Visa and Mastercard neck and neck in Europe

Visa and Mastercard’s Q3 financial results are well covered elsewhere. At Business of Payments, we’re more interested in what the investor updates tell us about trends in the European market and the success (or otherwise) of new products.

Mastercard continues to outperform Visa in Europe although its pace of growth has moderated. The two schemes are now almost neck and neck. Mastercard’s merchant payment volume grew 26% in Q3 to $602m while Visa’s was up 20% to $637m. Total scheme volume was up 23% in dollar terms although this falls to 14% when calculated in euros. Overall ATV was steady at $36.24.

European politicians and regulators have long been worried about an over-reliance on US payment networks. The European Payments Initiative and the Digital Euro are two of the latest responses. Asked about the threat of protectionism, Michael Miebach, Mastercard’s CEO was adamant that his business would always have a role in any payment ecosystem saying. “We’re seen as a technology company, a global technology company, not necessarily as a US payment brand.” That’s a bold statement and one which does not align with current sentiment at the European Central Bank and elsewhere. Dependence on foreign owned payment systems is a risk for any jurisdiction.

Last week, Worldline’s profits warning highlighted weakening European payment volumes, especially in Germany but Miebach said he saw no slowdown. “Consumer spending remains pretty steady in Germany and generally in Europe…. So Europe’s been a bright star, continues to be for us. So we don’t quite relate to what others are reporting.”

Portfolio wins

The deceleration in Mastercard’s European volume growth is primarily due to the removal of the NatWest portfolio win (16m cards) from the annual comparisons. But Mastercard has continued to win new card portfolios including 10m Deutsche Bank cards and 20m from UniCredit. Miebach said the Deutsch Bank conversion “has already started. It’s a combination of debit and credit. It will happen over an extended period of time. It’s not a flip-the-switch kind of scenario.”

Mastercard is also working with issuers to migrate more than 100m Maestro cards (mainly in Germany and the Netherlands) to its own-brand debit product. This is good news for consumers as their cards will now work online. It’s less good news for merchants who will be faced with higher transaction charges.

Visa is also positive about Europe, remarking that it has opened seven new locations over the last five years and more than doubled its workforce. Visa claims more than 100 relationships with European fintechs and even bought two of them – Tink (open banking) and CurrencyCloud (cross-border money transfers). 

Excluding Maestro, the total number of Mastercards in Europe rose 13% increase to 796m. Visa did not publish numbers for card this quarter but reported that, excluding the UK, the number of active Visa cards in Europe is up 50% since 2019. Including the UK, where it has lost one third of the debit market to Mastercard, the figures would not seem so pretty. However, Visa’s management says it expects to migrate 40m cards from 40 issuing clients in Europe over next few years. The company says that these incomings portfolios are skewed to high margin cross-border transactions.

Tokenised transactions

Increasingly, cards are tokenised which means that the fraud-prone 16 digit PAN is not included in the transaction data. Visa processed 14bn tokenised transactions worldwide in Q3, up 60% year on year. Tokens make card transactions significantly more secure, and this means that issuers are much less likely to block them. This is very good news for merchants. Ryan McInerney, Visa’s CEO, said “we’re seeing, on average, somewhere between 4% and 5% higher approval rates across our partners. And we also see it with a reduction in fraud — a 30% reduction in fraud.” 

Mastercard reported “the number of tokenized transactions has more than doubled over the past two years. We just processed over three billion tokenized transactions in one month.” Management highlighted the importance of tokens in allowing Mercedes-Benz customers in Germany to “pay for fuel directly from their vehicle using only their fingerprint.”

Open banking

Although Visa was blocked from buying Plaid, an open banking leader in the US, it was able to acquire Tink, a similar business HQ’d in Sweden. Management said that Tink “continues to perform very well in Europe…and we look forward to the opportunity to bring Tink outside of Europe.” 

