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MasterCard Aggressive on International Acquisitions, Partnerships

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Partnership extensions

MasterCard (MA) renewed its partnership with Huntington National Bank, including its debit, credit, and commercial business. The company also expanded its acquisitions of new consumer credit accounts with some of the largest banks in the market.

MasterCard is also expected to benefit from China, which is expected to open its market for payment processors in 2016. However, the country has yet to release its final regulations for opening a domestic market.

In the co-branded space, MasterCard, along with Citi and Barclays, won the contract for brands that include American Airlines, InterContinental Hotels, and Bed, Bath & Beyond.

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US partnerships

In the United States, MasterCard (MA) renewed its consumer credit co-branding with PayPal (PYPL). MA is looking to expand the partnership amid rising electronic transactions and payments.

In the previous quarter, MasterCard confirmed its partnership with General Motors (GM). MA will integrate digital enablement systems into GM’s OnStar platform.

MasterCard achieved net profit margins of 38% in fiscal 2015. Here’s how some of MasterCard’s peers in the payment processing industry fared with their net margins in 2015:

  • Visa (V) – 46%
  • American Express (AXP) – 16%
  • Fidelity National Information Services (FIS) – 11%

Together, these companies form 2.3% of the Technology Select Sector SPDR ETF (XLK).

Stabilizing the dollar’s impact

In 2Q16, MasterCard (MA) registered 13% growth in its revenue to $2.7 billion. However, adjusting for foreign exchange impact, MA’s revenue rose 14%. This reflects a marginal impact on adverse exchange movements.

The Federal Reserve is expected to hike rates at a slower pace considering the weak retail sales data in the current quarter. This could lead to the dollar cooling off, compared to a global currency basket.

In 2Q16, domestic assessments rose 8%, cross-border volume fees rose 12%, and transaction processing fees rose 21%. This was partially offset by a 21% rise in rebates and incentives.

Next, we’ll see how MasterCard is funding its acquisitions and growth.

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