With the U.S. government formally in the real-time payments business through the launch of FedNow, Mastercard CEO Michael Miebach spent part of his company's earnings call defending the card network's own capabilities and plans for the future.
Mastercard has developed technology to support real-time transfers over the past decade, and it's, developing specific products for real-time processing that can work with instant settlement schemes in different countries, Miebach said Thursday.
"There's more to come, but we feel we have the better solution on the market," Miebach said. "We're looking at head-on competition but with a mindset of partnership where it makes sense for us."
For the quarter ending June 30, Mastercard reported net revenue of $6.3 billion, up 15% from about $5.48 billion the prior year. Earnings per share were $2.89, up 14% from about $2.53 the prior year. Wall Street analysts projected $6.18 billion and $2.82.
Cross-border volume increased 24% from the prior year, reaching 154% of pre-pandemic levels, Miebach said. Switched transactions, which include authorization, clearing and settlement, increased 17% over 2022's second quarter.
The Federal Reserve's
While banks originally were opposed to FedNow, most have softened that stance over time and are expected to support the government option. FedNow will give the U.S. its second domestic real-time payment network. The Clearing House's RTP n etwork has existed for about six years and has more than 300 members covering about 70% of the deposits in the U.S. There are
Banks are in the process of deciding whether to adopt FedNow and which payments should route through the Fed's rail. One of the early uses will likely be matching recurring bill payments to instant transfers, giving banks more direct control over payments for utilities, rent and subscriptions.
"The use cases for FedNow include banks bringing more bill pay in house," said Joshua Siegel, a partner at Capco, adding that there were additional services banks could offer corporate clients to reduce back-office complexity.
In earlier earnings calls,
"Scale matters for merchants, and consumers want a safe way to pay in a ubiquitous fashion," Miebach said. "We have a lot of what merchants and consumers are looking for."
Mastercard's work in real-time payments dates to 2016 when it paid $920 million to acquire a controlling stake in
"We wanted to be in real-time payment infrastructure at the time, we needed the street credit and talent," Miebach said of the Vocalink acquisition. In the years since, Mastercard has extended real-time payment services to 13 of the top 15 countries by gross domestic product. Managing these services is an attractive business for Mastercard and provides a stepping stone for additional product development, Miebach said.
As an example, Miebach referenced a July deployment of artificial-intelligence-powered
"The U.K. deployment is a great example of how our expertise can be used in these markets," Miebach said. "Not everything will be marketwide. There will be some customer solutions. But we feel we have the muscle in this space and we will have a seat at the table."
Beyond answering analyst questions on FedNow, Miebach said higher inflation rates over the past year have not substantially harmed consumer payments. Cross-border volume grew 24% year over year for the quarter and has reached 154% of pre-pandemic levels.
"The overall labor market remains strong, there's wage growth, and consumers continue to be supported by credit and savings," Miebach said, adding there is considerable demand for travel and experiences.
Mastercard received a bump due to higher than expected cross-border volume, while transaction-processing fees were slightly below expectations, Jefferies said in a research note.
The card network affirmed its full-year outlook for growth in the low teens. Central banks have been raising interest rates to contain inflation, efforts that are showing signs of progress, according to Miebach.
"Our positive momentum continued this quarter. We delivered strong revenue and earnings growth supported by resilient consumer spending, particularly in travel and experiences, and the continued strength in services," Miebach said.
