Mastercard Inc. plans to support the development of central bank-backed crypto currencies (CBDCs) and crypto-currencies by creating rails that can run digital currencies and fiat currencies in parallel. It posted net profit at $1.8 billion in Q4FY20, down by 15% YoY from $2.1 billion in Q4FY19, on the back of a large drop in fee income from cross-border payments, according to its financial statements for the fourth quarter of the previous year.
“Our level of support will vary based on regulations in a given market. We will continue to be guided by published principles on security, compliance and consumer protection and the value to our stakeholders in determining our involvement in a specific initiative. There is certainly a lot going on and significant opportunity ahead,” said Micahel Miebach, chief executive officer, Mastercard during an earnings call.
The card network has been slowly investing in the crypto space with governments, banks and fintechs over the last few years. In May last year, it launched a crypto-card with Wirex in the United Kingdom in addition to expanding its crypto currency partner program. In September, Mastercard opened a sandbox for testing and building central bank-backed digital currencies (CBDCs). A few weeks ago, the card network launched a crypto debit card with crypto-exchange LVL allowing card holders to withdraw and deposit crypto and fiat currency interchangebly.
“This year we plan on adding digital currency to report directly on our network, enabling our partners to take advantage of our acceptance reach and settlement capabilities. This will give choice and flexibility for consumers and merchants for what currency they want to use or receive,” Miebach said.
On building central bank digital currencies
Since its network can now support both crypto currencies and fiat currencies in parallel, which gives the company considerable intellectual property capital right at the inception of a CBDC, digital or virtual currency race. “…As you could imagine a world where there is a bunch of smart contracts riding on a government issued CBDC and that is very similar to what we do in terms of applications in the real-time space although we do with debit and credit in the card space underlying set of rails which we participate in and then we help bring utility across governments and private sector. That’s the play, early stages, but we will support and we today only carry Fiat currency in our network and when this makes its way, then we will carry CBDCs in our network.” Miebach explained.
E-commerce and Contactless
The company says contactless payments accelerated in over 80 markets in 2020, primarily driven by consumer demand, allowing it to leverage contactless payments solutions for consumers and merchants. “As e-commerce accelerates with card-not-present transaction accounting for about 45% of our switched volume in 2020, which is up from 40% in 2019, we have several efforts underway to enable safer and more seamless online purchases,” Miebach said.
Cross Border revenue takes a hit
Mastercard lost around 40% of its revenue from cross-border volume fees over the course of the last year, while other lines of revenue were fairly flat.
“…while the pandemic is affecting business drivers in the short term, we have diversified our revenue streams and remain focused on managing our business for the long term, this means focusing on our strategic priorities. One, growing our share of core payment, ensuring the digital experience for our customers, partners and consumers are safe and seamless as we help drive the accelerated secular shift. Two, deploying meaningful services that help our partners adapt to the changing environment, and last but not least, providing choice with our multi-rail capabilities,” Miebach said.
- Glabl Payment volumes: Up by 1% YoY to $1.77 trillion
- Cross Board volumes within Europe: Down by 23% YoY
- Global Cross Board volumes: D0wn by 30% YoY
- Net Revenues: $4.12 billion, down by 7% YoY
- Operating expenses: $2.1billion, up by 2%
- Net Income: $1.8 billion, down by 15% YoY
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