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Home / Business / Weak travel for Visa, Mastercard and American Express (Amex) hit profits

Weak travel for Visa, Mastercard and American Express (Amex) hit profits



During the pandemic, global travel has stagnated, which is damaging the bottom line of credit card companies.

American Express, Mastercard and Visa all reported double-digit profits in the most recent quarter from a year ago. The two companies pointed out that international travel has plummeted as the border remains closed during the pandemic.

These companies receive a certain fee from every transaction conducted on their network, and American Express also receives a large portion of its revenue from the annual fee. The lack of cross-border payments is particularly painful, because the profit of swiping cards is higher, and ultimately the profit is higher.

Visa is the latest major credit card company and will announce its results on Wednesday. Cross-border transactions fell by 29%, and Visa’s revenue in the quarter fell by 1

7% from the same period last year. The company did not give guidance based on the uncertainty of the virus, but said that cross-border vulnerabilities are still a “significant and continuous drag on revenue growth.” Visa’s chief financial officer Vasant Prabhu said that this situation is likely to continue until 2021.

Prabhu said in a conference call with analysts on Wednesday: “Since the border was closed, cross-border recovery has been slow and there are significant obstacles, such as quarantine zones and other similar restrictions.”

Prabhu mentioned “significant uncertainty”, including the impact of the surge in Covid infections in the United States and Europe, the timing of the reopening of borders, the impact of treatments and vaccines, other stimulus plans and the economic impact after the stimulus plan ends. The Covid case in Europe has spurred the leaders of Germany and France to announce new economic restrictions next month, while the new case in the United States has hit a record high in recent weeks.

Visa competitor MasterCard announced many of the same-themed earnings on Wednesday. Mastercard’s net income fell 28% year-on-year, and net income fell 14%, which was lower than analysts’ expectations. The company reported that cross-border transactions fell by 36%, and it did not expect a rebound in travel spending in the short term.

Sachin Mehra, MasterCard’s chief financial officer, said in a conference call with analysts on Wednesday: “Although we believe that cross-border will eventually recover, it will take some time for people to build confidence in travel safety. “We think this may be related to the widespread popularity of vaccines and therapeutic drugs in the second half of next year.”

Mastercard’s stock price has performed the worst in the past week, falling 11% this week. Visa and American Express fell 8% and 10% respectively this week.

American Express started card revenue on Friday, and profits fell by 40% year-on-year. Tourism and entertainment expenditures fell 69% year-on-year. American Express Chief Financial Officer Jeffrey Campbell said in a telephone interview that although the company “is confident that travel demand will resume,” it “will take some time.”

Campbell said: “Humanity’s desire to travel is unsatisfactory, but it will take some time to come back like after September 11.” “To restore our company to pre-pandemic income levels, we do need consumption. Travellers are back-we are full of confidence and we are trying to take the right steps to rebuild growth and momentum.”

Campbell said that business travel (about 6% of American Express’s revenue) may take “a few years to come back.”

Despite the travel-related downturn, the two companies still have some bright spots. Mastercard chief executive Ajay Banga (Ajay Banga) pointed out that domestic travel has improved this quarter, including spending on accommodation and sports. Credit card companies pointed out that domestic spending has picked up, and the growth of e-commerce has also offset losses in other regions. Visa’s payment volume increased by 4%, while Mastercard’s total transaction volume increased by 1%.


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