Visa and Mastercard continue to prosper in Europe with total total scheme volume rising 11% in Q2 to €1.206 trillion, outpacing retail sales growth by some distance. The average transaction value (ATV) fell 2% to €32.89 as low-value purchases continue to migrate from cash to card.
Visa still processes more than Mastercard in Europe but the margin is narrowing. Mastercard has been successful in winning issuer portfolios from its arch rival and is growing more quickly. In Q2, Mastercard’s volume rose 12.3% compared with 10.5% at Visa.
Speaking about the Q2 results, Michael Miebach, Mastercard’s CEO said he believed the pandemic forced Europe to digitise more quickly but that the continent still offers great growth potential. “If you look at the economies in Germany, in Italy, there’s significant cash … that we can go after,” he explained. Where markets are already digitally mature, he still sees opportunities saying “The Nordics is a good example of that. There’s a whole new set of business models coming up… So I’m excited about the Europe outlook, and we continue to invest there. Bottom line.”
One of Mastercard’s main growth drivers is the conversion of Maestro cards – mainly in Germany and Netherlands – to debit Mastercard. The switch seems to be going well and Miebach reported seeing spend per card doubling because they can now be used online and outside their home country. 14m cards were converted in H1.
Visa is fighting back. It has resigned Lloyds Bank in the UK for debit and won its credit portfolio back from Mastercard, gaining an additional 10m credentials for consumer and commercial cards. Visa also renewed its commercial card contract with Raiffeisen and expanded consumer debit and credit in Czech and Romania, bringing 2m more cards. Visa has pushed hard on its Olympic sponsorship and claims to have added 100.000 merchant locations in France and issued nearly 6m Olympic branded cards.
Of course, cash isn’t going away. Together, Visa and Mastercard processed €271bn cash transactions in Q2. The total volume is flat but the transactions are gently declining (down 3%) as the ATV rose 5% to €159.
Both schemes have updated investors on lawsuits. In the UK one large legal action has been rumbling on since 2013 in which over 1150 merchants made a claim relating to excessive interchange fees. Visa says it has settled 475 merchants but £500m of claims still remain to be agreed. Meanwhile, the UK Competition Appeal Tribunal is hearing a class action related to interchange fees on commercial cards for which Mastercard is on the hook for damages of up to £1bn. Finally, a new lawsuit has begun in Portugal in which merchants are claiming damages of €400m from Mastercard for excessive interchange fees.
In product news, contactless is now the standard way to pay at POS. 80% of Visa’s face to face transactions outside the US are contactless with 55 countries at >90% contactless at POS.
Mastercard reiterated its commitment to phasing out PAN card entry for eCommerce in Europe in favour of one-click checkout. This is primarily delivered by the mass adoption of network tokens to support stored-credentials used by merchants for account-based checkout. Tokens have been a huge success. Worldwide, Mastercard says tokenised transactions were up 49% year on year. Visa has over 10bn tokens generating, it says, an incremental $40bn eCommerce revenue for merchants and saving more than $600m fraud.
Both schemes are still pushing Click to Pay for guest checkout but it’s tough going in the face of entrenched competition from PayPal, ApplePay, Stripe, Shopify and others. Mastercard says Click to Pay transactions “more than doubled” and it is “working with our merchants and bank partners to drive adoption.” Visa is integrating Click to Pay and Visa Passkey which enables cardholders to authenticate themselves using biometrics. Visa says it has “hundreds” of issuers representing more than 50% of eCommerce volume in pilot.
Visa Direct, a product which allows money to be sent to Visa cards, is finally delivering results. Total transactions were up 41% to 2.6bn in the quarter and European volumes using Visa Direct for person-to-person transactions “nearly doubled.” In the UK, Weavr, a fintech, is using Visa Direct to offer employee expense reimbursement, reward, recognition and earned wage access.
Neither scheme disclosed numbers relating to open banking although Visa said Tink, its open banking business, “continues to sign new partners.” With the continued growth in push-payment fraud, Visa sees an opportunity to sell its fraud expertise to banks. Visa Protect -a risk scoring solution – has piloted with Pay.UK and showed “average of 40% uplift in fraud detection” when applied to A2A transfers.