Mastercard saw minor improvement in Q3 as the card network entered its third phase of pandemic recovery

  • Mastercard saw minor improvement in Q3 2020.
  • But it may face challenges if another wave of the pandemic stifles consumer spending.
  • Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Payments & Commerce industry with the Payments & Commerce Briefing. You can learn more about subscribing here.

Mastercard saw minor recovery in Q3 2020, with global gross dollar volume (GDV) growing 1% year-over-year (YoY) as opposed to the 10% annual decline it saw in Q2, according to Mastercard's latest earnings report.

Compared with last quarter, Mastercard's US GDV saw notable growth: Volume grew 4% annually in Q3 as opposed to the 5% YoY decline it reported in Q2. Its switched transactions and switched volume both grew 5% YoY. Like last quarter, cross-border card-not-present transaction growth remains positive—as opposed to total transaction and card-present volume in the sector remaining under 0%. 

Mastercard has been following the recovery path previously outlined by CEO Ajay Banga: 

  • Mastercard entered the second phase of recovery—stabilization—in Q2. In the stabilization phase, ecommerce and essential goods play a key role in maintaining overall volume growth. Mastercard began seeing this toward the end of Q2, when the initial overall dip in volume after restrictions set in began to improve, especially after the month of April—when spending bottomed out for Mastercard and other networks—and into May and June. An uptick in online transactions in this period could have helped buoy the firm amid other declines and kickstart continued recovery into Q3.
  • And Mastercard may have entered the normalization phase in the US market in Q3, Mastercard CFO Sachin Mehra told Insider Intelligence. Mehra mentioned that Mastercard currently stands in the normalization phase, where spending in some categories approaches pre-pandemic levels as countries relax restrictions and consumers and businesses operate more freely in most markets. This is reflected in Mastercard's Q3 results, including the positive growth in US GDV. However, Mehra also noted that cross-border volume remains in the stabilization phase—hence the slow growth—likely attributed to international air travel remaining limited. 

However, Mehra believes Mastercard's continued recovery may not be as linear as Q2 and Q3 have been. With another wave of coronavirus cases currently sweeping throughout Europe and projected to hit the US in the coming weeks, Mastercard's growth could be stifled or even revert.

If this occurs, Mehra notes consumer spending might reorient, potentially leading to another uptick in card-not-present volume since more digital transactions could take place with another lockdown. In the first wave of the pandemic, US government stimulus payments helped boost consumer spending—and if another round of payments were to be released, Mehra mentioned that this could influence Mastercard's recovery going forward as well. 

Want to read more stories like this one? Here's how you can gain access:

  1. Join other Insider Intelligence clients who receive this Briefing, along with other Payments & Commerce forecasts, briefings, charts, and research reports to their inboxes each day. >> Become a Client
  2. Explore related topics more in depth. >> Browse Our Coverage

Are you a current Insider Intelligence client? Log in here.

Learn more about the financial services industry.

Source: Read Full Article