MasterCard Worldwide absorbed a sharp downturn in U.S. consumer credit card purchase volume and total consumer credit card accounts in 2009 as the recession drove consumers to cut spending. But the company turned a healthy profit anyway, thanks to its success in other areas, including relatively strong international purchase volume.
“Economic problems forced a lot of U.S. consumers out of credit cards, through a combination of issuers cutting credit lines, rate increases and an overall movement to spend less, and that hit MasterCard hard,” says Aaron McPherson, a research manager with IDC Financial Insights. “But MasterCard continues to have an edge in developing new technology and business-to-business products.”
Purchase volume for MasterCard’s U.S. credit and charge cards in 2009 totaled $477 billion, down 12.8% from $547 billion a year earlier. Credit and charge card accounts totaled 170 million, down 21.7% from 217 million. Some 203 million credit and charge cards were in circulation at the end of the year, down 21.9% from 260 million (see chart).
U.S. signature- and PIN-debit transactions initiated with debit MasterCards totaled $327 billion during 2009, up 5.8% from $309 billion a year earlier. Total debit accounts numbered 121 million, up 4.3% from 116 million. Some 125 million debit cards were in circulation in the U.S. at the end of the year, down 0.8% from 124 million a year earlier.
MasterCard posted a profit of $1.46 billion in 2009; it reported a loss of $253.9 million in 2008 that included $2.5 billion in antitrust litigation payouts. Net revenue was $5.1 billion, up 4.1% from $4.9 billion. MasterCard also cut operating expenses by 49.1%, to $2.8 billion from $5.5 billion.
Chris McWilton, MasterCard president of U.S. markets, acknowledged during an analyst conference call in February the recession hurt MasterCard’s credit card performance in 2009. But he asserted that MasterCard research shows debit card volume is growing primarily from the displacement of checks and cash and is not directly cannibalizing credit card use.
“We find it encouraging (to see) that debit is an incremental growth (area),” McWilton said.
Beefing up its funds-transfer services, MasterCard in May unveiled Mobile MasterCard MoneySend, which enables participating issuers’ cardholders to send and receive payments via prepaid MasterCard accounts through any mobile phone using text-message codes.
On the technology side, MasterCard in January last year acquired Orbiscom Ltd., an Ireland-based software developer of versatile card-controls technology. The acquisition enhanced MasterCard’s opportunity to market its existing inControl payment-control services to more bank customers, the company said.
MasterCard also made significant headway in expanding PayPass contactless-payment acceptance, adding new venues such as parking lots at airports in Philadelphia and Norfolk, Va., and merchants that include The Home Depot Inc., The Sports Authority Inc., Circle K Stores Inc. and Whataburger Restaurants LP.
MasterCard in March 2009 said institutions had issued some 50 million contactless PayPass devices, doubling the total from a year earlier.
In one of the largest Near Field Communication payment trials to date, MasterCard in June teamed with Citigroup Inc., Nokia Corp., Vodafone Group PLC and Vivotech Inc. for a mobile-payments trial in Bangalore, India. Some 3,000 consumers and 250 local merchants are participating.
The trial, encompassing Citi credit cardholders in the region, is continuing indefinitely. PS
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