Mastercard Says Consumer Spending Decelerates in October

Mastercard has pointed to a “resilient” consumer, buoying the latest quarter’s results.

But management noted on the conference call with analysts that spending is decelerating into October.

Shares slipped 4% at the market’s open on Thursday (Oct. 26) after the earnings were released.

Earnings materials from the company show gross dollar volumes were up 11% to $2.3 trillion from last year. Overall spending in the U.S. was up 5.4% across both debit and credit cards. Credit spending was up 6.8%. Debit was up 3.9% from a year ago.

As for the update into October: Through Oct. 21, overall switched volumes of transactions grew by 11% in the month, down from monthly growth rates in the mid-teens percentage points. In the U.S. in October, switched volumes month to date stood at 5%, down from previous growth rates logged at 7%.

CEO Michael Miebach said on the conference call with analysts that cross-border travel “remains strong” and stood at 155% of 2019 levels in the third quarter.

Looking Toward New Payment Flows

And with a nod to other avenues of growth, Miebach said “we see substantial runway for growth through the long-term potential in person-to-merchant payments. The sizable opportunity to address new payment flows, our diverse suite of fast-growing service capabilities and our investments in areas of future growth like open banking and digital identity.”

Contactless payments now represent 63% of the company’s in-person switched transactions, the CEO said, adding later in the call that the number of tokenized transactions has more than doubled through the past two years — and Mastercard, according to Miebach, just processed 3 billion tokenized transactions in a single month.

Miebach also said on the call that there remains a “significant opportunity to convert cash and check to commercial card products.”

CFO Sachin Mehra said on the conference call that value-added services and solutions’ net revenue increased 14% year over year, marked by strong cyber-intelligence solutions demand.

With comments related to the current, post-third-quarter environment, Mehra said that though consumer spending remains resilient, “we are closely monitoring the elevated macro and geopolitical concerns and stand ready to adjust expenses,” adding that “consumer spending patterns continue to normalize post-pandemic.” Net revenue will grow at a low double-digit growth rate, he said, on a currency-neutral basis.

During the question-and-answer session, asked about debit interchange caps being lowered, as proposed by the Federal Reserve this week, and about the Credit Card Competition Act, Miebach said the CCCA (and debit routing changes) is “not good for consumers, it is not good for small business, and it is not good for merchants.”

As for the debit interchange caps, he said the interchange is a “balancing mechanism for the industry. It does not directly affect our P&L. So those are important things to keep in mind.”