Mastercard Europe closing the gap with Visa

Mastercard posted a 1% increase in European payment volume to reach $502bn in Q4 2022, outperforming rival Visa Europe, whose volume decreased by 4% to $546bn, according to company reports. Mastercard has gained significant ground on its larger rival, securing issuing portfolios from prominent banks including NatWest, Santander, and Deutsche Bank, contributing to its growing market share. Europe now accounts for 29% of Mastercard’s global volume, as compared to 20% for Visa.

Michael Miebach, Mastercard’s CEO, noted that, confounding expectations, continental European consumers have proven to be “fairly resilient” due to fiscal cushions and energy-saving measures, although the UK market “might be a little more shaky“. He sees continued growth opportunities in Germany and CEE, with a “dramatic digitisation opportunity“, particularly with contactless payments at POS.

Combined Visa and Mastercard payment volume rose 8% when counted in Euros, roughly in line with consumer price inflation and overall economic growth. With domestic volume growth likely to remain constrained, the financial performance of both card schemes will remain closely linked to the evolution of high-margin cross-border transactions.

The news of China’s reopening, coupled with both schemes reporting strong growth in cross-border transactions, has been welcomed by analysts. Mastercard reported a 20% increase in cross-border volume at constant currency, excluding intra-EU transactions, with continued strong numbers running into January 2023. Visa reported a 31% increase in cross-border volume at constant currency, with Europe’s inbound and outbound travel now exceeding 2019 levels.

Both sets of management made a series of product-related updates.

Visa Direct, a product that enables merchants and financial institutions to make payments to Visa cards, has seeing good progress, much to the delight of Visa’s management. In Q4, the product recorded 1.9 billion transactions globally, a year-over-year increase of 39%. Visa regards Visa Direct as the key to unlocking the vast potential of the B2B payment market, with new deals being secured with leading companies such as Go Henry. This product now allows parents to more easily top up their child’s Go Henry debit card.

Click to Pay is the card schemes’ competitive response to highly successful one-click payments such as Apple/Google Pay and PayPal. In one form or other, the product has been operational since 2012 but has made little progress. Mastercard reported a new distribution partnership with Adyen.

Visa-owned open banking API aggregator, Tink, has seen a healthy number of new contracts, although has not revealed transaction volumes. BNP Paribas has become the latest partner of Tink, serving as its primary provider of open banking and money movement services. Tink has also renewed and strengthened its partnership with ABN AMRO, integrating Tink’s Money Manager into the bank’s consumer app.

In a different approach, Mastercard has opted to partner with Token for its open banking initiatives, instead of acquiring or building the necessary capabilities in-house. The company has reported a partnership with UK’s Secure Trust Bank, a provider of point-of-sale finance, though it has also declined to disclose its transaction volumes. 

Mastercard announced its role in powering the eFaktura service, widely utilized by the Norwegians for bill payments. Additionally, Tysys has partnered with Mastercard to offer digital receipts to 5 million cardholders in the UK and US. The digital receipts will be made available through Mastercard’s Consumer Clarity product, developed by Ethoca, which aims to reduce chargeback queries by providing consumers with detailed information regarding their transactions.

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