Mastercard has acquired Token, another European open banking provider. Questioned about the commercial model for the schemes to enter open banking, Mastercard’s Miebach said “We’re putting in our open banking connection to make it clear is there a balance on the account. It’s called the payment success indicator. That is the product. And it is a per-click fee related to the API call. So that is the model.”


Mastercard says contactless now represents 63% of face-to-face transactions globally. Miebach explained why mass transit was so important. “By converting transit to Open-Loop, we gain access to more low-ticket, high-frequency transactions, both at the station and the surrounding merchants.

Visa reports 76% of all F2F transactions outside the US are contactless, up 5ppts. The US is growing more quickly, albeit from a lower base. Contactless share was up 13ppts to 40%. Rapid transit is driving adoption worldwide. Visa says it enabled 150 new transit systems for contactless, taking the global total to 750. Impressively, 40% of these new customers are using Cybersource, Visa’s in-house acceptance solution, as their payment gateway. 


Cybersource seems to be out-performing Mastercard Gateway Services, its direct competitor. Cybersource attracted 2,600 additional customers in 100 countries in Q3. McInerney put its success down to investments in omni-channel, tokenisation (vital for mass transit) and fraud prevention capabilities. 

Both schemes have products that allow money to be sent to one of their cards. Visa reported 7.5bn Visa Direct transactions globally in Q3 up 19%. In Europe, it is supported by 1000 programmes managed by 100 Visa partners. McInerney said Visa Direct is “focused on bill payments, on earned wage access, on insurance disbursements, on P2P more broadly in new geographies around the world, both domestic and cross-border.” 

Strong international transaction growth boosts Visa and Mastercard

Visa and Mastercard announced a strong set of Q1 2023 results, with global net revenues at both schemes rising 11% to $8.0bn for Visa and $5.7bn for Mastercard. The networks highlighted continued growth in high-margin international transactions, with Visa’s international transactions up 19% in Q1, and Mastercard’s cross-border volume up 35%. However, the two companies have experienced contrasting performance in Europe, with Mastercard outperforming Visa, mainly due to the shift of Natwest’s volume, recently won from its arch rival.

Visa’s CEO, Ryan McInerney said “I have been at Visa for nearly a decade and I have never been more excited about the opportunities in front of us.”. Visa’s operational leverage saw net income rise 17% to $4.3bn. In contrast, Mastercard’s operating income was up just 6% to $3.1bn, mainly due to higher rebates paid to banks as it competes ferociously to put its logo on credit and debit cards.

Both Visa and Mastercard reported trading in Europe was ahead of expectations, with Vasant Prahu, Visa’s CFO, saying “Europe is strong, defying what we may have expected going into the year. If there is a positive surprise, it’s clearly Europe.” Michael Miebach, Mastercard’s CEO, said that not only were macro factors better than feared, but the secular trends from cash to cards in a number of key European markets were still moving strongly in its favour.

Mastercard had the better quarter in Europe, mainly due to the shift of Natwest’s volume. Mastercard’s European purchase payment volume rose 22% to $510bn. In constant currencies the increase was 31% leading Miebach to say “we feel very well positioned in Europe.” 

The number of Mastercards issued in Europe was up 16% to 743m and, despite its imminent demise, the number of Maestro cards also rose slightly to 387m. Visa no longer publishes similar numbers for Europe.

Visa’s European volume grew just 3% to $540bn although excluding currency fluctuations and the UK, it also arrives at underlying volume growth of 31%. Total transactions were up 12% to 14.7bn with ATV falling 8% year on year to $36.8.

Stung by the loss of Natwest, Visa reports new portfolio wins in Germany (ADC, the country’s largest automobile association) and an additional 2.6m debit cards in Belgium.

