We recently got a look at Mastercard's (MA +1.84%) latest results, and while payment volume actually increased year over year, revenue and earnings are down significantly. In this Nov. 2 Fool Live video clip, Industry Focus host Jason Moser and Fool.com contributor Matt Frankel, CFP break down the numbers and discuss what investors should know, and when the company might get back to earnings growth.
Jason Moser: Well, let's move over to MasterCard here because that was a similar looking report and a similar, I think, sound on the call where the optimism was obviously still there even though the numbers are challenged in some areas. But MasterCard, the numbers, net revenue down 14 percent for the quarter. Dealing with a lot of the same challenges that Visa (V +0.86%) is dealing with in regard to cross-border and global. But what stood out to you in regard to MasterCard's quarter?
Matt Frankel: First of all, these earnings calls, we could just play the Visa numbers again, they are that similar. But MasterCard, slightly better in terms of revenue. Revenue is down 14 percent. My theory is that's just because Visa is more of the debit card king in the United States and debit cards of lower interchange fees and they're seeing more debit card activity. Cross-border volume was down even worse than Visa, it's down 48 percent year-over-year.
Jason Moser: Yeah.
Matt Frankel: Their earnings suffered as a result down 26 percent. Both Visa and MasterCard released their consumer spending trends into October by week-by-week and we're seeing through October, everything staying pretty steady, cross-border is inching up. Overall payment volume is inching up. But we're not seeing a giant recovery heading into the holiday season. If that's what people were looking for at this point. In the fourth quarter, it's going to be peaky because on one hand, the virus cases are spiking and people are worried that they're going to be locked out and stuff like that. On the other hand, it's holiday shopping season. A lot of pent-up consumer demand. A lot of people have been saving money all year. So it'll be really interesting to see how the next quarter plays out for both of these. But as far as the numbers, it wasn't too surprising. I mean, I actually thought cross-border would be down a lot more than 48 percent just based on how locked down everybody's borders are these days.
Jason Moser: Yeah.
Matt Frankel: So Mastercard, four percent overall volume growth in the US was exactly the same as Visa's. So these numbers to show just what similar businesses these two are.
Jason Moser: Yeah, I think your point there about feeling like maybe the numbers could have been worse given the state of things. I mean, I think part of that is due to the way the consumer actually feels about this right now. I mean, I noticed in MasterCard's call, they've pointed out some of their own internal research, you know, talking about the shift toward electronic payments and they noted in the call that essentially, 7 in 10 people globally say that this shift toward electronic payments in more e-commerce like business being done will likely be permanent. Then also, that the research showed that about 60 percent of consumers plan to use less cash even after the pandemic's besides. I mean, on the one hand, I feel like, yeah, that makes perfect sense and on the other hand, I thought, man, you know what? It seems like those numbers should be higher. But maybe we're still a little bit earlier on, I think regardless, whatever, it does show you, the state of the consumer, where the consumers' head is at, at this point, and that definitely is going to play something into these businesses favor longer down the line, right? I mean, that I think is a good long-term trend that you'd like to see that these businesses are focused on, capitalizing on and I think they'll continue to do that.
Matt Frankel: If I put a one sentence takeaways that consumers are spending money but within their home countries. If Visa and MasterCard are not going to break new or set new earnings records for each company into across border returns, which I don't see happening till mid next year, at the earliest.
