Mastercard's Cross-Border Payments Remain Stable Amid U.S. Tourism Decline

Mastercard has identified an opportunity amidst the challenges faced by the U.S. tourism industry. The company's chief financial officer, Sachin Mehra, noted during a recent earnings call that while the number of travelers to the U.S. has decreased due to tariff policies, funds that would have flowed into the U.S. have instead been redirected to other regions. This shift has led to a decrease in cross-border payments, but not entirely.

According to the latest data from the U.S. Travel Association, the number of foreign visitors to the U.S. dropped by 14% in March. This decline occurred before the April 2 tariff announcement and followed a 2% decrease in February, marking the first decline since the onset of the COVID-19 pandemic in spring 2020. The decrease is attributed to political opposition to the policies of Trump. A survey conducted by Languard International from April 10 to 11 found that 60% of Canadians were avoiding the U.S. due to the president's policies.

Mastercard reported that its cross-border payments and tourism revenue are diversified, similar to most payment companies. The company stated that Trump's tariff policies have not yet impacted its overall payment business. However, it acknowledged a decline in international tourism numbers in March and the first three weeks of April. This decrease was primarily seen in travel to the U.S., while other routes, particularly within Europe, the Middle East, Africa, and the Asia-Pacific region, saw growth in recent weeks. Mehra noted that Mastercard's overall tourism payment volume remained stable, but there were shifts within this category.

Mastercard has also emphasized its investments in artificial intelligence as a means to diversify its revenue streams. The company recently launched the Mastercard Agent Pay platform, which leverages its existing generative AI technology to enhance customer service, security, and user onboarding through automated responses. This platform delves deeper into Mastercard's data and AI tools to assist shoppers in selecting products for specific events, help businesses manage supply chains, and aid retailers in developing marketing or sales strategies. The platform uses intelligent agent AI, designed to minimize or eliminate human oversight.

Mastercard is collaborating with Microsoft to expand this platform, with additional partners including IBM for B2B technology and Braintree and Checkout.com for security services. The company relies on its global network of card issuers and merchants to gather data for its AI engine. CEO Michael Miebach highlighted that AI powers one-third of Mastercard's service products.

In another strategic move, Mastercard has expanded its partnership with Corpay, including a 3% stake in the company. Corpay will become the preferred supplier for Mastercard's financial institution clients in currency risk management and comprehensive payment technology. The companies will also expand their collaboration on virtual cards, and Mastercard's Move payment service will be available to Corpay's clients, including small and medium-sized enterprises. Miebach noted that 85% of Mastercard's service revenue is recurring, providing a stable foundation for growth amidst economic fluctuations.

For the quarter ending March 31, Mastercard reported a net income of $3.3 billion, a 9% increase year-over-year, and net revenue of $7.3 billion, up 17%. Adjusted earnings per share were $3.73, a 16% increase. These results exceeded analyst expectations. Cross-border payment volume grew by 15%, global gross dollar volume reached $2.4 trillion, up 9%, and the total number of cards in the market was 3.5 billion. Mastercard confirmed its 2025 performance expectations, forecasting a net revenue growth rate in the high teens.

Despite global uncertainties, Mastercard has built a diversified and resilient business model, allowing it to navigate various economic environments effectively. The company's proactive approach to leveraging AI and strategic partnerships positions it well to capitalize on opportunities even in challenging times.