Visa vs Mastercard: Who performed better in Q4 2022?

Weekly 10-Q

Visa v/s Mastercard: Who performed better?

Results for the quarter ending 31 Dec 2022 are in - let's take a look

by SARA KHAIRI

VISA

Non-GAAP earnings of $2.18 per share beat the market consensus of $2.01 a share

Rising interest rates can be positive: The continued interest rate hikes by The Federal Reserve have worked for the credit card processor to generate significant revenues.

• Net revenue amounted to $7.9 billion, increasing 12% YoY
• Net income rose by 6% to $4.2 billion
• Processed transactions came in at 52.5 billion, up 10% YoY
• Cross-border volume surged 22% YoY, compared to a 40% growth over the same quarter a year before 
• Operating expenses of $2.8 billion increased 25% YoY, due to increased personnel costs and litigation provisions

However, higher interest rates also mean consumers being mindful of spending, which led to a slowed growth in payments volume, up just 7% YoY, versus the post-lockdown 20% YoY increase recorded in the same period a year ago.

- Payment volumes surge as travel demand ebbs: Results for the quarter also benefited from the rebound of cross-border travel post-pandemic, in addition to steady domestic volumes and transactions.

- Focus on value-added services: With a broad customer base and strong transaction processing infrastructure, Visa aims to incorporate value-added services, resulting in an increase per transaction revenue, with more banks and fintechs interested to forge partnerships for card issuance and merchant acquiring. 

Visa renewed its partnerships with Bank of America, Capital One, and Commerce Bank. The company also generates revenues through license fees for using the Visa brand or technology. These are contributing factors to increasing net flows.

“In our consumer payments business, we made significant progress this quarter through large deals with traditional issuers and co-brands. In addition, we continue to develop and expand our global value-added services globally,” former CEO Al Kelly said last week.

Visa has appointed Ryan McInerney as the new CEO, effective February 1, 2023.

MASTERCARD

Diluted earnings of $2.62 per share surpassed Wall Street estimates of $2.56 a share

Net revenue was up 17% YoY to $5.8 billion

• Net revenue was up 17% YoY to $5.8 billion
• Net income increased by 11% YoY to $2.5 billion
• Operating income was up 19% YoY to $3.2 billion
• Cross-border volume grew 31% YoY on a local currency basis to $1.8 billion, compared to a 53% rise posted a year before
• Operating expenses rose to 13% due to the incurred costs of its recent acquisitions

Travel craze = more cross-border volume: The surge in the number of people traveling means more volume of foreign transactions and other cross-border fees, which significantly contributed to net revenue in Q4 2022. However, there’s room for recovery in the Asia Pacific region.

Increased consumer spending: Restaurants, lodging, hotels, and travel are still areas of strength, while home-related categories have been weaker, according to Mastercard Chief Financial Officer Sachin Mehra.

“While macroeconomic and geopolitical uncertainty persists, consumer spending has been remarkably resilient,” Mastercard CEO Michael Miebach said last week.

Mastercard will now be the exclusive payment provider for Citizens. Additionally, Mastercard recently partnered with SoFi Technologies, which became the first U.S. bank to launch the Mastercard Installments program for buy now, pay later purchases.

In the quarter, Mastercard also expanded its partnership with JPMorgan to include Pay-by-Bank - enabling direct ACH payments from the mobile baking application at online checkout using open banking.

Market recap

Fintech stocks traded up in January, but still have a long way to go

Shares of many consumer lenders rose last month, largely due to earnings reports that were received positively by the market. 

Additionally, the continued interest rate hikes by The Federal Reserve means increased revenue for lenders, aka higher net interest income, as borrowers will pay even more interest on credit cards and other types of debt.

LendingTree - up 86% to $39.66 per share

• LendingTree operates through three segments: home, consumer, and insurance. 
• Despite a turbulent two years of the homebuying market, LendingTree's Consumer segment, which includes credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products, fared well due to the macroeconomic climate.

Affirm - up 67% to $16.19 per share

• Affirm inked a partnership with online travel company Kayak on 25 January 2023 to be its exclusive pay-over-time provider in the US.
• This move came as Affirm's deal with Amazon to be its sole provider of buy now, pay later services expired last week.

Coinbase - up 65% to $58.48 per share

• Coinbase is trying to make it through a challenging time in the cryptocurrency industry. Bitcoin is also up 40% in the month to finally break the $20K mark.
• The company's cash reserves and USD Coin are generating enough interest-income revenue to keep its shares afloat.

SoFi - up 50% to $6.93 per share

• SoFi Technologies stock climbed after its Q4 results exceeded Wall Street expectations and its guidance for 2023 adjusted EBITDA came in higher than the consensus
• Shares rose by 12.5% on 30 Jan 2023 to close at $6.68 after the company announced that it was on track to achieve profitability later this year
• The company continues to pull new members for its financial products, as it benefitted from higher personal loans due to high inflation.

Block - up 30% to $81.72 per share

• Despite a prolonged crypto winter, in its core business, Square aims to build a two-sided digital payments ecosystem, with products designed for both merchant sellers and consumer buyers. 
• Cash App user growth and monetization is the driving factor in Square stock. Younger demographics are expected to remain the key source of Cash App user growth.

Editor's picks

Tweet of the week

Just look at the charts

This week's reads

Marqeta acquires card management platform Power Finance for $275 million

PYMNTS

Marqeta made its first acquisition, securing Power Finance in a $275 million all-cash deal.

SoFi stock rockets as earnings bring 'major positives' on profits and growth

MARKETWATCH

SoFi expects to deliver a GAAP profit in the fourth quarter of 2023.

Block's Cash App launches new feature to help consumers with savings

PYMNTS

Cash App has launched a new feature designed to make it easy for people to save for the first time.

Amex is rolling out a small business hub with tech from the embattled fintech Kabbage

FAST COMPANY

Kabbage, whose platform was purchased by American Express in 2020, is now “fully integrated.”

US lender Upstart to cut 20% of jobs in a bid to return to profitability

FINTECH FUTURES

California-based lending platform Upstart is embarking on another round of job cuts, with 365 employees, around 20% of its total staff, facing the axe.