Visa, Mastercard Earnings Hit By Lack Of Cross-Border Transactions

Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA) earnings on Wednesday failed to impress, as the American shopper held back from spending in the middle of the pandemic, the Financial Times reports.

Both Visa and Mastercard reported a year-over-year revenue decline — at 16.9% and 14.10%, respectively.

What Happened: Total retail spending excluding petrol in the September quarter remained in the low growth mode, rising 1.8% YoY, according to Mastercard.

Total domestic spending on Mastercard and Visa network grew 4% and 7.5%, respectively — unchanged since summer.

Moffett Nathanson payments analyst Lisa Ellis said that total spending volumes were weaker than expected but called Visa's earnings better than Mastercard. The former has more exposure to the U.S. and debit cards, FT reports.

The revenue declines for both companies resulted from a lack of higher fees for cross-border transactions, as global travel remains limited.

Mastercard reported a 36% YoY drop in cross-border transactions while Visa reported a 29% YoY decline.

Wolfe Research analyst Darrin Peller had anticipated stronger earnings from both companies considering the pandemic-driven rise in electronic transactions. Still, the earnings showed how cross-border transactions affect the entire business. 

Why It Matters: Mastercard Chief Financial Officer Sachin Mehra ties the return of cross-border transactions to vaccines and therapeutics' availability.

Mehra remarked on the company conference call that personal travel will bounce back faster than business travel.

According to Mastercard President Michael Miebach, contactless payments are growing in popularity with 41% penetration of in-person purchase transactions.

Miebach expects e-commerce spending to remain elevated from pre-pandemic levels due to altering consumer payment behavior, reports the Wall Street Journal.

V, MA Price Action: Visa shares declined 4.8% to $180.87, and MA shares fell 8.11% to $291.38 on Wednesday's close.