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Citing higher purchase volumes for credit and debit cards in all regions, MasterCard Inc. earned net income of $717 million for the third quarter, up 38.4% from $518 million a year earlier.
November 2 -
Sen. Dick Durbin is working behind the scenes on a new effort to ensure that small banks are not being hurt by the cap on debit interchange fees.
November 1 -
Visa Inc. next year plans to ramp up a series of incentives for merchants and acquirers, as the world's largest payments network braces for new regulations that are expected to cost it some debit transactions.
October 27 -
Huntington Bancshares Inc. said it will be converting all of its debit cards to MasterCard Inc. from Visa Inc. But MasterCard's coup comes as new regulations and bank fees are cooling the potential of the overall debit market.
October 27
MasterCard Inc. is in a debit holding pattern.
Following the company's positive third-quarter earnings release on Wednesday, the card network's chief executive Ajay Banga discussed broadly plans to step up the company's activity in the debit card space, but offered few specifics on how exactly MasterCard plans to take advantage of new regulations working in its favor.
"There [are] many moving parts and there's still a lot of negotiations going on. And the issuers are looking for incentives, the merchants are looking for incentives, the acquirers are looking for incentives," said Banga on an analyst call. The CEO several times declined to elaborate on specifics of the company's debit strategy.
The Purchase, N.Y. payment network has long been the underdog in the debit market relative to competitor Visa Inc. But new regulations forbidding exclusive debit networking routing deals may shake up the field, giving MasterCard and other debit players an opportunity to grab market share from Visa.
"Durbin is an opportunity" for MasterCard, says Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods Inc.
New rules require banks to include at least two unaffiliated processing networks on their debit cards. That means a card that carries Visa's logo for signature transactions must carry at least one non-Visa network for PIN transactions.
Both companies are "going to do everything they possibly can" to preserve or gain market share, says Madeline Aufseeser, a senior analyst with Aite Group.
Visa has indicated that it won't give up its territory without a fight. On its earnings call last week, the MasterCard rival said
MasterCard's Banga said on the Wednesday analyst call that the company's strategy for debit
Executives even used similar language from August in describing the company's plan.
"We remain focused on strategic and surgical opportunities that make sense for us" in the debit space, Banga said on the call.
Last quarter, president of U.S. markets at MasterCard, Chris McWilton, said the network would "be very thoughtful and very surgical in how we approach the opportunities in PIN and signature debit as it unfolds under Durbin."
On Wednesday's call, Banga did outline four objectives for the debit arena: retaining exclusive MasterCard portfolios, getting its PIN debit brand Maestro on the back of competitor cards, converting portfolios to MasterCard, and winning routing preference with selected merchants.
Industry players, however, await further detail.
"People will be yearning for a little more information surrounding debit," said Glenn Fodor, an analyst with Morgan Stanley.
"We would all like a little more color on what the competitive dynamics will be, but this is a sea change in the debit market so I can respect the fact that they have competitive considerations," he adds.
And for its part, MasterCard might in part be waiting out decisions by banks and others before it makes its move.
"Their lack of giving specifics on what their strategies are is a function of the fact that there's still a lot of stuff that needs to happen," says Sakhrani. MasterCard is "waiting on the banks and the banks are still trying to put out some of the other fires."
Banks need to decide if they are going to include two PIN networks on the back of their debit cards, let alone actually select a second network, Sakhrani adds. "That's a big factor [for MasterCard] in deciding whether to give incentives to merchants," he says.
Overall, the company reported big gains. Mastercard posted $717 million in earnings, up 38.4% from a year before, on revenue of $1.8 billion, up 27.3% from the prior year.
Debit and credit card volumes grew despite the lagging economy. Domestic debit purchase volume grew 21.3% from a year prior and domestic credit purchase volume grew 6.8%.
"It's positive that their volumes are hanging in there," despite macroeconomic concerns both in the U.S. and worldwide, says Sakhrani.
