Travel rebound drives strong first quarter for Mastercard

By the numbers: Mastercard reported a strong first quarter as the card network’s payments volume continued to rebound from challenges it faced during the pandemic.

  • Gross dollar volume (GDV) rose 17% year over year (YoY) to $1.9 trillion in Q1, slowing slightly from 23% growth in Q4 but well above Q1 2021’s 8% climb.
  • Purchase volume surged 21% YoY to $1.5 billion, down from 27% growth in Q4 but an improvement from 10% in Q1 2021.
  • Cross-border volume was one of Mastercard’s key growth drivers in the quarter, mirroring Q4 with a 53% YoY increase that far exceeded a 17% decline in Q1 2021. For the first time since the pandemic, cross-border volume was above 2019 levels across all regions, according to CEO Michael Miebach. Rival Visa reported similar cross-volume strength for its fiscal Q2.

Trendspotting: Here are two takeaways from Mastercard’s Q1 earnings call:

Travel comeback isn’t over

  • CFO Sachin Mehra revealed international travel had come back stronger than expected and that there “continues to be pent-up demand.”
  • International travel took off at the end of January as countries lifted travel restrictions. It’s now at 110% of 2019 levels, according to Mehra, propelled by the omicron wave’s decline. “We've worked hard to expand our travel-oriented portfolios, which positions us well to capitalize on a strong recovery in cross-border travel," Miebach outlined.

Russia impact offset

  • Mastercard suspended operations in Russia after the country’s invasion of Ukraine. The move was expected to cost millions in lost volume, with around 4% of 2021 net revenues coming from Russia—equal to roughly $756 million.
  • But Miebach said there has been “minimal impact” to wider growth and that strong cross-border travel recovery and strength in consumer spending offset lost volume.

What’s next? Mastercard can focus on partnerships and crypto to sustain growth:

  • Partnerships: Mastercard plans to build on crypto card tie-ins with partners in Europe and Latin America, perhaps looking to take advantage of the 30% of adults in Latin America who hold crypto. It also singled out expanding open banking partnerships with Finicity and Aiia.
  • Crypto: The card network has embraced digital assets, partnering with crypto exchange Gemini and launching crypto payment cards in Asia. Miebach said Mastercard wanted to make it easier for consumers to purchase cryptos and NFTs and that it was enabling consumers to spend their cryptos on card and cash out their crypto wallets via Mastercard Send.

Impending card fee hikes are another big talking point for Mastercard and Visa. Fees for some sub-$5 transactions will be lowered, but the changes would increase fees overall by $475 million, per CMSPI estimates. The card networks say the fees will help fund innovation and fraud prevention, but pressure from lawmakers and retailers to keep fees down could complicate Mastercard’s plans.