Mastercard profit jumps 18% as data services drive growth

Mastercard reported a third quarter profit of $4.6 billion on Thursday, up 18% from a year earlier. Revenue rose 14% to $9.8 billion. Both numbers beat Wall Street expectations. The surprise is where the growth came from. It was not mainly the card network you use at checkout. It was a growing set of services built on the data that network produces.

What changed

The card network is still the foundation. Its revenue climbed 11% to $5.7 billion, as steady consumer spending meant more transactions and more fees. But growth there is limited. Cards are already everywhere in mature markets like the US and Europe. So Mastercard and Visa are racing to sell extra services that earn higher margins.

Those services include risk scoring, cyber threat monitoring and fraud detection. The companies also sell market analytics packages. Banks, merchants, retailers, corporations and governments buy them. Mastercard executives call this a "virtuous cycle." The company also reaffirmed that it expects full-year revenue growth in the low teens.

The bigger picture

Visa and Mastercard control as much as 90% of card payment transactions and processing outside of China. By global share, Visa holds 38%, China's UnionPay 34% and Mastercard 25%, according to the Nilson Report.

The push into digital money

Mastercard is also betting on stablecoins, a type of digital money. It launched a Global Money Platform, a system for settlements and payouts. Banks, fintech companies, payroll providers and others can hold, convert and move both regular currencies and stablecoins in one place. Before the launch, Mastercard finalized a $1.8 billion deal in August to buy BVNK, a company that builds stablecoin infrastructure.

What the market thought

• Mastercard shares rose more than 4% on Thursday.
• The stock is up 13% so far this year.
• 39 of 43 analysts polled by Zacks Investment Research recommend buying it.

What is not clear yet

The material does not say how much of the quarter's revenue came from the data services alone. It also gives no details on how the new money platform will reach everyday customers. For most people, the likely effect is indirect. Banks and merchants are buying more fraud and security tools, and more digital money options are coming behind the scenes.