Mastercard’s Fintech Bet Pays Off With Higher Card Spending

(Bloomberg) -- Mastercard Inc.’s new initiative to team up with more startups on credit cards is beginning to pay off.

The company has been initiating card programs for fintechs including Brex Inc., Revolut Technologies Inc. and TransferWise Inc., and has unveiled programs designed to make it easier for startups to join Mastercard’s network. That helped boost customers’ spending on the firm’s cards to $1.28 trillion in the quarter, up 11% from a year earlier and in line with analysts’ estimates.

“The solution that Mastercard brings is more holistic than just saying, ‘We’ll switch the transaction for you,’” Chief Financial Officer Sachin Mehra said in a telephone interview Wednesday. “We say, ‘All right, fintech ABC, what are your objectives? What are you trying to achieve? You’re trying to go cross border or you’re trying to target travelers? Here, let us help you with data analytics and fraud tools.’”

Mastercard also notched several major renewals in recent months, extending its deals with Citigroup Inc. and Capital One Financial Corp. As a result, the firm has been setting aside more money to entice banks and retailers to route spending over its network. Rebates and incentives totaled $2.31 billion in the last three months of the year, up 17% from a year earlier and more than analysts expected.

The company’s adjusted net revenue is likely to climb by a percentage in the “low teens” this year, while operating expenses will increase by a percentage at the “high end of high single digits,” according to a presentation Wednesday. That’s in line with analysts’ expectations.

Mastercard shares rose 0.4% to $321.38 at 11:53 a.m. in New York. The firm’s shares have climbed 61% in the past year, more than the 51% gain for the 71-company S&P 500 Information Technology Index.

Cardholders’ overseas spending increased 15% in the first three weeks of the year, Mehra said on a conference call, slightly slower growth than the 16% reported for the fourth quarter. The company is keeping a close eye on how the spread of the new coronavirus that originated in the Chinese city of Wuhan may impact consumer spending around the world.

To contact the reporter on this story: Jenny Surane in New York at jsurane4@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub, Steve Dickson

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