Plastic is, once again, increasing in popularity. More people than ever before are using credit and debit cards to pay for their purchases. The proof is in the profits: MasterCard’s earnings are higher-than-expected, due to an increase in credit and debit cards transactions in emerging markets.
“A solid global performance, including strong increases in volume and processed transactions, fueled revenue growth this quarter,” Ajay Banga, Chief Executive at MasterCard, issued in a statement.
The MasterCard payment empire includes the multi-national debit card service Maestro and the worldwide interbank network Cirrus, as well as their own namesake plastic powerhouse: the MasterCard. Those brands are licensed to more than 22,000 financial institutions for use in their own payment programs, according to investors.com.
JPMorgan analyst Tien-tsin Huang stated in a report that “the MasterCard network includes 1 billion cards and more than 32 million merchant locations worldwide.”
The company gains revenue as a result of the number of transactions processed, as well as through the volume of gross dollar purchases.
The Federal Reserve reported that June saw tremendous increases in consumer borrowing. Credit showed the biggest gain since August of 2007, with an increase of $15.5 billion. That’s nearly three times as much as the $5.08 billion rise in May.
Debtmerica.com reports that “the amount of money spent on consumers’ credit cards and the number of times they were used both increased considerably on a year-over-year basis during the month of July.”
This all coincides with the Wall Street Journal reporting that U. S. retail sales rose in July. Consumers have been spending more on everything ranging from gasoline to electronics, as grocery stores, furniture stores, clothing stores and online retailers all reported gains.
Retail sales have historically been a meaningful indicator of consumer spending and tend to be a driving force for economic growth.
However, the increasing use of debit and credit cards by consumers could simply be a result of elevated costs. Steep gasoline and food prices nationwide may be forcing people to pull out plastic at the register for their household necessities, instead of cash.