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Mastercard betting big on acquisitions as volume increases 18%

Mastercard has reported strong growth in its core business in Q2 2019, at a time when the network continues its push for contactless cards and development of the new Secure Remote Commerce system for online payments.

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Mastercard betting big on acquisitions as volume increases 18%

Mastercard announced it switched 21.4 billion transactions globally in the three months ending June 30, up 18% from 18.2 billion in the year-earlier period. In the US, it reported total purchase volume of $427 billion, an 11% increase from $384 billion on Q2 2018. Credit card purchase volume grew nearly 13% on higher spending and business from new issuers. Debit volume increased 9% to $199 billion.

The firm’s gross dollar volume (GDV) rose 8.4% year-over-year (YoY), decelerating from the 15.4% YoY growth it found in Q2 2018. This drop-off was predominantly driven by its non-US business, where its GDV increased 7.7% YoY in its most recent quarter compared with the 18% YoY surge it saw in the same quarter a year ago.

President and CEO Ajay Banga noted in the company’s earnings release that its acquisitions and partnerships are enabling it to address changing payment needs, and specifically mentioned “real-time account-to-account and cross-border payments.”

Mastercard’s acquisition of Transfast can enable it to compete for account-to-account transfers. The acquisition is set to close in H2 2019 and will see Mastercard build on its cross-border payments performance, which increased 16% YoY on a local currency basis in Q2 2019, decelerating from the 19% YoY jump it posted in Q2 last year. Just as importantly, the acquisition will further diversify its business beyond card transactions and could bolster its difficult non-US business.

Mastercards partnership with P27 Nordic Payments Platform could further expand its noncard business and help it cash in on the potential of real-time payments. The collaboration will see it work with the platform to provide real-time (RTP) and batch payments in Nordic markets and replace their current payments infrastructure. This would make Mastercard a core part of noncard payments in an entire region, and also give it a chance to capitalise on the global RTP market, which is projected to be worth $39 billion in revenue by 2025.

Both Mastercard and Visa are trying to grow beyond card transactions, and Mastercard’s position and interest in RTP could put it on a better path to success. RTP’s speed could support the rise of card alternatives, threatening the core businesses of Mastercard and Visa. But Mastercard’s acquisition of Vocalink gives it visibility into direct debits, while Visa may lack the same capabilities.

Interestingly, Al Kelly, CEO, Visa has expressed scepticism about RTP, suggesting Visa may not be taking the same interest as Mastercard in the space. If RTP takes off, it could be a boon to Mastercard’s payments volume that Visa will lack, potentially moving Mastercard’s performance significantly ahead of Visa’s, especially if card alternatives gain popularity.

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