Deceleration in Foreign Exchange transactions for Visa and Mastercard
The summer holiday period and the easing of lockdown measures have led to a significant increase in travel within the European Union (EU) during the recent quarter. This uptick in travel has been reflected in the cross-border volumes for both Mastercard and Visa, which have shown some signs of recovery.
The recovery of foreign volume can be attributed to several factors. Easing travel restrictions, increased global demand, and improved supply chains have all contributed to this revival. However, there are hindrances that continue to pose challenges. Ongoing geopolitical tensions, regulatory barriers, and economic uncertainties, particularly affecting countries with high export dependency and sectors such as tourism, automotive, and electronics, remain significant obstacles.
In contrast, travel outside the EU remains anemic, reflecting the ongoing impact of the global pandemic and related travel restrictions.
In a positive development, card not present transactions continue to perform well, with ecommerce growth remaining strong at over 20% year on year. This digital shift is a testament to the resilience of online commerce in these challenging times.
Interestingly, yields within the EU are lower than outside the EU, potentially hindering revenue growth. Our data suggests that this pricing discrepancy could be a significant factor.
Looking ahead, personal travel is expected to recover faster than business travel, and is projected to be the larger driver of revenues. However, the possibility of more lockdowns through the winter looms, and could potentially disrupt this recovery.
In the latest financial reports, Mastercard and Visa both reported a decrease in top line revenue for the quarter, by 14% and 17% respectively. Despite this, the contraction of cross-border volumes for Mastercard and Visa was at a slower pace in the quarter compared to previous quarters, offering a glimmer of hope for the future.
As the world continues to navigate the challenges posed by the pandemic, the payments industry will undoubtedly remain a key barometer of global economic health and recovery.
