Card network giants struggled amid pandemic in 2020 but Q4 numbers show signs of recovery

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American Express, Mastercard and Visa saw a decline in commercial payments volume by 21%, 7% and 4% in 2020. However, the Q4 ‘20 results showed signs of a rebound.

by Manpreet Singh

Created: 8 March 2021

The commercial payments sector faced a huge challenge as business travel evaporated during the pandemic in 2020. Companies in these sectors were forced to change their business model in order to survive. Many partnered, some acquired other businesses and a lot of other launched products to cater to the needs of growing popularity of digitization.

According to their latest SEC filings, Mastercard, Visa and American Express have reported volume declines in their commercial payments segment by 7%, 4% and 21% respectively in 2020 as compared to 2019.

American Express recorded $109.1 billion in proprietary billed business in Q4’20 which is 11% higher than the previous quarter but 18% lower than Q4’19. On the other hand, its industry rival, Visa recorded a 19% jump in its commercial payments volume from the previous quarter to $258 billion but a decline of 5% on a year over year basis.

In Q3, Commercial Payments International reported that Visa and American Express were still struggling to pick up their pace in the commercial payments segment. The Travel & Expense (T&E) segment was the hardest hit and continues to be.

Mastercard, which does not disclose quarterly commercial payments volumes in its SEC filings, has released financial year numbers according to which the company processed $682 billion commercial payments volume in 2020, 7% lower than 2019. However, the company saw a 20% increase in commercial credit and debits cards bringing it to 102 million cards in circulation. American Express on the other hand had 14.5 million commercial cards in circulation, 2.6% lower than 2019.

“The opportunity from a B2B standpoint still remains largely untapped. And this is where our suite of assets from a multi-rail standpoint really will play an important part,” said Sachin Mehra at Chief Financial Officer at Mastercard.

American Express shed some more light on the recovery in the commercial payments segment when its Chief Financial Officer Jeff Campbell said, “Spending from small and medium-sized enterprise customers who historically have the highest mix of non-T&E spending has been the most resilient throughout 2020”. While adding further, “large and global corporate card spending, which historically has been primarily T&E, has been down the most during the pandemic”.

Travel and Expense recovery remains the pain point

American Express in its filings mentioned that the T&E segment now represented 12% of its proprietary billed business in Q4’20 down from 28% in Q4’19. While its non-T&E business showed a 2% increase YoY, its T&E segment was 74% down in Q4’20 as compared to Q4’19. The hardest hit was Large and Global Corporates (L&G) spending which was 51% down YoY in Q4’20.

Visa’s total nominal cross-border volume was 18% down YoY in Q4’20 ending period while for Mastercard the cross-border volume in the same period was 27% down.

“Significant obstacles in crossing borders remain the single most important factor driving the slow recovery of cross-border travel”, said Vasant Prabhu, Vice Chairman and Chief Financial Officer at Visa.

Echoing his competitor, Mastercard’s CEO Michael Miebach said, “In October and November, we saw some improvement in cross-border within the EU, although recent restrictions are causing some slowing over there, as mentioned earlier. Improvement in cross-border travel outside the EU remains limited. Now, we continue to believe travel will improve, starting with personal travel as border restrictions ease and as vaccination efforts expand. We believe corporate travel will follow”.

Slowdown not holding companies expansion plans

In Q4’20, Mastercard expanded its presence in the Middle-East and Africa. The company partnered with PayCentral to digitise SME payments in South Africa, partnered with Network International to expand its presence in MEA. In Q1’21, the company partnered with First Abu Dhabi Bank for commercial cards. For Asian markets, the company extended its B2B solutions in the region.

It also partnered with ACI Worldwide for a new payments system, EnKash in India for B2B payments, Marqeta for global partnership and with Extend and TSYS it launched virtual card solutions. While it also upgraded its Mastercard Track Business Payments Services in the last quarter of 2020.

On the other hand, Visa, its global rival, partnered with Conferma Pay and bought Yellow Paper.

“In the virtual card-based business, we’ve expanded our relationship with UK-based Conferma Pay to launch Visa Commercial Pay, which has three offerings. A mobile app enabling virtual card issuance and management for business incidentals. Two, a solution to manage business travel spend with enhanced data,” said Al Kelly, Chairman and Chief Executive Officer at Visa.

The company also announced partnerships with Boost Payments Solution, CardUp, and rivalling Mastercard, it also partnered with First Abu Dhabi Bank for B2B virtual cards.

While American Express partnered with Coupa to expand its partnership in the US and it also launched business credit cards for Amazon Business small businesses.