Debit And Services Help Mastercard Stay Afloat During the Pandemic

Like its bigger rival Visa Inc., Mastercard Inc. managed to remain profitable during the pandemic-ravaged second quarter and in recent weeks has been seeing improving transaction trends.

Mastercard on Thursday reported total U.S. purchase volume of $405 billion in the quarter ended June 30, down 5% from $427 billion a year earlier. The United States fared better than many other countries; on a local-currency basis, Mastercard’s worldwide purchase volume slipped 9% to $1.04 trillion.

As with Visa, travel and other spending that consumers and businesses normally would have charged to credit cards plunged because of governmental stay-at-home orders and other measures to control the Covid-19 pandemic. Mastercard reported U.S. credit volume was down 21% year-over-year to $179 billion. 

Conversely, Mastercard’s U.S. debit and prepaid card purchase volume rose 13% to $226 billion even though the number of debit transactions slipped 2% to 4.91 billion. That combination pushed the average U.S. debit ticket 16% higher to $46.05 from $39.70 in 2019’s second quarter.

Reflecting trends seen by other networks, payment processors, and technology providers, Mastercard said its online purchase volume and contactless transactions at the point of sale are way up. “In the second quarter, contactless penetration represented 37% of in-person purchase transactions, up from 28% a year ago,” chief financial officer Sachin Mehra said on a conference call with analysts Thursday morning.

Globally, Mastercard switched 19.4 billion transactions in the quarter, down nearly 10% from 21.4 billion a year earlier. After dropping 20% year-over-year in April, transaction numbers have been improving in the ensuing weeks. So far this month weekly transaction levels on a percentage basis are above year-earlier levels by the low-to-middle single digits. But chief executive Ajay Banga said on the call that “progress will be non-linear” for recoveries across countries and merchant sectors.

Mastercard’s transaction- and volume-dependent fee and assessment revenues fell in the quarter, led by a 52% year-over-year plunge in cross-border fees to $637 million. But strong growth in revenues from the company’s growing menu of services—everything from fraud control to data analytics to systems supporting non-card payments—rose 14% to $1.08 billion. In all, Mastercard reported net revenues of $3.33 billion, down 17% from a year earlier on a currency-neutral basis. Net income declined 31% to $1.42 billion.