- Mastercard‘s Q4 earnings report shows minor volume growth, mirroring Q3 results as the card network continues in its normalization phase of recovery.
- And it should continue to leverage product innovations and partnerships to boost card usage and advance into the next phase of its recovery path.
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Mastercard reported that its Q4 gross dollar volume (GDV) grew 1% year over year (YoY) globally, reaching a value of $1.75 trillion—mirroring growth from Q3.
The low growth results could be attributed in part to worsening pandemic conditions throughout the quarter likely impacting consumer spending. Meanwhile, Q4 switched transactions grew 4% annually, slowing down slightly from Q3 when the metric increased 5% YoY.
Despite relatively minor growth, Mastercard‘s Q3 and Q4 periods are improvements over Q2, when the card network initially felt the pandemic impact, leading to a 10% annual drop in switched transactions. Based on Q4 results, Mastercard may still be in its normalization recovery phase, the third of four pandemic recovery phases outlined by Mastercard CEO Ajay Banga earlier in the crisis. In this phase, spending gradually begins to recover.
There’s growing disparity between Mastercard‘s debit and credit card volume—reflecting pandemic-driven trends in spending—which impacts the card network’s volume potential.
- Credit: Global credit GDV in Q4 declined 6.9% YoY, reaching a value of $796 billion and representing approximately 45.6% of total GDV in the period. Mastercard‘s results reflect the ongoing pandemic-driven trend of consumers turning away from credit cards to avoid accumulating debt during the crisis. Overall US credit card volume growth even declined at some points in December, a shopping-heavy month: Volume dipped 0.7% YoY in the week ending December 20, according to data from PSCU.
- Debit: Mastercard‘s global debit GDV saw brighter results in Q4, growing 8.4% compared with Q4 2019, to reach a value of $950 billion. Global debit GDV accounted for 54.4% of total GDV for the quarter. Results are indicative of a wider card usage trend, with card spending throughout the pandemic leaning in favor of debit as consumers look to use their cash on hand to fund their purchases. Throughout the entire month of December, for example, debit card volume growth consistently outpaced credit.
The card network should continue to leverage product innovations and partnerships to boost card usage and advance into the next phase of its recovery path. Mastercard has been investing more capital into its innovation arm: It recently introduced its Cloud Tap on Phone pilot in the US market, which aims to expand cloud-based contactless payment capabilities for merchants.
Introducing these types of offerings can allow it to extend its reach to more merchants, especially small businesses, in turn helping it reach more customers and boost credit and debit card volume. Additionally, the card network has been focusing on key partnerships: Mastercard partnered with Chase and Air Canada to launch a cobrand credit card, for instance, and it’s also working with Goldman Sachs on its newly bought General Motors ‘ card portfolio.
Combined with potential incoming government stimulus aid that might help consumer spending, these tie-ups can position Mastercard to reach new markets, ultimately helping it increase card volume. And boosts to volume could bring it to the next stage of pandemic recovery, called growth, which is defined as the period when spending returns to prepandemic levels.
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