COVID-19 Pandemic Impacts Visa (NYSE:V) MasterCard (NYSE:MA), And American Express’ (NYSE:AXP) Profits With Weak Cross-Border Spending

Profits of credit card companies Visa Inc. (NYSE:V), MasterCard Inc. (NYSE:MA), and American Express (NYSE:AXP) have been greatly affected by the pandemic as global travel came to a halt.

Pandemic impacted profits of credit card companies

In the most recent quarter, the companies reported a double-digit drop in their bottom line compared to the same period a year ago. The companies indicated that the slump in international travel due to the closure of borders because of the pandemic was the attributing factor to the drop in profits. Credit card companies earn from transactions that run on their network. However, the lack of cross-border has hit the providers because such swipes tend to have higher margins and are highly lucrative.

On Wednesday, Visa reported its latest quarter report stating that cross-border transactions dropped 29%, with revenue in the quarter dropping 17% YoY. Because of the pandemic’s uncertainty, the company didn’t offer guidance but indicated that cross-border weakness is still significant and will continue dragging revenue growth.

According to Visa CFO Vasant Prabhu, the weaknesses experienced with cross-border transactions are likely to continue through 2021. Considering borders are still closed, cross border recovery continues to be sluggish. Prabhu said that restriction and quarantines continue to impede crossing borders.

Travel spending recovery not expected soon

MasterCard also saw a drop in its YoY net income by 28%, with net revenue falling 14% to miss analysts’ estimates. The company said that cross-border volumes dropped by 36% and didn’t predict recovery in travel spending anytime. MasterCard CFO Sachin Mehra said that although they are optimistic cross-border spending will recover, which will take time as people build confidence in travel safety. Mehra said that this is linked to vaccine and treatment availability, which is likely to be towards the end of next year.

Amex saw a 40% YoY drop in profit, with entertainment and travel spending dropping 69% YoY. The Company’s CFO Jeffrey Campell said that they are optimistic travel demand will rebound, but it will take some time.

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