Mastercard CEO speaks to digital growth above political headwinds

The U.S. has long lagged in contactless payment adoption — despite aggressive efforts to bring the technology to market years ago — but there’s finally signs of a turnaround as more consumers and merchants get on board.

Mastercard CEO Ajay Banga said Mastercard is positioned to weather political uncertainty in the U.S., U.K. and China. During Visa’s earnings call, CEO Alfred Kelly mentioned the U.S. government shutdown, Brexit and the U.S./China trade war could harm the global economy, a concern shared by other financial executives such as JPMorgan Chase CEO Jamie Dimon.

“We have grown our share overseas and that gives us a better leg to stand on,” Banga said on the company's Thursday morning earnings call. “We have also been diversifying our revenues, which includes services. We expect services revenue to grow faster than our core payment revenue.”

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More than half of card present transactions are now happening at contactless-enabled merchant locations in the U.S., he said.

“We’ve been working with financial institutions to bring contactless to smaller issuers and credit unions,” Banga said, adding Citi, Santander, HSBC and other banks with a large presence in the U.S. are either adding contactless cards or are accelerating their migrations.

Merchants such as CVS and Target recently added support for NFC payments, which provides another boost for contactless technology in the U.S.

After holding out for more than four years, Target recently said it would accept Apple Pay, effectively opening its point of sale to all NFC payment options. That makes one of the largest U.S. retailers an enabler of contactless transactions, and also pushes additional acceptance at the retailers that are often located near Target in shopping centers.

Earlier in 2018, CVS and 7-Eleven added support for Apple Pay, and thus a wide range of contactless NFC payments via smartphones and contactless cards.

Mastercard has used these developments to push both the biometric authentication that accompanies smartphones and the mobile payments capabilities. During Visa’s earnings call on Wednesday evening, Kelly also noted a pickup in contactless, saying JPMorgan Chase, Wells Fargo and BofA were all accelerating issuance.

That should allow contactless payments to advance in the U.S., which has traditionally had a much lower penetration of contactless payments than other markets such as the U.K. That would allow both card networks and their issuing banks to offer a broader range of services via mobile wallets to broaden relationships, as well as advance their tokenization and single payment “button” initiatives for digital payments.

“We seeing momentum on both the issuer and acceptance side,” Banga said.

For the quarter that ended Dec. 31, Mastercard reported net income of $900 million, or 87 cents a share, up from $200 million, or 21 cents a share, a year earlier, when income numbers were lower because of tax policy.

Adjusted earnings per share rose to $1.55 from $1.14, which for Mastercard was better
than the FactSet analyst consensus of $1.52. Net revenue at Mastercard increased to $3.8 billion from $3.3 billion, in line with analyst estimates. Mastercard did not report cross-border sluggishness as Visa did, saying volume rose 17 percent.