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MasterCard Transactions Benefit from International Growth

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May. 11 2016, Updated 9:07 a.m. ET

Processed transactions

In 1Q16, MasterCard (MA) reported total processed transactions of 12.6 billion compared to 11.0 billion in the prior year’s quarter. Total transactions represent the payments and cash transactions reported by the company’s clients on their operating certificates. Total transactions increased by 12% on a year-over-year basis. The composition of the spending changed marginally. Processed transactions include transactions involving MasterCard, Maestro, and other cards processed on the company’s networks.

MasterCard achieved an operating profit margin of 54% in fiscal 2015. Here’s how some of MasterCard’s peers in the payment processing industry fared with their operating margins in fiscal 2015:

  • Visa (V) – 65%
  • American Express (AXP) – 25%
  • Discover Financial (DFS) – 43.6%

Together, these companies account for 1.8% of the SPDR S&P 500 ETF (SPY).

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International remains strong

In 1Q16, MasterCard saw a 7% growth in volumes processed in the United States. The company saw double-digit growth in all regions except the United States.

MasterCard also saw an increase in US rebates and discounts due to a renewal of partnerships. The company is facing stiff competition in the domestic market since consumers are demanding higher discounts and merchants are seeking improved terms.

The company faces competition not only from other payment processors but also from cash and checks. The most widely used forms of payment—cash and checks—account for approximately 85% of retail payment transactions worldwide. So there’s huge potential to attract customers from standard methods.

In the next part, let’s see why MasterCard is targeting international partners for growth.

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