Visa, Mastercard Find Road Trips, Holiday Spending Not Enough

(Bloomberg) -- Extra spending on road trips and holiday shopping hasn’t been enough for Visa Inc. and Mastercard Inc.

Consumers continue to avoid travel and spending overseas, limiting transactions that are among the most lucrative on the firms’ networks. Cross-border volume slid 48% in the quarter ended Sept. 30 at Mastercard and 29% for Visa, the companies announced Wednesday

“Travel remains impacted,” Mastercard Chief Financial Officer Sachin Mehra said in an interview. “We expect over the longer term, travel will come back. We think personal travel will come back before business travel does.”

Mastercard and Visa stocks have both declined this year amid the coronavirus pandemic, which prompted economies around the world to shutter and stifled global travel. Both stocks were among the worst performers in the 73-company S&P 500 Information Technology Index on Wednesday.

“The recovery is being led by lower-yielding areas of the business -- domestic versus cross-border,” Sanjay Sakhrani, an analyst at Keefe Bruyette & Woods, said in a note to clients after Mastercard reported earnings.

Both networks have seen spending on their cards in the U.S. recover faster than other regions around the world. That’s partly due to the stimulus and additional unemployment insurance offered to consumers.

“We’ve certainly seen positive year-over-year growth in the U.S. in the third quarter, which is very encouraging from our standpoint, especially given the low point we saw in the second quarter,” Mehra said. Still, he warned, “we do expect, given the uncertainty around the virus, that this may be nonlinear.”

Travel, Shopping

Consumers are still traveling, but they’re often taking road trips instead of long flights to exotic places. Holiday shopping has also already started as the largest online retailers have made major pushes to capture more of that spending this year.

Visa’s cross-border results exceeded the average estimate of analysts polled by Bloomberg, pushing the stock about 2.4% higher in extended New York trading before it lost some of the gains. The firm said online spending excluding travel purchases has climbed about 30% so far this month compared with a year ago.

“As the world turns increasingly to digital payments, we see tremendous opportunity for growth,” Chief Executive Officer Al Kelly said in a statement.

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