Credit Card Spending Soars as US Consumers Battle Rising Inflation, Mastercard Says

A customer inserts a credit card into Square Inc. device while making a payment in San Francisco, California, U.S., on Tuesday, March 27, 2018. The mobile payment market is anticipated to grow reaching a market value of $4,574 billion by 2023, according to data provided by Allied Market Research (AMR). The growth projections are attributed to an increasing demand for hassle-free purchase of goods and services, as well as an increased preference of consumers toward digital and cashless payments. Photographer: David Paul Morris/Bloomberg , Bloomberg

Jenny Surane, Bloomberg News

Jul 28, 2022

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(Bloomberg) -- Mastercard Inc. said spending on its network jumped 18% as US consumers battle once-in-a-generation levels of inflation. 

Payment volume soared to $1.65 trillion in the second quarter, topping the $1.64 trillion average of analyst estimates in a Bloomberg survey. The company boosted its forecast for revenue growth for the year after it reported a 58% surge in overseas payments as consumers flocked to take trips and get back on the road following two years of pandemic-induced lockdowns. 

“We had strong revenue and earnings growth again this quarter, as overall consumer spending remained robust and cross-border volumes grew,” Chief Executive Officer Michael Miebach said in a statement Thursday. “Increasing inflationary pressures have yet to significantly impact overall consumer spending, but we will continue to monitor this closely.” 

Mastercard and Visa Inc. take a slice of the purchase price each time consumers use their cards at checkout, so the payment giants are benefiting from higher prices. Mastercard said it now expects net revenue for the year to increase by a percentage in the “low-end of high teens” range, compared to an earlier forecast of growth in the “high-end of mid-teens.” 

Shares of the company, which are down 2.9% this year, climbed 1.7% to $349.25 at 9:32 a.m. in New York. 

Mastercard has been spending more to develop alternative-payments systems and on its data and other analytics businesses. Expenses at the Purchase, New York-based company rose to $2.5 billion, topping the $2.31 billion average of analysts’ estimates. Costs for the year are now expected to rise by a percentage in the “low-end of low double digits,” compared to an earlier forecast of a percentage in the high single digits. 

Net income climbed 10% to $2.3 billion, or $2.34 a share. Excluding certain one-time items and litigation expenses, profit rose to $2.56 a share. That compares with the $2.37 average of analyst estimates compiled by Bloomberg. 

Mastercard and Visa are facing fresh controversy in Washington, where two US senators said Wednesday they plan to introduce legislation that would give merchants the ability to route credit-card transactions over alternative networks.

The bill would take aim at a key source of revenue for the companies, which set the fees merchants are charged each time a consumer swipes one of their cards at checkout. Banks collect the bulk of these so-called swipe fees before handing over a slice to the payments giants. 

(Updates with share performance in fifth paragraph.)

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