The number of cross-border transactions processed by Mastercard decreased during the first trimester of this year, according to the Chief Financial Officer of Mastercard, Martina Hund-Mejean. This decrease is linked with the decision of the largest banks is the world to prohibit the use of their credit cards for purchasing cryptocurrencies. Since a couple of months ago, the clients of these banks cannot use their credit cards to obtain cryptocurrencies.
Martina Hund-Mejean in a recent meeting said that Mastercard registered an increase of 19% when it comes to the cross-border transactions in the first trimester of this year. However, when compared to the last trimester of last year, the cross-border transaction volume decreased by 2%, which present a relatively significant decrease that is attributed to the aforementioned prohibition of purchasing cryptocurrency with credit cards.
The Mastercard’s CFO assured the decrease coincided with the measures taken by the largest banks, mainly the ones from the United States of America. These measures eliminated the possibility of using the credit cards issued by these banks to obtain cryptocurrencies. Hund-Mejean said: “I would like to call out a few items related to the revenue profile for the year. First, we do expect deal closings and implementations to pick up from Q1 levels which will increase rebates and incentives in the following quarters. Second, we expect cross border growth to moderate somewhat. This is due to the recent drop-off in crypto wallet funding. And in addition, cross-border will also face tougher comps for the balance of the year given the strengthening of the euro during 2017. You can see this a bit already in our April metrics.
What the issue is that a number of the banks have decided, in particular in the United States, that they would not allow the usage of cards for this particular funding vehicle. And that’s why we have already seen a relatively significant decrease of the volume related to that event.In terms of where the funding is coming from by country, we’re seeing quite a bit coming out of the United States. We saw quite a bit coming out of Australia and some other select countries in Asia, and then a number of countries in Europe.”
The measures were introduced at the beginning of February this year when JPMorgan Chase, Bank of America and Citi Group decided to stop processing purchases of bitcoins with their credit cards.
It is important to know that the aforementioned banks were soon joined by Lloyds Bank from the United Kingdom, Commonwealth Bank from Australia and City Bank India, who also decided to introduce the same measures and prohibit the use of their credit cards for purchasing cryptocurrencies.
Among the common reasons that the banks stated when they announced the new measures were the unclear regulations against money laundering and the forgery of information at the moment of purchasing cryptocurrencies. Moreover, more and more institutions are using the lack of regulations as an argument for eliminating the processing of transactions related to the digital currencies, which is a situation that affects negatively the participants in the cryptocurrency ecosystem.
On the other hand, according to Ajay Banga, the CEO of Mastercard, these restrictions are not the only ones that could influence the cross-border transaction volume of Mastercard since the uncertainty regarding the new restrictions reflected on the cryptocurrency exchanges as well, who reported less interest in the cryptocurrency world in the last part of the fourth trimester.
Banga assured that the cryptocurrencies are not part of the earnings projections of the company. He also added the company is interested to keep it that way. The CEO of Mastercard said: “The governments around the world – I was out in Asia recently. And Korea, for example, has pulled back on allowing some of these exchanges as well to operate. There’s a lot of concerns even in Japan because one of their biggest exchanges got hacked into and has now been bought out by another company in an effort to bring that back to an even keel.
In general, the in and out of buying currency – a normal fair currency to put into a crypto wallet, which is what we were involved using our cards with, it depends a little bit on the interest in cryptocurrency. And as you can see, right now there’s a little less interest than there was in the latter part of the fourth quarter and the first quarter. So when we did our earnings call last time, we actually said that this is not something we count on because we just don’t know how to predict it or we don’t even want to count it.”