With cost cuttings and consumers resuming their spending, MasterCard has posted a strong second quarter with profits beyond expectations. However, the company also cautioned against the economic outlook which seems hazy at the moment. According to MasterCard whose revenues comes from processing of payments made by customers through debit cards and credit cards, said that the consumers in US are spending less money on luxury items but more on travel related expenses like airlines and hotels in the recent months. The company`s volumes for cross border which also indicated the use of cards abroad by customers rose by 15.2% during the second quarter in comparison to the number a year ago.
According to chief executive Ajay Banga, there are conflicting signals in the US which are making it difficult to determine if we have moved into a period of actual economic recovery. Martina Hund-Mejean, who is the chief financial officer, told in an interview to Reuters that until foreclosure trends and unemployment start going in a more positive direction, the US consumers are likely to not spend as much. Reports also show that the US consumers have spent the same amount of money on their MasterCard in the second quarter as they did in the previous year at around the same time. However, the customers from abroad have spent more. The domestic processing business of MasterCard was hit by the loss of debit processing business of the top 4 banks in the last couple of year. According to Hund-Mejean, the impact of the loss of contracts from those banks will stop by the end of the year 2010.
It has also been reported that the number of transactions that were processed by MasterCard in the 2nd quarter was unchanged from a year before. However, these would have grown by about 10% after leaving out the impact of the contracts lost. There have been some encouraging signs of consumer spending. Corporate card customers and businesses are willing to spend more money on travel once again according to the chief financial officer. According to another analyst, it was a good quarter but not great. The volume trends in payment were not spectacular although they were good. However, they were not as good as Visa`s. Clearly there is room for caution as the economy is still unstable. The data and the various reports have been conflicting to some extent. MasterCard is currently the second largest processing network of credit and debit cards.