MasterCard Deploys Higher Rebates for Market Share


Sep. 20 2016, Updated 7:04 a.m. ET

Rebates and discounts

MasterCard’s (MA) rebates and incentives rose 21% to $1.1 billion in 2Q16. This movement was due to higher volumes and renewals of existing deals.

MasterCard continues to focus on partnerships rather than spending directly on marketing efforts. The company’s advertising and marketing expenses rose 5% to $184 million in 2Q16 compared to $176 million in 2Q15.

The company’s general and administrative expenses include personnel, network and processing, and professional fees. General and administrative expenses rose 15% to $930 million in 2Q16 compared to 2Q15.

MasterCard achieved total revenue of $9.5 billion in 2015. Here’s how some of MasterCard’s peers in the payment processing industry fared with their revenues in 2015:

  • Visa (V) – $13.9 billion
  • American Express (AXP) – $35.9 billion
  • Discover Financial Services (DFS) – $7.6 billion

Together, these companies account for 2.4% of the iShares Russell 1000 Growth ETF (IWF).

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Total spending

MasterCard’s 2Q16 operating expenses, after excluding non-operating items, rose 12%–13% on similar currencies. The company saw a 7% increase in expenses due to personnel as it continues to invest in strategic areas such as digital, data analytics, and geographic expansion.

Excluding special items, the company posted an operating margin of 55.2%, which was marginally higher than the prior year’s quarter. Operating income for 2Q16 increased 10%—up 13% adjusted for currency—compared to 2Q15.

In 2015, the company posted an operating margin of 54%, which was similar to the prior year’s period. In 2015, its operating income was $5.2 billion, a rise of 2% compared to 2014.

In the final part of our series, we’ll look at MasterCard’s expectations for moderate growth and steady valuations.


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