American Express sees the sharpest declines in commercial payments business in Q1 2020

American Express saw a 12% decline in its commercial payments business as Covid-19 crushed T&E worldwide.

by Manpreet Singh

Created: May 11th 2020

Global payments giants are starting to feel the impact of the Covid-19 pandemic in their financial results. American Express in its first quarter SEC filings showed that the company has recorded $116 billion in its commercial payments business. This is the lowest business billed in the commercial card segment by American Express since Q2 2018. Contrariwise, its rival Visa Inc.’s commercial payments business grew by 2.6% to $278 billion in Q1 2020.

“Cross border traffic has declined significantly”, Stephen Squeri, Chief Executive Officer at American Express, told investors on an earnings call.“It’s also fair to say you haven’t yet seen the impact of the changes that have gone on in Europe and in the US just in the most recent days,” he further added.

Mastercard which does not reveal its quarterly numbers said in an investor call that the company’s Gross Dollar Volume (GDV) growth in the US was 6% and outside the US it declined by 9%. The company’s overall cross-border growth declined by 1% globally with most the decline occurred in the month of March.

Mastercard’s CEO Ajay Banga in the company’s Q1 2020 investors call said that Mastercard’s roadmap to revival will be “containment, stabilization, normalization and growth” and also pointing out that the parts of Asia are on the stabilisation path.

Both American Express and Visa in its investor call pointed out that the companies had strong results in the month of January and February but after the lockdowns and shutting of business globally, its cross-border payments and commercial payments declined significantly in March.

The average spending per card for American Express’s proprietary business declined by 12.1% to $7,836 per card. The sub $8000 mark is lowest since Q1 2018. The company’s non-T&E (travel and Expenses) payments declined modestly but T&E payments which represent 30% of Amex’s proprietary volumes declined by 95% due corporations reduced spending and governments implemented travel restrictions. The proprietary billed business increased by 5% both in January and February but declined by 25% in March.

The results come after an update given to investors wherein the company reported the initial impact of the COVID-19 crisis.

Mastercard and Visa had already warned of slow Jan-March quarter in their 8k filings with warnings on a further decline in the April-June quarter. Mastercard has suspended its annual 2020 outlook for both net revenue and operating expense growth.

Meanwhile, Visa also expanded its footprints in the B2B segment by partnering with Industrial and Commercial Bank of China (ICBC) for B2B virtual cards which is the company’s first B2B partnership in China. It also partnered with Australian cross-border fintech company, Airwallex for the launch of borderless B2B cross-border card.

“Value-added services are an extension of our core business and represent a significant opportunity for us to deepen relationships, help clients and grow our business,” said Al Kelly, Chairman and CEO of Visa Inc.