Debit Traffic Now Bigger Than Credit Transactions for MasterCard

The weakening U.S. economy that's provoking angst in Washington and on Wall Street has yet to crimp No. 2 payment card network MasterCard Inc., which on Thursday reported strong fourth-quarter financials and transaction growth. MasterCard, however, is seeing a shift away from discretionary spending and toward so-called “everyday” purchases such as groceries and gasoline, chairman and chief executive Robert W. Selander said at an analysts' conference call. “Regardless of what happens, we expect consumers will continue to transact,” he said. Selander added that MasterCard generates half its business internationally, which helps insulate it from a U.S. downturn. MasterCard is still benefiting from the long-standing shift from paper to electronic payments, and it doesn't issue credit cards and thus doesn't have lending exposure, he also noted. In the U.S., debit cards, which again led MasterCard's growth, now account for more transactions than credit cards for the Purchase, N.Y.-based card network. Signature-debit purchase transactions hit 1.72 billion in the fourth quarter, up 17% from 1.47 billion in the year-earlier period. Purchase volume increased 16.4% to $71 billion from $61 billion in 2006's fourth quarter. For the year, debit purchase transactions grew 26% to 6.46 billion from 5.13 billion in 2006. Dollar volume jumped 23.8% to $267 billion from $216 billion in 2006. U.S. credit card growth lagged far behind debit, as has been the trend in recent years. Credit and charge card purchase transactions totaled 1.71 billion in the fourth quarter, up 7.9% from 1.58 billion a year earlier, while purchase charge volume grew 8.9% to $147 billion from $135 billion. For the year, credit and charge purchase transactions increased 7% to 6.31 billion from 5.9 billion in 2006, and dollar volume hit $548 billion, up 7.7% from 2006's $509 billion. Worldwide purchase volume increased 16.1% on a local currency basis to $477 billion in the fourth quarter. Purchases hit $1.7 trillion for all of 2007, up 15.7% from 2006 on a local currency basis. MasterCard processed 5.19 billion MasterCard, Maestro and Cirrus transactions worldwide in the fourth quarter, up 17.2% from 4.43 billion in the year-earlier quarter. For all of 2007, MasterCard processed 18.7 billion transactions, up 16.2% from 16.1 billion in 2006. MasterCard reported fourth-quarter net income of $304 million, up from $41 million in 2006's fourth quarter. The 2007 numbers include a $185 million after-tax gain from additional sales of MasterCard's interest in Brazil's Redecard S.A. Fourth-quarter revenues grew 27.8% to $1.07 billion from $839.2 million in the 2006 period, with currency fluctuations accounting for 4.7% of the increase. For all of 2007, MasterCard's first full year as a publicly traded company, MasterCard posted net income of $1.09 billion, including $254 million from the sale of its Redecard interests, compared with $50.2 million in 2006. MasterCard took $420 million in charges in 2006 related to the IPO and litigation expenses. Net 2007 revenues grew 22.3% to $4.07 billion from $3.33 billion in 2006.