Nov. 3 (Bloomberg) -- Leaders in finance and technology are gathering in Las Vegas today as the Money 2020 conference kicks off, where they'll discuss innovations in the global payment market and the future of money. Bloomberg's Willem Marx went overseas to Sweden ahead of the event where alternatives to cash payment are popping up and may even push traditional money out.
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Credit-Card Firms Ride Wave of Electronic Payments
MasterCard, Visa Report Strong Growth as More Consumers Ditch Cash
Card giants are benefiting from a move away from cash and checks toward spending on credit and debit cards. Above, paying for gasoline in San Francisco. BLOOMBERG NEWS
By SAABIRA CHAUDHURI
Updated Oct. 30, 2014 7:41 p.m. ET
Consumers are spending more and using cash less, a combination that is driving profits higher at MasterCard Inc. and Visa Inc., the largest credit-card payment networks in the world.
MasterCard reported third-quarter earnings on Thursday that eclipsed analysts’ estimates, sending its stock soaring the most since August 2011.
Visa’s results for the quarter, released Wednesday after the close of trading, were also better than expected. On Thursday, its shares posted their biggest one-day percentage gain since June 2011 and powered a rally by the Dow Jones Industrial Average.
Investors had been focused on the companies’ results, with weakness in Europe and Latin America stoking concerns about whether they could continue to grow. The results eased the worries, and both offered a strong outlook for coming quarters.
Visa and MasterCard are benefiting from a migration from cash and checks even as consumer-spending growth remains sluggish in parts of the world.
“Cash is the real opportunity for companies like us and that’s what we’re focused on,” MasterCard Chief Executive Ajay Banga said on a conference call with analysts.
MasterCard earned $1.02 billion, or 87 cents a share, up from $879 million, or 73 cents a share, a year earlier. Revenue rose 13% to $2.5 billion. Analysts polled by Thomson Reuters had projected 78 cents a share in earnings and $2.45 billion in revenue.
“Personal-consumption expenditure is still growing in the world despite the very low rate environment,” Chief Financial Officer Martina Hund-Mejean said in an interview. Looking to 2015, she said she expects “more of the same, hopefully a little better.”
Consumer spending in the third quarter showed “mixed trends in the U.S.,” Mr. Banga said, noting that while retail-sales growth was stronger than second-quarter levels, some sectors saw a September slowdown.
Europe’s consumer-spending growth slowed in the third quarter from the second as consumer confidence and economic sentiment fell slightly, Mr. Banga said. In Latin America, retail-spending growth also fell in the third quarter from the second.
MasterCard affirmed its outlook for the rest of the year, while Visa said it expects 2015 revenue growth on a constant-dollar basis of low double digits, which is stronger than the 10% expected by analysts.
“Despite a lackluster growth environment, the results gave investors a renewed sense of confidence in their business models,” said Nomura Securities analyst Bill Carcache. The companies delivered “very strong top-line results and continued very strong performance in controlling expense growth,” he added.
MasterCard gained $7.14, or 9.4%, to $83.13. Visa added $21.99, or 10%, to end the day at $236.65, a record close.
more here:
http://online.wsj.com/articles/credit-card-companies-ride-surging-wave-in-electronic-payments-1414688111
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