The Economic Winds Blow Mastercard’s Way, Lifting Purchase Volumes and Profits

Strong consumer spending and a benign world economy worked in Mastercard Inc.’s favor in the first quarter, lifting the network’s U.S. purchase volume by nearly 11% and profits by over 30%.

The No. 2 payment card network by volume on Wednesday reported that U.S. purchase volume rose 11% to $359 billion from $324 billion a year ago. Credit card purchases increased 8.8% to $185 billion from last year’s $170 billion. U.S. debit put in strong performance, with purchase volume rising 13.4% to $174 billion from $154 billion in 2017’s first quarter.

Correspondingly, U.S. credit purchase transactions increased 7.1% to 2.02 billion, and debit transactions jumped 11.2% to 4.33 billion.

Overseas, purchase-volume growth was even stronger. Volumes rose 22.1% in Latin America. Mastercard’s Europe-Middle-East-Africa region was close behind at 21.8%, followed by Asia-Pacific at 12% and Canada at 9.7%.

Mastercard’s total switched transactions grew 13.5% worldwide to 16.7 billion from 14.7 billion in the year-earlier period.

All of this volume growth helped lift Mastercard’s net revenues to $3.58 billion, a 30.9% increase (27% adjusted for currency fluctuations) from $2.73 billion in the year-ago quarter. Net income jumped 38% (32% on a currency-neutral basis) to $1.49 billion from last year’s $1.08 billion.

“We’re off to a very strong start this year,” Mastercard president and chief executive officer Ajay Banga told analysts on a morning conference call to review the results.

Like rival Visa Inc., Mastercard expressed strong support for a proposed new specification for a single e-commerce buy button developed by payment card standards body EMVCo. The button could replace network-branded buttons on e-commerce and mobile-commerce checkout pages such as Masterpass or Visa Checkout, but neither bank card network has yet said those brands are going away.

Banga, however, was unequivocal in his support for the EMVCo spec, saying it will reduce consumer confusion, enhance security, and improve operational processes for merchants and card issuers.

“Just like the single acceptance terminal in a physical store, we believe there should be one common checkout button in the digital world,” Banga said on the call. “That will deliver tremendous benefits for consumers, for merchants, and for issuers.”

Abroad, Mastercard scored a big win in the United Kingdom with the planned conversion of Spain-based Santander’s 9-million-account U.K. consumer and commercial debit card portfolio to the Mastercard brand. The few blots outside the U.S. were in Venezuela, where political and economic turmoil spurred Mastercard to separate operational results from its regular reports, and potentially in Europe, where the United Kingdom is pulling out of the European Union. But the so-called Brexit process is a slow one and its effects have yet to show up on payment volumes.