Visa Q4 - Crossborder Woes

Visa released its September quarter numbers showing a double-digit decline in revenues, as closed borders and limited travel hurt its high margin business. The recovery so far has been led by contactless payments as people stay close to home and spend more on their local travel adventures.

Revenues came in at $5.1 billion, down 17% with earnings being down 29% to $2.14 billion year-on-year; both ahead of expectations. The high margin cross-border payment volumes were down 29% - defined as the spending done by cardholders outside of the country where the card is issued.

Management said that when travel comes back, personal travel will bounce back faster than business travel. This has been the trend observed in the EU, where travel numbers improved in the past quarter. We expect this to slow down again as EU countries have re-introduced tough restrictions to curb Covid-19 infections.

Contactless penetrations (don't ask, I won't say) was 41% of all in-person purchase transactions in the third quarter. This means merchants can process transactions much faster and take transactions of any size, hassle-free! The Visa share price has held up quite nicely post March lows and these recent erratic market moves only provide an entry point for long-term investors.

Here at Vestact we believe that it's not long before economies open and trade freely, and individuals will travel and shop in ways they're more accustomed to. E-commerce will probably stay elevated thanks to Covid-19 induced behavioural changes and in the end, payment companies like Visa, Mastercard and other FinTech businesses emerge as winners.