Debit Traffic Soars at MasterCard While Ticket Sizes Drop

Reporting results for its first full quarter as a publicly held company, MasterCard Inc. on Wednesday released statistics showing significant gains for its U.S. debit card brand. Signature-debit cards accounted for 1.39 billion point-of-sale transactions in the third quarter, a 62% jump over volume in the year-ago period. The product now accounts for fully 48% of MasterCard's total U.S. purchase transaction volume, up sharply from 37% a year ago. Overall, the company said its branded credit and debit cards produced 3.14 billion U.S. transactions in the third quarter, up 27%, the bulk of which occurred at the point of sale. The remarkable growth in debit transactions came as the company also saw a 32% jump in signature-debit cards in circulation, to 95 million (MasterCard excludes from its statistics figures for its Cirrus and Maestro PIN-debit programs). MasterCard now has 380 million cards carrying its brand in the U.S., up from 346 million a year ago. Of these plastics, 25% are now signature-debit cards, compared with 21% a year ago. Much of MasterCard's debit growth stems from the conversion of Washington Mutual Inc.'s 10.5-million-card portifolio, one of the largest in the nation, from Visa (Digital Transactions News, Jan. 7, 2005). This process was completed in the second quarter. MasterCard's figures also show a continuing trend toward smaller ticket sizes in the U.S. market. Although purchase transactions on all cards grew 26%, to 2.89 billion, dollar volume increased just 18%, to $187 billion. At the same time, the average ticket fell to $64.66 from $69.02. “You'll see transaction growth outpace gross dollar volume because ticket sizes are coming down,” Chris A. McWilton, chief financial officer for MasterCard, told analysts in a conference call Wednesday. “It's a fact of life. People are using plastic for smaller transactions and we like to see that.” McWilton attributed part of this trend to the company's growing contactless-payment program, PayPass, though he did not disclose numbers for transactions or dollar volume. “We're very pleased with the rollout of that product,” he said. PayPass is aimed at converting cash transactions to cards at high-throughput merchant outlets. On the charged subject of interchange fees, McWilton said the document MasterCard posted to its Web site earlier this week containing its interchange rates carries detailed explanations of the pricing structure. Merchants that may have questions after reviewing the 72-page document, he said, should talk to their acquirers. “We view merchants as part of the payment system but don't define them as a customer,” McWilton said in replying to a question concerning whether the company might set up a help desk to answer merchant queries about interchange. Interchange costs are a subject of increasing controversy between merchants on the one hand and banks and the card companies on the other and have spawned a series of lawsuits brought by disgruntled merchants. MasterCard, which became a publicly traded company in May, reported net income for the quarter of $193 million, up 82%, on revenue of $902 million, a 14% rise.