Mastercard 4Q13 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Retail sales grew 3.9% in 4Q from Mastercard’s data

“Our SpendingPulse data that showed that U.S. retail sales growth x auto for the fourth quarter was 3.9%, and includes the fact that holiday retail sales grew faster than last year”

7% volume growth in the US

“We saw an increase in our United States business in the fourth quarter with volume growth of 7%, driven by improvements in consumer credit and in debit.”

Europe still subdued, but potentially recovering

“In Europe, overall economic growth in the fourth quarter remained subdued, although there are some indicators of a potential recovery. Consumer sentiment continued a slow but very steady climb, as did business sentiment across our major markets.”

Asia Pacific declined

“In Asia Pacific, consumer and business sentiment levels declined in the fourth quarter across major markets, including Australia. In addition, worries about slowing growth in China go beyond being just a domestic issue and have broader implications, as you all know, for other markets that depend on Chinese demand.”

Slow growth in Latam too

“In Latin America, economic growth slowed a bit in the fourth quarter with consumer confidence declining in both Brazil and Mexico. But across the rest of the region, it was fairly positive.”

US and Europe leading, could be a catalyst for emerging markets

“Overall, it feels like the U.S. and Western Europe markets where we generate well over half of our revenue are slowly starting to regain their economic footing. The general consensus is the U.S. should have a decent economic growth in 2014, and there is increasing optimism about Europe. As these developed markets recover, it could be a catalyst to spark further growth in Asia and Latin America.”

$1.1 T gross dollar volume in 4Q

“for the fourth quarter. Our worldwide gross dollar volume, or GDV, was up 14% on a local currency basis to over $1.1 trillion. U.S. GDV grew 7% with credit volumes growing 6%.”

2 Billion cards globally

“Globally, the number of cards grew 9% to almost 2 billion MasterCard and Maestro-branded cards.”

Increased focus on security: EMV, Tokenization

“There’s going to be a ton of things that will happen with how data is secured, how it’s kept, how it’s encrypted in motion and address things that we all do, things that very often — you cannot expect small merchants to do in the same way, or smaller acquirers to do in the same way. That’s one of the reasons why, in the future, with digital technology, tokenization is actually a key because in tokenization, that data doesn’t even go to be stored in that location. It’s encrypted with a key that only the networks and the banks recognize. And therefore, the concept of that data line in the weakest link in the chain will go away. So it’s both EMV, tokenization, fraud tools, all the things that are going on. It’s not one thing, but EMV is a really big arrow in the quiver.’

It makes sense that Apple, Google and Amazon are interested in mobile payments. We’re going to be a partner

“You all know that they’re all thinking about this. And the fact that Google is out there first and actually doing something, doesn’t mean that the others weren’t working on it. They’re all working on it. And they’re all trying to figure out what the right role to play for their respective strengths and weaknesses are, as this payment opportunity evolves. And it’s not just payments. When you talk to most of them, they will tell you it’s about the before, during and after the transaction. So Google tends to think about it as a metric to look at enhancing their advertising and consumer outreach business, not really as a payments business. Others think differently. And everybody comes in from a different perspective. So that’s why what we’re trying to do is to partner with as many of them as we can. And we’ve managed, I think, well to shift the dialogue from one of distant mediation to one of partnership, because we bring some very strong assets to the table in terms of what we haven’t possess and also what we’re investing in. And so that’s kind of where they’re going with it. That’s our — I’m not the least surprised. I believe it’s the right thing to do anyway with all the strong players in the digital world. We’ll have a role to play in some way to enable payments for their consumers. It’s the right thing to do.”

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