Both companies remain focused on contactless payments, which is accelerating the shift to digital payments by replacing small cash-based purchases. Visa reports that contactless transactions account for 74% of all POS transactions outside the US, while Mastercard notes that over 100 of its markets have reached 50% contactless penetration. Although the US is catching up with a 10-percentage point increase in contactless transactions year-on-year, tap-to-pays still only accounts for 34% of POS transactions. Meanwhile, globally, contactless payment on mass transit is rapidly expanding, with Visa processing 745 million “tap-to-ride” transactions in the last two quarters, a 35% increase, and available on 650 transit systems.

The schemes discussed contrasting strategies to grow from their core of credit and debit processing. 

Visa+, the newly announced, “network of networks” has attracted a great deal of interest. This product will allow users of P2P apps to send money to each other through a personalised payment address issued by Visa. Pilots with Venmo, Paypal and Western Union are expected soon but the product is for US domestic use only. 

Visa management is also excited about Visa Direct. This product allows money to be sent to any Visa card but also via 66 ACH networks, 11 real-time payment networks, 16 card networks and 5 gateways to reach 7bn endpoints globally. Visa announced new deals in Latin America and the APAC but not in Europe. 

Mastercard is promoting value added services to its existing banking and merchant customers. Worldwide VAS revenues were up 19% in Q1, largely driven by strong growth in cyber and intelligence solutions as well as “scaling of our identity and authentication solutions.” These are crowded markets but Mastercard’s management believes access to its unique data pool gives it differentiation. 

Examples of VAS wins in Europe include MediaMarktSaturn, the large German electronics retailer, using Mastercard’s “test and learn capabilities to support the assessment and optimisation of new business initiatives.” There’s a good case study available which shows how Mastercard evaluated the impact of the retailer’s price-matching strategy.

Generative AI is this year’s hot topic. Visa’s McTiernay said: “We’ve got people all over the company that are tinkering and dreaming and thinking and doing testing and figuring out ways that we could use generative AI.” Miebach at Mastercard was more cautious. “We’ve encouraged our employees to experiment with the technology, but we set very clear guardrails. Don’t do it in production…. We will lean in, but make sure that we are a trusted party when it comes to scaling it up.”

Despite the reputational risk of association with crypto, Visa is maintaining investment. McInerney said “We see the potential for stable coins. … We’re enabling on and off ramps on crypto. We’re working with exchanges around the world to issue their users Visa credentials. And we’re developing the capability for our issuer and acquirer partners to have a choice to settle in stable coins.

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.

Mastercard Europe – strong dollar offsets boost from travel volume

Mastercard’s Q3 results showed healthy increases in worldwide revenues, mainly due to continued strong growth in high margin international transactions. Worldwide cross border payment volume was up 29% in constant currencies with very high growth (+73%) in travel related spend offset by smaller increases (+13%) in cross-border eCommerce.

With investors worrying about macro conditions, management reassured that Mastercard is well prepared for the coming storm. Michael Miebach, CEO said: “Consumer spending remains resilient and cross-border travel continues to recover. The macroeconomic and geopolitical environment remains uncertain. Inflationary pressures have remained elevated. Should the market outlook weaken, we are prepared to act quickly to modulate our expenses.”

Local currency weaknesss hit Mastercard’s European business, just as it has with all the global payment companies reporting in dollars. Sachin Mehra, CFO, revealed that every $0.01 change in the $/€ exchange rate hits topline revenue by $55m per quarter.

Currency fluctuations apart, management is very positive on its European operations as it believes Mastercard is outperforming Visa in winning issuing mandates from banks and fintech’s. Sachin Mehra said: “We continue to see good Mastercard performance in Europe. Remember in terms of what you are seeing in our metrics, you’re seeing not only what the underlying economies are doing but also the impact of our share growth which has been taking place in Europe. It’s kind of the amalgamation of all of that which is coming through.”

Total purchase volume on Mastercards in Europe[1] was up 1% to $478bn in Q3 but looks healthier (up 16%) when measured in constant currencies. Whichever measure chosen, Mastercard beat Visa whose European payment volume was down 6% in dollar terms in Q3.

ATV on card purchases was up 8% to $33.61.

