How the Pieces of Mastercard’s ‘Multirail’ Strategy Are Starting to Fit Together

You wouldn’t always know it, listening to the top executives at Visa and Mastercard, but these two rival networks are still chiefly card networks. Thursday morning, Mastercard Inc. laid out for equity analysts an update on what it has called its “multirail strategy,” major moves into account-to-account money transfers, real-time payments, open banking, and cryptocurrency processing.

The strategy has paid off during the pandemic, the company said, as pressure built on payments companies to get government relief funds into the hands of hard-pressed citizens, a move that often required access to their accounts. “We have to have the best solution available beyond cards,” chief executive Michael Miebach said Thursday while discussing first-quarter results.

To help secure non-card transactions, Mastercard has agreed to acquire Seattle-based Ekata Inc. for $850 million in a transaction expected to close within six months. That deal “accelerates” Mastercard’s multirail strategy, Miebach said, adding Ekata has “access to data points to generate very accurate identity scores.”

And last month, the network closed on what could be the key to the whole strategy—the acquisition of the account-to-account processing business of Denmark’s Nets Group. At the time the $3.19-billion deal was announced in August 2019, it was the biggest in Mastercard’s history. The company has not indicated whether that price changed. Miebach said Thursday he agreed to license Nets’ infrastructure technology to other parties to satisfy European Union officials, whose reservations elongated the closing process. “We have other assets to compete, and we can use [Nets] ourselves,” he said, though he lamented the time it took to get deal closed. “It was certainly different in terms of the timeline,” he said. “It should have happened faster than it did.”

One key to the Nets capability, now that the technology is under Mastercard’s roof, is its applicability to smaller clients. Miebach sees now an opportunity to offer account-to-account capability to a wide range of users, with Mastercard’s Vocalink real-time architecture more suited to larger transaction loads.

Another key plank in the multirail platform comes from Finicity, whose open-banking technology allows clients to verify funds in accounts and initiate transfers. Mastercard acquired the company in November for $825 million. On Thursday, Miebach pointed to new large bank clients, including US Bank, and growth in Europe. “We’re off to a strong start with Finicity,” he told the analysts.

Mastercard’s recent moves into cryptocurrency also play a role in the new strategy. Here, Miebach focused on the emerging digital currencies issued by central banks, a business where he said the public sector should not crowd out private companies like Mastercard. “There’s a role to play for us to help the public and private sector,” he said. “Ideally, there’s a two-tier system where the government takes the role of mining [CBDCs] and the private sector takes the role of distributing it.”

In February, Mastercard announced that later this year it will introduced the ability to send and receive crypto transactions natively on its network, a major move beyond processing transactions for operators that have already converted their crypto assets to fiat currency.

“Our role is to provide a testbed, not just for governments, but also for commercial banks,” Miebach said Thursday.

For the quarter, the company’s total switched transactions came to 23.8 billion, up 9% year-over-year. But this category began taking off in March, with a 20% increase. Compared to the same quarter in 2019, the category showed monthly increases exceeding 20%. Cards in circulation, including Maestro cards, totaled 2.8 billion for the quarter, up 6%. Revenue totaled $4.16 billion, up nearly 4%.