MasterCard Blames Crypto Card Bans For Its Decline in First quarter Growth

The crypto craze of 2017 was so unprecedented that there was an uncontrollable and massive influx of retail investors in buying digital currencies. Several banking institutions like Bank of America, JPMorgan, Citigroup and which earlier allowed its customers to make crypto purchases through the bank’s credit card saw this signals to be cautioning and worrisome.

Earlier this year, many banks started prohibiting its customers to make crypto purchases through their credit cards saying that the banking institutions feared that customers were making purchases over the appetite to repay again.

This action led to a sudden drop in the cryptocurrencies and MasterCard - one of the world’s biggest digital payments services providers says that this has impacted the quarterly growth earnings of the company in the first quarter of 2018. Although the company’s cross-border value grew by 19 percent, the overall figures dropped by 2% from the fourth quarter of 2017.

In an earnings call on Wednesday, Mastercard chief financial officer Martina Hund-Mejean said "This is due to the recent drop-off in crypto wallet funding. We expect cross-border growth to moderate somewhat."

Before the banks introduced the ban on crypto purchase through credit cards, customers used to use the MasterCard for purchasing digital currencies and store them into “crypto wallets”.

Martina explained the reason for the decline in the company’s growth saying that “the issue in this, first of all, in terms of the stacks, on the cross-border volume growth, the cryptocurrency funding or the crypto wallet funding really was 1 percent. It was 1 percent that we saw in the fourth quarter and it was 1 percent that we saw in the first quarter. 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.”

Mastercard CEO Ajay Banga who also joined the call said that the regulatory uncertainties in the Asian markets of Japan and South Korea have put somewhat dent in the growth earnings. Ajay said: "There's a lot of concerns even in Japan because one of their biggest exchanges got hacked. 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.”

However, he later made it clear the crypto is not the major part of company’s corporate earnings strategy as it is difficult to predict how the markets can take shape at any given time. He said: "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."