Visa and Mastercard: Still winning in Europe

Despite increasing political focus on payment sovereignty, total payment volume growth from the American schemes in Europe picked up a little in Q2 according to the latest financial results from Visa and Mastercard. 

Total volume rose 12% in dollars (9% in euros) to a combined €1.47 trillion. This is slight uptick after six quarters of declining growth rates but well below the consistent double digits we saw through 2023 and 2024. Nonetheless, 9% volume growth is 2-3 times nominal GDP growth and roughly double nominal consumer spending growth. This indicates that Visa and Mastercard remain key beneficiaries of the secular shift towards digital money.

Visa maintained its slight lead over Mastercard with volume of €749bn vs €721bn. Overall average transaction value was flat at €33.50.

Both schemes also report cash transactions – mainly withdrawals from ATMs – and these have proved remarkably resilient. But the headline figure of €285bn of cash transactions in Q2 masks changing consumer behaviour. People are taking out more cash less often. A fall of 9% in the number of transactions was almost entirely offset an increase in ATV to €285. 

Globally, the lucrative cross-border card payment market keeps growing, up 12% in constant dollars in Q2. Despite the Middle East disruption, commercial transactions were buoyant and inbound spending by foreigners in the US continued to improve, boosted by the World Cup in June. Visa reported that card present transactions in host cities were up 20% on match days; notably contactless payments in mass transit.

Mastercard added that impacts from the instability in the Middle East moderated throughout the second quarter and were less severe than anticipated. Wealthy residents of the impacted GCC countries, have begun spending more money abroad.  

The growth numbers tell only half the story. Behind the scenes, the real battle is for issuers, where both schemes continue to invest heavily in winning new issuing mandates. In Q2, both schemes trumpeted new client wins in Europe that will deliver more cards, or credentials as they are now often called. Yet there seems some evidence they are becoming more disciplined about the economics of portfolio wins.

Visa says that through portfolio migrations and organic expansion it has added more than 40 million European cards in the last 12 months and say that a further 30 million are in the pipeline. Visa recently won “the entire consumer credit portfolio” of Natwest’s retail bank and says it expects to continue to win debit business from domestic schemes such as Giro in Germany and Carte Bancaire in France. These local players are now investing in new features such as pre-authorisations, pay-outs and Apple Pay support but have been slow to modernise, leaving a gap for Visa and Mastercard to grow their debit business in Europe. 

This explains why Mastercard is serious about replacing the old-fashioned Maestro with feature-rich Mastercard Debit. The number of Maestros issued fell 19% to 271m. 

Mastercard says it “flipped” Eurobank’s entire consumer and commercial portfolios in Greece and is working with Santander in the UK to accelerate cross-border spend through targeted marketing campaigns. Michael Miebach, Mastercard’s CEO says he has refused European issuing deals which don’t make financial sense, including Lloyds Bank’s credit portfolio. He added: “winning share of a portfolio which is growing at 1% helps me in the first year and then is a huge drag on growth for the years thereafter.”

Both schemes discussed the impact of AI on their operations. Visa says that it has changed its product development model. Instead of teams of ten people, product development is now carried out by “nimble agentic squads” of two to four staff. This delivers “80% more code commits and 80% plus improvement in requirement definition from 30 days to 5 days, which has translated to 65% plus faster feature development.” This improved productivity, helped Visa ship more than 300 major product releases over last 12 months. Result: an announcement of layoffs impacting 7% of its global headcount, with most cuts landing on technology and product teams.

Today’s stablecoins look complicated and there’s a clear opportunity for the schemes to bring the scale, security and interoperability necessary for mass-market adoption. Although stablecoins have clear utility in global treasury and possibly some B2B and P2P flows, they seem unlikely to make many inroads into merchant payments. “There’s no problem to solve,” says Michael Miebach, Mastercard’s CEO. He added that its crypto co-brand volume had more than tripled over the last 2 years although didn’t give figures. 

Both schemes are investing in stablecoin capability, mainly related to settlement. Mastercard has acquired BVNK, giving it a ready-made stablecoin infrastructure business serving merchants, PSPs and finTechs. Visa has instead built Visa Stablecoin Platform in-house, targeting banks and payment institutions with a platform integrated into Visa’s existing network. VSP will integrate with Visa’s very successful Pismo card issuing platform, likely making the whole proposition very attractive to its bank customers.

Visa and Mastercard are both key members of the new Open Standard initiative which will issue the Open USD stablecoin. Many think that Open USD is going after Circle and Tether (the businesses behind the two leading stablecoins today) but Ryan McInerney, Visa’s CEO says that “Visa going forward will remain multi-coin, multi chain. Our role is not to pick winners.”

Visa’s Cybersource eCommerce gateway has launched a “unified checkout” which orchestrates multiple payment types. 4.500 sellers and acquirers have enabled unified checkout including one of the largest acquirers in the UK; most likely to be Barclaycard Payments. And Corpay will adopt Visa’s Fleet 2.0 solution for its fuel card platform in Europe.

In litigation news Visa has been granted leave to appeal the UK Competition Appeals Tribunal decision on Interchange. Less positively, a group of merchants has filed a claim at the UK high court alleging interchange fees are an unlawful restriction and seeking damages dating back to 2019. Mastercard’s trial in Portugal for similar allegations is set for October. 

Finally, neither scheme provided meaningful evidence that agentic commerce is yet generating material payment volumes. Maybe we’ll learn more in Q3 but I suspect I suspect meaningful payment volumes remain at least another year away.