As Its U.S. Business Slows, Mastercard Looks to Emerging Markets Like Real Time Payments

Mastercard Inc. is confronting a slowdown in dollar volume in its home market while it pushes into vital new markets like real-time payments and open banking, its presentation of fourth-quarter 2023 financial results indicated early Wednesday.

Gross dollar volume of $727 billion in the December quarter represented a 4% rise year-over-year, down from the 7% increase Mastercard posted in the same quarter in 2022. Meanwhile, growth in the rest of the world accelerated 13% to $1.63 trillion, up from a 7.7% growth rate a year ago.

That’s putting an emphasis on new payment flows at the New York City-based card giant. Mastercard especially likes its position in the fast-developing market for faster payments, its top executives made clear during Wednesday’s presentation. The Real Time Payments network, which has been operating since 2017, “is carrying a lot of volume for us,” chief executive Michael Miebach noted on a call with equity analysts. RTP relies on key software from VocaLink Holdings Ltd., a Mastercard company.

Mastercard last week announced a multi-year renewal of that contract with The Clearing House Payments Co., RTP’s operator. TCH reported its dollar volume grew 14%, to $39 billion, in the fourth quarter compared to the prior quarter, as transactions were up 15% to 74 million.

But new payment flows will also stem from open-banking initiatives, Mastercard’s top brass said. Here, “we expect to see volume growth—that’s the whole idea,” Miebach said Wednesday. “We expect to see payments volume coming through.”

In this market, in which fintechs rely on software to gain access to users’ bank accounts to validate balances and ownership and to facilitate payments, Mastercard’s key asset is Finicity, a technology company it acquired in 2020 for $825 million.

For now, Mastercard is less focused on money transfers and more attentive to account opening, Miebach said, for such potential account-based applications as pay-by-bank. “Open banking enables us to go after use cases we wouldn’t otherwise be able to go after,” he said. “We are looking at this as one of the assets we will bring together for our customers.”

In the meantime, Mastercard’s top executives made clear most volume growth will come from markets outside North America. “We continue to believe the secular growth opportunity is greater outside the United States,” chief financial officer Sachin Mehra said on the call. “We don’t expect a meaningful shift [in growth rates] between 2023 and 2024.”

Nor, he reported, has Mastercard detected much effect from a Federal Reserve ruling last July requiring banks to support merchants’ network choice for card-not-present debit card transactions, a Durbin Amendment mandate many issuers had been neglecting for a decade. “We haven’t seen any material effect, but obviously we keep a close eye on it,” Mehra said.

For the quarter, Mastercard reported net revenue of $6.55 billion, up 11% from the same quarter in 2022 on a currency-neutral basis. Adjusted net income totaled $2.99 billion, a 15% increase. Switched transactions grew 12%, to 38.1 billion, as cards grew 8% to 3.32 billion.