Visa and MasterCard have
reported their latest quarterly results, and both will be buoyed by
rising payment volumes in the face of recessionary pressures
worldwide. But, as Victoria
reports, MasterCard’s results were dampened by the
loss of three major debit portfolios switching to


Visa Inc’s latest quarterly results
encompass the fiscal first quarter of 2010 for the three months
ended 30 September 2009. Net income for the quarter was $763
million, while net operating revenue was $2 billion, an increase of
13 percent from the year-ago period. Visa Inc attributed the growth
to a jump in data processing revenues and international transaction

Payment volume grew 2.5 percent from the
year-ago period to reach $720 billion, while the number of
Visa-branded cards in circulation amounted to 1.8 billion
worldwide, a rise of 5 percent.

Total processed transactions, representing
transactions processed by VisaNet for the three months ended 31
December 2009, totalled 10.9 billion, a rise of 12 percent from the
year-ago period.

For the fiscal first quarter 2010, Visa Inc’s
service revenues were $827 million, an increase of 4 percent from
the year-ago period, and are recognised based on payments volume in
the prior quarter.

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All other revenue categories are recognised
based on current quarter activity. Data processing revenues rose 38
percent from the year-ago period to $765 million, while
international transaction revenues, which are driven by
cross-border payments volume, grew 9 percent over the prior year to
$552 million.

Other revenues, which include the Visa Europe
licensing fee, were $190 million, up 21 percent over the prior
year. Total operating expenses on a GAAP basis were $743 million
for the quarter, a 4 percent decrease primarily a result of a $41
million pre-tax gain recognised related to the prepayment of the
remaining obligations under merchant-related litigation.

Visa Inc’s financial outlook for 2010
estimates that annual net revenue growth will be in the range of 11
percent to 15 percent and its annual operating margin in the
mid-to-high 50 percent range.

MasterCard’s net profit rises 23

MasterCard reported fourth quarter
net income of $294 million, a rise of 23 percent from the year-ago
period, while net revenue was $1.3 billion, a rise of 6

Currency fluctuations, driven by the
movement of the euro and the Brazilian real relative to the US
dollar, contributed 3.8 percentage points of the increase in net
revenue for the quarter.

Operational results

Visa and MasterCard quarterly


Q4 2008

Q4 2009

% chg y-o-y


Credit card payment volume ($bn)




Debit card payment volume ($bn)




Number of processed transactions (bn)




Number of Visa-branded cards (bn)





Credit card payment volume ($bn)




Debit card payment volume ($bn)




Number of processed transactions (bn)




Number of MasterCard-branded cards (bn)




Source: Company reports

Cross-border volumes up

MasterCard saw an increase in cross-border
volumes of 3.9 percent, while the number of processed transactions
rose 6.7 percent to 5.9 billion. MasterCard’s worldwide gross
dollar volume rose 5.3 percent to $674 billion.

Worldwide purchase volume during the quarter
rose 5.7 percent on a local currency basis from the year-ago period
to $510 billion. As of 31 December 2009, there were over 966
million MasterCard-branded cards in circulation worldwide, a fall
of 1.3 percent from the year-ago period.

However, higher-than-expected costs and a 35
percent jump in rebates impacted MasterCard’s results. The increase
in rebates was largely driven by new and renewed customer
agreements, and rebates associated with new cross-border pricing
which was introduced in October 2009.

According to Sanjay Sakhrani, an analyst at
Keefe, Bruyette & Woods, MasterCard will also be increasing its
assessment fee in April 2010 to acquirers by around 16 percent to
0.110 percent from 0.095 percent, which would benefit earnings per
share between $0.37 and $0.47.

“Management noted that the rebates associated
with the new cross-border pricing was done to encourage the
customers for certain behaviours, which we believe makes sense
particularly given the lucrative economics from cross-border
volume,” Sakhrani told CI.

“Furthermore, we believe that the April fee
increase could help to offset part of the higher rebates and
incentives going forward.”

MasterCard’s processed transaction volume was
also hit by the loss of three major banks (HSBC, Royal Bank of
Scotland and Washington Mutual) who decided to convert their debit
portfolios to Visa.

The network’s advertising and marketing
expenses rose by 25 percent, with MasterCard justifying the
increase by stating that it was positioning itself to take
advantage of emerging opportunities.

For the rest of 2010, MasterCard stated that
annual net revenues were unlikely to get back to the 12 to 15
percent range, but that the company remains committed to annual
margin expansion of 3 to 5 percentage points and average annual net
income growth of 20 to 30 percent.