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Mastercard profit boosted by card customers traveling abroad

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Customers spent more with the firm’s plastic when they traveled abroad in the first three months of the year, aided by a weakening US dollar.

[NEW YORK] Customers spent more with the firm’s plastic when they traveled abroad in the first three months of the year, aided by a weakening US dollar. Cross-border volume on Mastercard’s network climbed 32 per cent in the quarter, the fastest clip in at least two years, the Purchase, New York-based firm said Wednesday in a statement.

As cross-border spending climbed, the firm raised its guidance for full-year revenue growth to a percentage in the “low 20s.” It previously said revenue would grow at “the low end of high-double digits.”

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Mastercard rose 2.3 per cent to a record US$184.34 at 10.24 am in New York. The shares have jumped 22 per cent this year, compared with the 5.3 per cent advance of the 69-company S&P 500 Information Technology Index.

Chief Financial Officer Martina Hund-Mejean said the firm expects cross-border volume growth to moderate due to a drop-off in consumers using their credit-cards to fund cryptocurrency purchases. In the first quarter, JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc said they would halt purchases of Bitcoin and other cryptocurrencies on their credit cards because they didn’t want the credit risk associated with the transactions.

“It depends a little bit on the interest in cryptocurrency,” Mastercard Chief Executive Officer Ajay Banga said on a conference call with analysts. “There’s a little less interest than there was in the latter part of the fourth quarter.”

Ms Hund-Mejean said the firm’s cross-border volume growth was helped by Chinese lenders once again issuing credit cards with foreign-payment networks such as Mastercard. That had been curtailed by the People’s Bank of China.

Total spending on the firm’s network climbed 20 percent to $1.04 trillion, topping the $1.01 trillion estimate from analysts at Oppenheimer & Co.

“The investments are in the areas they need to be,” said Tom Plumb, president and fund manager at Wisconsin Capital Management, which owns shares of Mastercard. “Everyone expected them to have a very good quarter and this is beyond even what the highest expectations were.”

A weaker US dollar boosts Mastercard’s profits outside the US, where the firm gets most of its revenue. The company has been lowering fees and sweetening rewards in a bid to ink card deals with banks, especially in Europe, where competition has intensified since Visa Inc’s US$20 billion purchase of Visa Europe in 2016.

Visa said last week that it also benefited from a weaker US dollar in the first three months of the year as foreign spending in the U.S. increased at a double-digit pace for the first time in more than four years. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, dropped 3 per cent during the quarter, the fifth consecutive quarterly drop.

Mastercard spent US$1.49 billion on rebates and incentives for banks to issue cards on its network in the quarter. That came in lower than the US$1.54 billion analysts expected.

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