 billion and volume declined 8% to $138 billion, although by the fourth quarter the shrinkage was improving. In this year’s first quarter, transactions grew 3% year-over-year and volume increased 4%.
Discover had attributed the declines to the loss of a large issuer as well as debit network competition in the wake of the Durbin Amendment, which upended the U.S. debit market after its transaction-routing requirements took effect about five years ago.
“I’m really pleased that Pulse volume returned to double-digit growth as our network team has secured more favorable routing and expanded our debit relationships,” Discover chairman chief executive David W. Nelms said in a Wednesday conference call, according to a Thomson Reuters StreetEvents transcript.
Including Pulse, the Discover credit card, Diners Club International, and Discover’s network partners, total second-quarter volume on Discover Financial Service’s networks hit $83.5 billion, up 9% from $76.5 billion a year earlier.
