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Will MasterCard’s Processed Transactions Rise in Q4?

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Processed transactions

MasterCard (MA) has seen a steady rise in processed transactions on the back of rising transactions in international markets. The company’s processed transactions include Mastercard, Maestro, and other payment cards processed on its networks. The company generates almost 70% of its dollar volumes from international markets. It benefits from partnerships, corporate programs, and rebates in Asia and Europe. In 3Q16, MasterCard reported 14.5 billion total processed transactions compared to 12.3 billion in 3Q15.

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The total transactions represent payments and cash transactions reported by the company’s customers on their operating certificates. Total transactions rose 18.0% in 3Q16 on a year-over-year basis. In 4Q16, the company is expected to see a mid-teens rise in total transactions and processed transactions, mainly due to growth in international markets. The company had 2.3 billion issued Mastercard and Maestro cards as of September 30, 2016.

MasterCard posted an operating profit margin of 54.0% last year. Here’s how some of its peers in the industry performed with operating margins.

  • American Express (AXP): 25.0%
  • Discover Financial (DFS): 43.6%
  • Visa (V): 65.0%

Together, these companies account for 2.1% of the SPDR S&P 500 ETF (SPY).

Strong penetration globally

In 2016, MasterCard has managed the highest growth in international markets compared to peers. The company has seen strong growth in Europe, the Middle East, and Asia. The company has also increased its rebates and discounts in recent quarters in a bid to strengthen its marketing efforts to attract more retail clients. In 3Q16, MasterCard saw a rise of 21% in rebates and discounts to $1.2 billion compared to $1.0 billion 3Q15.

MasterCard is investing in technology-backed solutions in a bid to compete with financial technology companies, wearables, and other payment processing technologies.

In the next part of this series, we’ll analyze Mastercard’s initiatives for growth in and outside the United States.

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