While payment volume remains strong amid economic concerns, Mastercard executives this week stressed that the company can quickly adjust to any headwinds and affirmed its strategy to tap into new business lines like open banking.
"Over the past two years we had a slowdown on the payments side in the macro economy overall in the beginning of the pandemic, and our services business carried the day for us," Michael Miebach, Mastercard's CEO, said during Thursday morning's earnings call. "We will continue to push harder there."
For the quarter that ended Sept. 30, Mastercard reported $2.5 billion in profit, compared with $2.4 billion a year earlier. Earnings per share were $2.58, versus $2.44 a year earlier. Excluding one-time costs, earnings per share were $2.68, which beat analysts expectations of $2.56 per share, according to Refinitiv.
Mastercard projected year-over-year growth for 2022 at a rate in the high end of the mid-teens, which is consistent with the company's prior projections. In a research note, analysts at Jefferies said the October month-to-day trends are "encouraging," adding cross-border and overall volume were above that of 2019, or pre-pandemic levels.
Mastercard can adjust expenses if economic conditions deteriorate, with flexibility in marketing and internal costs, Miebach said. Mastercard is also working to grow the services segment of its business, expanding relationships with clients in areas such as open banking, where the card network says its international network of issuers and merchants can enable firms to connect with each other.
Open banking refers to sharing data between banks and third parties, providing access to services from multiple providers from a single relationship. Mastercard acquired the technology firm
"With open banking it's early in the game and it's a tremendous opportunity," Miebach said. "We're the partner that brings what's needed in open banking to provide scale."
Mastercard is focusing on supporting the data management, consumer protections and compliance that open banking requires. The card network recently partnered with Quicken to manage consumer permissions for data sharing. Another partner, Bonifi, uses Finicity to support consumer-permissioned data access for credit unions to inform underwriting for mortgages, auto loans, personal loans and small-business loans.
"This is just the beginning. There's more to go in open banking," Miebach said.
Mastercard is also expanding its crypto strategy, recently releasing Crypto Secure, which combines technology from
Mastercard continued the trend of major card companies reporting strong payment revenue despite economic challenges. While inflation can boost payment volume through higher prices, the rise in interest rates and the specter of recession could also create headwinds by lowering transaction volume and credit risk.
Both Discover and Amex noted tighter underwriting standards during their earnings calls.
"Consumer spending remains resilient and cross-border travel continues to recover," Miebach said, adding the card network could modulate expenses to navigate periods of uncertainty. "We will continue to monitor impacts related to elevated inflation and other macroeconomic risks."
