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Mastercard reported a strong third quarter on Thursday as it builds out the foundations for a near-term future in which it sees itself playing a central role in new transaction flows involving account-to-account (A2A) transfers and digital-currency payments.
Mastercard has been laying the groundwork for A2A business for at least the past couple of years. The payments network expects to close by year’s end on its acquisition of Copenhagen-based open-banking provider Aiia, chief executive Michael Miebach told equity analysts Thursday morning. The deal, terms of which were not announced, represents Mastercard’s second major acquisition in open banking, following its $825-million pickup late last year of Salt Lake City-based Finicity Corp.
Both deals involve technology that allows financial firms to verify account balances and ownership, vital functions for transfer activity that doesn’t depend on cards. “We see [A2A] as an opportunity, a way to get volumes we’ve not historically been involved with,” Miebach said. Years before these deals, Mastercard had laid the groundwork for its nascent A2A business in Europe with its acquisitions of the software firm Vocalink and Transfast Remittance LLC, a cross-border payments specialist.
Mastercard is in a race with its rival network, Visa Inc., to build out its A2A capabilities, with Visa recently having agreed in June to acquire Stockholm-based open-banking network Tink AB in Europe. Earlier, Visa withdrew an offer to buy open-banking specialist Plaid Inc. after the Department of Justice objected to the deal on antitrust grounds.
Addressing an analyst question Thursday, Miebach denied the race to build A2A capability will hurt his company’s core card business. “We don’t see a disintermediation risk. I see a way to form partnerships and improve our [transaction] flows,” he said. “It’s still early days.”
Other opportunities beckon for Mastercard, Miebach made clear. He cited the rapidly growing market for buy now, pay later installment lending online and at the point of sale, for which Mastercard has built an application programming interface call Mastercard Installments. There will be further developments soon, he promised. “Watch this space. More to come,” he told the analysts.
Miebach also promised further development of Mastercard’s early ventures into cryptocurrency. One entry point, he said, lies in helping users buy and sell crypto. “We see a role in facilitating that,” he said, “It’s good from a volume perspective, and there’s real opportunity.” Longer term, he said, his company plans to support crypto transactions on central bank digital currencies, which are digital versions of the dollar and other national currencies. “When it comes to crypto as a payment tool, we will make our network able to do that when a government is ready,” he said.
For the quarter, gross dollar volume for Mastercard in the U.S. market climbed 20% to $618 billion. That’s compared to a year-ago quarter impacted by the pandemic. Debit volume alone shot up 36% to $292 billion. Overall volume globally totaled $1.99 trillion, up 21%.
Revenue for the quarter came to $4.99 billion, up 30%. Transaction processing, the biggest component of that flow, grew 27% to $2.85 billion.
