On Wednesday, Mastercard Inc. provided a more encouraging view of spending trends than investors had feared, helping to give its stocks a boost.
Although society has experienced a sharp contraction in spending as more countries have imposed social distancing measures, Mastercard
executives said trends appear to be stabilizing and highlighted areas of the business such as services that are proving particularly resilient.
See more: Mastercard stocks earn after profits above expectations amid COVID-19
One of the highlights of the Mastercard call for results was the revelation that cardless transactions accounted for 50% of volumes in April, up from 40% a year ago. This suggests the company is helping to offset the drop in store spending with online shopping, as more and more consumers try digital services like online grocery orders for the first time.
Wedbush analyst Moshe Katri called this a “revolutionary” spike that far exceeded his estimate that cardless transactions accounted for 36% of the volume. He said the company’s results were an optimistic signal that investors will soon hear from Visa Inc.
PayPal Holdings Inc.
Global Payments Inc.
and Fidelity National Information Services Inc.
Mastercard has also put an end to the trends observed in its cross-border activities. This area raised concerns in the report, as cross-border spending is strongly linked to travel, and although cross-border volume “seems to stabilize by around 50% year-on-year”, some cross-border areas show better dynamic.
Cross-border volumes without a card fell only about 25% in April, the company said, but even that category includes spending on online travel. Excluding travel and entertainment, cross-border volumes without a card would increase by about 20% for the month, the company said. This includes purchases of subscription services, games and clothing, according to CFO Sachin Mehra during the call for results.
Mehra told MarketWatch that the crisis has provided “a strengthening of the relevance of Mastercard’s strategy” as the company’s investments in e-commerce and contactless payments have paid off. Mastercard saw a 40% increase in tap-to-pay transactions in the first quarter as it increased transaction limits on these purchases and consumers were more reluctant to use money for fear of spreading it. coronavirus.
“If I want to buy something, I certainly don’t want to touch the pen, I certainly don’t want to type numbers on the keyboard, and all of that leads to contactless,” said Mehra. “We will continue this educational process. “
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Many countries have been faster than the United States to adopt contactless payments, but Mastercard and Visa Inc. have worked with issuers in recent quarters to introduce more contactless cards to the US market. The hope is that consumers will ultimately gravitate toward speedy tap payments, making them more likely to choose cards rather than cash for small purchases.
Various Mastercard executives highlighted the resilience of Mastercard’s service business, which includes analytics, risk and loyalty. The company’s “other income” category increased by 26% or 28% on a currency neutral basis, including a 6 point impact from acquisitions.
“Our service lines are holding up well despite the slowdown, as a significant portion is unrelated to transaction levels,” said President Michael Miebach. The company is seeing an increased need for digital identity products that help verify that people buying with digital credentials are who they say they are.
Mehra noted that merchants of all sizes are also interested in loyalty services that help them build and maintain customer relationships. “Now more than ever, people will want to establish deep loyalty with their customers,” he said.
Mastercard shares have fallen 12% in the past three months, the S&P 500