Mastercard's global plan relies on a lighter regulatory load

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Fresh off new progress with U.K. and economic winds in the U.S., Mastercard is betting the regulatory tide is turning in its favor.

"We're looking at [favorable] taxation, regulation and infrastructure spending," said Ajay Banga, Mastercard's CEO, during Tuesday morning's fourth quarter 2016 earnings call.

A day after calling President Trump's immigration travel ban into question, Banga on Tuesday focused more on parts of Trump's agenda that Mastercard would find favorable. "Trump is talking about taking out two regulations for every new regulation," Banga said.
Banga was referring to an executive order Trump signed on Monday mandating executive departments and agencies abolish two regulations for each new one proposed. The order was sweeping and general, and the direct impact on the financial industry is unknown at this time. Trump has called the Dodd-Frank law a "disaster" and has vowed to "do a number" on it, though there's not a clear path to repeal or replace the law and the attached Durbin amendment on card fees. But the macro political environment would portend at least some easing.

"I find the regulatory changes will likely be a net positive for our company," Banga said. "[Trump] seems genially concerned about regulations as a hindrance to businesses."

Banga did express concern over possible trade battles given Trump's criticisms of open trade policies.

"A lot of us have built business based on a more free cross-border goods and data flow. If that changes, that will be a problem," Banga said. "But I don't think that's Trump's intent."

For the quarter ending Dec. 31, Mastercard reported net income of $933 million, or 86 cents per share, compared with $890 million, or 79 cents per share, the prior year, a penny above Wall Street analysts' expectations. Overall revenue was $2.76 billion in the quarter, up from $2.52 billion in fourth quarter of 2015 and just below Wall Street's expectations of $2.78 billion. That caused a slight dip in Mastercard's stock price in premarket trading.

Broader economic fundamentals remain strong, and coupled with the expectation of an easier U.S. legal environment, there's reason to be optimistic, according to Banga.

"Post election optimism is relatively high, consumer confidence and wages are holding steady," Banga said. "There will be some form of infrastructure spending, both physical and digital. That will increase the velocity of money in the economy and that will be helpful to a company like ours."

Mastercard has also made regulatory progress in light of the watchdogs in the U.K. pressuring the card network on the market impact of its Vocalink acquisition, though recently that regulator said it would consider a proposal from the card network to create a more open ATM network.

In other countries, the card network is also benefiting from India's focus on cash-reducing policies and is working with regulators in China to build a market in that country, Banga said. In the interim, Mastercard is working on deals with individual financial brands in China, and has made deals with more than 10 banks, Banga said.

Banga took a neutral tone toward Ant Financial's rapid expansion, including its pending acquisition of MoneyGram.

"I consider different forms of payment to be competitive. But I also consider [these different forms] to be conducive to fighting the 85% of payments that are still cash and check in retail," Banga said. "I have the same view of PayPal and Alipay. There's enough space in this market."

In other business, Mastercard reported growth for digital products. Masterpass, for example, is now available in 34 markets, with 340,000 merchants supporting online and in-app purchases and 6 million locations supporting contactless payments, Banga said.

"Digital is a marathon, not a sprint," Banga said. "Masterpass is driving user adoption and acceptance, and our 'digital by default' strategy enables issuers to auto enroll cardholders to drive scale and keeps the issuer at the center of their customer relationships."

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Payment cards Earnings Regulatory relief Mobile payments Donald Trump Mastercard