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.

Strong European performance at Visa gets lost in translation

Visa reported another strong performance in the July-September quarter. This is Visa’s Q4 and completes the 2022 financial year. Despite looming headwinds of inflation, the Ukraine war and the threat of global recession, consumers keep spending on Visa cards. Alfred Kelly, CEO, said “the reality is that while consumers might be altering a bit what they buy in different categories.… they’re still spending the same amount of money and using the same ways to pay as they did before.”

Looking forward, management remains confident reporting that “business trends have remained strong and stable” into the new financial year. “We remain as certain as we’ve ever been about our extraordinary long-term growth opportunity. There is still plenty of cash to digitize in core consumer payments.”

Distancing itself from plastic cards, Visa now describes the paying public as “credentials” and there are 9% more of these than one year ago. Many credentials are now tokenised by Apple Pay and other services. In fact, there are now more tokens than credentials. And there are 10% more merchant locations worldwide at which these credentials are accepted. 

The recovery of international travel is a positive for Visa as its charges higher fees for cross-border transactions. Vasant Prahbu, CFO, said “summer travel in and out of Europe was also very strong, with a travel index to 2019 in the 130s, up 13 points from the third quarter. European travel appears to have benefited most from the strong dollar.”

While a strong greenback is great news for American tourists, it’s less helpful for US listed corporations that report in dollars. A very positive European performance by Visa got lost in translation. 

Despite quarterly transaction growth of 16%, European payment volume actually fell 6% year-on-year in the quarter to $533m. ATV declined from $50 to $42. Taking constant currencies paints a much happier picture. Payment volume was up 12%. It’s an even more positive story when the UK (where Visa has lost issuing clients) is removed. Mainland European volume was up 30% at constant currencies. 

Management is particularly pleased with progress in the German debit market. Visa has profited from Mastercard’s withdrawal of Maestro to add more than 12m debit credentials including ING, DKB and Comdirect. Santander Germany will begin issuing Visa credentials in 2023. 

Shrugging off currency fluctuations, Al Kelly is taking the long view, saying “We really like what we’re seeing in the continent in Europe in terms of the growth that we’re seeing there, which is really strong.”   

Turning to product updates, while Mastercard is investing in inter-bank payment rails, Visa is pushing Visa Direct as safe and secure alternative to account-to-account payments. These often lack basic consumer protection. In contrast, Visa Direct offers “zero liability, chargebacks and solid dispute management.” There are a claimed 7bn “endpoints” worldwide to which a Visa Direct payment can be pushed. FY 22 transactions were 5.9bn up 42% year on year. New programmes include Vipps, the Norwegian mobile payment app, which is to offer users access to Visa Direct for all domestic payments. Another new signing is Thunes, which boasts a network of mobile wallets in over 44 countries, giving Visa Direct  access to 1.5bn digital wallets.

Other news included:

  • The UK is no longer the world’s number one market for contactless transactions. The US has finally begun to adopt tap-to-pay and is now the global leader in number of transactions.
  • Mass transit (tap to ride) was up 70% in 2022 surpassing 1bn transactions worldwide for the first time.
  • Although the crypto market continues to be volatile, Visa (like Mastercard) is signing deals to help people spend their crypto. FTX, a crypto-exchange, will issue Visa credentials. Click here to join the wait list.

Visa optimistic on Europe and VAS

Reporting its Q2 results (or Q3 if you’re Visa and weirdly start your financial year in October), the largest global card brand made positive noises about the world economy. International travel, and business travel in particular is recovered from the pandemic and spending on Visa cards exceeded 2019 levels for the first time. “Consumers are back on the road, visiting various corners of the world, resulting in cross-border travel volume surpassing 2019 levels for the first time since the pandemic began in early 2020.”

Payment volume in Europe was up 17% on the same quarter in 2021 despite the impact of Visa losing a large British issuing client. Excluding the UK, European volumes were up a very impressive 37% “reflecting share gains in multiple markets.”

Travel to Europe recovered a sizeable 30 points in the third quarter with more than half of that from North America. Inbound travel to Europe was 21% above 2019 with luxury hotel payments  volume and average ticket size outpacing more modest accommodation.

Worries about a looming recession were brushed aside. Alfred Sloane, Visa’s CEO, said there was “No indication of any slowdown, including in more recent weeks” although the UK may be an outlier. Payment volumes in Britain did not grow in the quarter. 

Visa has been building an impressive roster of Fintech acquisitions and highlighted its success in cross-selling to its issuing and acquiring base:

  • Global Payments and NCR have agreed to market Visa’s Cybersource payment gateway to their merchant customers. This is a good win for Visa as it indicates that even the largest acquirers may be struggling to invest in their own market-leading payment gateways with global delivery capability. Visa mentioned that acquirers are twice as good a distribution channel for Cybersource than direct sales
  • Revolut which already took Visa Direct and Currencycloud has started using Tink for openbanking payments
  • Demand for 3DSv2 as Europe implements SCA >60% increase in transactions at Cardinal Commerce, which authenticates card transaction for gateways, acquirers and larger merchants

Together, Currencycloud and Tink are reported to add c.$35m/quarter of revenues for Visa and c.$70m/quarter of cost. It’s early days but a great deal more cross-selling will be needed to recoup the acquisition costs of $0.9b and $1.9b respectively.