Mastercard CEO sees 'opportunities' from payment mergers

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Much like Visa's CEO, Mastercard's top executive is viewing the recent mergers in the payments industry as a chance to build partnerships rather than a competitive threat.

“I feel like there is a lot of opportunity on the consumer side as well as with commercial side of things with these merged entities,” said Mastercard CEO Ajay Banga during Tuesday's earnings conference call.

Banga was commenting on the recent acquisition deals, in which FIS agreed to acquire Worldpay and Fiserv came to terms on a deal to buyFirst Data. Banga noted the two deals have not yet closed, but when completed he had a very positive view on partnering with them.
That's a similar sentiment to Visa CEO Alfred Kelly, who In Visa's most recent earnings call said the large mergers will extend payment technology to new markets. Visa then quickly announced a deal with FIS to use a distributed ledger to extend B2B payments automation.

The large mergers bring payments issuing and merchant acquiring technology, and are expected to lead to more mergers downstream among companies that do not serve both bank technology and merchant services. These deals could create larger debit networks that could compete with Visa and Mastercard, though Visa and Mastercard's CEOs are currently focusing on synergies and partnerships

For the quarter ending March 31, Mastercard reported delivered a diluted earnings per share (EPS) of $1.78 up 19% over the first quarter a year ago when it produced an EPS of $1.50 due to strong growth in gross dollar volume (GDV) spending, transactions switched and cards issued. Mastercard reported first quarter 2019 adjusted net income of $1.8 billion, or adjusted diluted earnings per share of $1.78 and net revenue of $3.9 billion, up from $3.6 billion in the first quarter a year ago.

While overall cards had grown to 2.54 billion in the quarter, up from 2.37 billion in the quarter one year ago, the mix between Maestro and Mastercard branded cards had changed. Mastercard has made progress in convincing banks to switch from the more limited Maestro cards to the more functional Mastercards. In the first quarter the number of Maestro cards fell to 471 million from 531 million in the quarter one year ago. Branded Mastercards rose from 1.84 billion in the first quarter in 2018 to 2.07 billion in the first quarter of 2019.

The mean earnings estimate for the quarter was $1.66 per share, according to MarketWatch. Mastercard attributed the performance to increases in consumers and businesses spending, and banks issuing more Mastercard branded payment cards.

In growing the core product base, Banga highlighted recent deals and innovations such as the Apple card with Goldman Sachs, the T-Mobile Money checking account, a renewal with Rogers Bank in Canada and an expansion of payment cards with Santander in Brazil. He also noted that Mastercard Send direct transfer product has been very successful in adoption in the US. “Send powers seven of the major mobile P2P players in the United States,” noted Banga in the earnings call.

Recent deals such as Target, Japan Airlines and Jumia give the company greater access to new customers, Banga said, adding the Jumia deal provides access to customers in 14 different countries in Africa.

The acquisition of Ethoca allows Mastercard to reduce digital account fraud which helps in it create new service lines, Banga said. In addition the company has expanded faster payments through its VocaLink acquisition.

“I want to present in all payment rails, not just card rails,” Banga said.

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Earnings Payment cards Mastercard Visa FIS Fiserv