MasterCard Soars On Debit

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PURCHASE, N.Y. – MasterCard yesterday reported a 41.5% surge in fourth quarter earnings, fueled mainly by continued fast growth in its debit cards business.

The cards giant reported $415 million in fourth quarter profits, and an 11% rise in revenues to $1.4 billion. For the full year MasterCard reported a 9% rise in revenues and a 26% surge in net income to $1.8 billion.

The company said the fastest growing segment of its business continues to be the processing of debit transactions, which rose by 15% in the fourth quarter, and by 16% for the full year.

MasterCard’s report came a day after Visa also reported a big surge in earnings, likewise fueled by its debit card business. The two are working to fend off a Federal Reserve proposal that would cut debit card fees charged to merchants and apportioned through the two card networks. Both cards companies said debit has become the fastest growing segment of their payments business, outpacing credit cards.

Credit unions have a major stake in both companies and in the debit fees battle. First because MasterCard and Visa and are the only two common stocks widely owned by credit unions. And second because credit unions stand to earn as much as $2 billion in debit fees from the two companies this year.

Ajay Banga, MasterCard’s president and CEO, said the company is “disappointed” by the proposal by the Federal Reserve, which seeks to cap transaction fees banks collected from merchants with each swipe of a debit card at 12 cents. MasterCard is “seeking changes” to the proposal, said Banga.

Fourth quarter highlights included a December agreement to acquire the prepaid card operations of foreign exchange group Travelex for $458 million.

 

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