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Driving Factors behind Mastercard’s Double-Digit Revenue Growth

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Double-digit revenue growth

Mastercard (MA) has registered double-digit revenue growth for the last six consecutive quarters. Its revenues for fiscal 2016 and 2017 also grew in double digits.

In its second-quarter results, which it reported on July 26, Mastercard’s adjusted revenues increased 20.0% YoY to $3.67 billion. These revenues surpassed the Wall Street estimate of $3.65 billion. Its strong top-line growth was driven by higher switched transactions, increased cross-border and gross dollar volumes, and gains from acquisitions.

According to Wall Street expectations, Mastercard’s revenues for the third quarter and fiscal 2018 are expected to rise 13.7% and 19.7%, respectively, on a YoY basis.

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Three factors that drive volume

During the William Blair Growth Stock Brokers Conference in June, Mastercard’s (MA) CFO, Martina Hund-Mejean, noted three factors that have positively impacted the company’s business fundamentals.

Firstly, she highlighted the rising consumer spending due to the low unemployment level and steady wage growth. According to data compiled by the U.S. Bureau of Economic Analysis, consumer spending in the United States totaled $12.84 trillion, up ~1.0% sequentially and ~2.6% YoY. Increased spending and the use of digital payment methods help payment processing companies like Mastercard and Visa Inc.

The second factor that Hund-Mejean highlighted was Mastercard’s wide range of digital payment solutions, which is driving its usage. The company has been able to provide a different mode of digital payment solutions to meet its consumers’ requirements.

These solutions include digital wallet service Masterpass, a tokenization service through its Mastercard Digital Enablement Service, and contactless technologies that streamline transactions. The company also powers mobile payment solutions like Apple’s (AAPL) Apple Pay, Alphabet’s (GOOGL) Google Pay, and Microsoft’s (MSFT) Microsoft Wallet.

The third factor that’s driving Mastercard’s volume is the increased usage of digital means for financial transactions in the European region. Hund-Mejean stated that the company has been successful in gaining market share in Europe primarily due to the wins against domestic programs. According to Mastercard, its Europe-based programs are more lucrative than in other parts of the world.

Mastercard comprises ~6.2% of the ETFMG Prime Mobile Payments ETF (IPAY).

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