Mastercard’s forced withdrawal from the Russian market impacted the total number of purchase transactions, which fell 7% to 14.2bn. This is the second successive quarter of decline. The total number of cards[2] rose 5% on the quarter but remains 1% below Q3 last year.  

In line with the continued shift to digital money, Mastercards are used less frequently for cash withdrawals. Cash volume in Europe fell 24% to $142bn with ATV down 16% to $142.

Intra-EU cross-border is a good indicator of the health of the European travel/tourism market and continued to show strong year on year increases – up 36% y-o-y and 40% up on 2019. However, Mehra expects “some moderation within Europe” in Q4 as comparisons get tougher. 

Mastercard reported strong growth in the UK where it has won a large issuer customer from Visa. Less positive was a $208m provision for litigation with UK merchants relating to allegations of over-charging Interchange. This follows a $27m settlement with a UK merchant in Q3 21 in a similar but unrelated case. The merchant is believed to be Sainsburys, a large supermarket.

Elsewhere, management is bullish on Germany where a portfolio win at Deutsche Bank will shortly come on stream and Mastercard also hopes to benefit from the forthcoming switch from Maestro to Mastercard debit. This is expected to drive additional eCommerce transactions because Maestro cards cannot be used on the Internet.

Despite the meltdown in crypto trading activity, Mastercard continues to build out its Defi ecosystem. In Q3 it announced plans for whitelabeling a crypto asset tracking and custody solution from Paxos Trust Company. This gives Mastercard some option value without needing to make a financial commitment. Whether any of its bank partners had decided against offering crypto services, but will now change their mind because Mastercard is sponsoring a product, is an open question.

Mastercard has also struck a deal with and Young Platform in Italy to use Mastercard Send as an off-ramp for crypto to fiat conversion. Again, this is low risk but gives Mastercard some upside if trading restarts in earnest.

Other product news included:

  • Impressive results from Mastercard’s Digital First solution which provides a set of tools allowing issuers to better manage cardholder accounts. Across the first 200 banks taking part, Mastercard reports 2ppts higher approval rates, 4ppts reduction in fraud and 10% higher average spend per account. Chase in UK,  Citi Banamex and ING in Spain are among the latest European customers.
  • Dynamic Yield, a product recommendation and personalisation engine bought from McDonalds for $325m, has gone live with a German fashion brand with 1400 stores.

[1] excluding Maestro

[2] excluding Maestro

Mastercard European volumes up 14%

Mastercard’s European payment volume grew a healthy 14% in the second quarter with ATV ticking up slightly. CEO Michael Miebach said that “spending trends are positive, although the risks related to both the supply of natural gas and higher interest rates remain headwinds.

Miebach, like his counterpart from Visa, also highlighted the long-term potential of Mastercard’s push into Openbanking in Europe. 

Mastercard announced a series of impressive cross-selling product wins with European financial institutions as the card brand strengthens its position in payment-related services.  

  • Paysafe will offer Mastercard Send (allowing easy pay-outs to Mastercards) to its merchant customers in the UK and the EU.
  • Postepay is using Mastercard’s Identity Check payment authentication service in Italy and claims double digit improvements in approval rates
  • Dwolla, Synctera and i2c have signed up as openbanking partners

On the product front, Mastercard continues to promote the much delayed Click to Pay. Other than to say that it is now enabled in 20 markets, no other information was forthcoming. Similarly, we’re in the dark about how much BNPL volume is running through Mastercard Instalments. 

One new acquisition was announced in the quarter. Mastercard purchased Dynamic Yield from McDonalds which had, itself, only bought the company in 2019.  Total cost is $325m including $219m goodwill. Dynamic Yield is a SaaS platform that offers “individualized product recommendations, offers and content based on a range of factors, including past purchases, page views, time of day, current store traffic and trending products.”

As a footnote, the decline in Maestro may have slowed or even stopped. The number of cards issued edged up 1% in Q2.