Mastercard, which
The card network said the cuts would unlock capacity that will enable investment and a redeployment of resources into growth areas, according to a report by Bloomberg.
The staff reductions come as both
"This is more of a case of shifting strategies at Mastercard," said Aaron McPherson, principal at AFM Consulting.
While investors for the past two years have been waiting for signs that inflation is
"Likely, they are putting more resources into growth areas like AI, digital wallets and P2P payments," McPherson said. "I have seen the overall credit card balances reaching new highs, but not accompanying default rates. In any case, that would hit banks more than Mastercard."
Mastercard in its most
"With that as a backdrop, we remain focused on executing our strategic priorities which fuel our growth algorithms across core payments, new payment flows and services," said Mastercard CEO Michael Miebach in an statement provided by the card network's public relations office..
Mastercard's public relations office also said the card network recently announced organizational changes, realigning the regions and businesses to accelerate growth and unlock capacity that will enable investment in long-term opportunities. "As these changes are made, we plan to redeploy resources into growth areas. Some of these include opening acceptance in new verticals and continuing to apply technology in ways that help us realize even more of the shift to digital across both consumer and commercial. We'll also enhance and expand our Value-Added Services, such as in data analytics, fraud and cyber security, particularly as we further embed AI into our products and services," Mastercard said.
The layoffs, which are expected to total about 1,000 jobs, are part of a reorganization to promote growth in the card network's services business, according to a research note from RBC Capital Markets.
"Even though Mastercard controls huge market share, there is an opportunity to streamline," said payments consultant Richard Crone. "Services" at Mastercard and Visa refers to products that the card brands sell to clients that aren't directly related to payments.
Mastercard's recent investments to fuel its services strategy include a
In July, Mastercard
The accelerator is also supporting payment technology that enables payments directly between bank accounts. Account-to-account payments avoid card payments and card fees, but selling technology that supports A2A payments provides an alternative source of revenue for Mastercard.
In another recent move, Mastercard partnered with the
While Mastercard's layoff plans are new, other payment technology companies have
"Mastercard's layoffs are a right sizing," said Tony DeSanctis, senior director at Cornerstone Advisors.
Mastercard and Visa for years have relied on revenue from a high volume of payments, according to DeSanctis. While that's still the case, there has been an influx of fintech competitors and regulatory pressure on interchange that is pushing a diversification strategy.
Payment fees are also under pressure due to regulatory and legal issues. A federal judge recently rejected a deal between the card networks and merchants that would have reduced card fees.
The judge's rejection means that a multi-year battle over interchange fees will continue, leading to the possibility that any future court decision or settlement will cause larger reductions in fees. Miebach recently told analysts that he is disappointed in the judge's rejection of the fee deal but is hopeful that a new settlement can be reached before the fee dispute goes to trial. Visa CEO Ryan McInerney in a recent earnings call said he "strongly disagreed" with the court's decision, and like Miebach signaled hope for a new settlement.
The U.S. Congress and regulators are also considering several measures that would
"Knowing there's going to be regulations and competition, there is a change in skillset and also a demand to create a more comprehensive payment structure as opposed to a network fueled by volume," DeSanctis said.
