Mastercard Wins New Partnerships Without Big Incentive Boost

(Bloomberg) -- Mastercard Inc. is winning new deals with banks and merchants even without sweetening its incentives as much as analysts expected, helping the world’s second-largest payments network post profit that topped estimates in the third quarter.

  • Mastercard offered its partners $1.73 billion in rebates, an 18 percent increase from a year earlier but still below the $1.84 billion average estimate of analysts surveyed by Bloomberg. The network has said it was boosting incentives in its bid to ink card deals.

Key Insights

  • Rebate costs are being closely watched as competition for customers heats up among payment networks. Mastercard poached a major Bank of America Corp. card deal from larger rival Visa Inc. and added the store cards for Kroger Co. and LL Bean Inc. this year.
  • Spending on the firm’s network climbed 11 percent to $1.08 trillion, missing the $1.11 trillion average of five analyst estimates compiled by Bloomberg. Visa also posted a smaller jump in spending than analysts expected.
  • While some analysts predicted the firm would change its forecast for this year’s adjusted net revenue, the company said Tuesday it still expects the figure to climb by a percentage in the “high teens.” Operating expenses are also still forecast to rise in the “mid-teens” range previously set.

Market Reaction

  • Mastercard shares, which surged 26 percent this year through Monday, jumped 1.1 percent in early trading to $193.15. This year’s advance outpaced the 6.1 percent gain of the 66-company S&P 500 Information Technology Index.

Know More

  • “Our business wins and new partnerships, strengthened by our differentiated services offerings, are helping drive our global momentum,” Ajay Banga, Mastercard’s chief executive officer, said in a statement announcing third-quarter results.
  • Fees from cross-border transactions, or money spent abroad, rose 16 percent to $1.34 billion, just below the $1.35 billion estimate.
  • For more details on the results, read here.
  • Read the statement here.

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