Visa commercial spend bounces back while AmEx flags

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Card giant Visa’s commercial payments volume is close to pre-pandemic levels, while low T&E dragged down American Express.

by Manpreet Singh

Created: 18 May 2021

15 months since the World Health Organization declared Covid-19 as a pandemic, card network companies have yet to see commercial billed volume return to pre-pandemic levels.

In the latest SEC filings of commercial payment giants, Visa’s commercial payments volume is just 1.43% below its levels a year ago, but up by 6.2% from the previous quarter. Arch-rival American Express’s proprietary billed volume in the first quarter of 2021 is down by 10% as compared to the same period a year ago, and 4.7% down as compared to the previous quarter.

American Express’s per card commercial payments volume stood at $7,159 in Q1 2021, down by 8.6% from Q1 2020 and 4.7% from Q4 2020.

Mastercard which does not disclose its commercial payment volume numbers in its 10Q SEC filings has revealed that its Gross Dollar Value (GDV), which includes consumer and commercial spend, rose by 9.3% to $1,711 billion in Q1 2021 from the same period the previous year but in terms of cross-border volume fees, it saw a drop of 23% to $932 million respectively.

Back in Q1 2020, then Mastercard’s CEO Ajay Banga noted that the road to revival for the company is “containment, stabilization, normalization and growth” to which the successor to former CEO, Michael Miebach in Q1 2021 earnings call, has highlighted that they “believe many markets are transitioning from the normalization phase to the growth phase domestically. Cross-border travel spending continues to be in the stabilization phase, where spending is restricted due to closed borders”.

American Express in its Q1 2021 report noted that it’s Global Commercial Billed Business was down by 12% YoY overall but its travel and expense (T&E) segment was down by 64% YoY and 72% down as compared to Q1 2019.

But the company’s CFO Jeff Campbell seemed optimistic on the T&E segment underling this in the company’s earnings call that “on T&E spending, the trends we’ve seen in the first quarter are encouraging and give us more confidence in our current assumption that by Q4, T&E spending will have recovered to around 70% of its Q4 2019 levels, led by recovery in U.S. consumer domestic travel”.

Digging deep on numbers, the company presentation notes that the SME commercial billed business saw a modest decline of 3% YoY as compared to large and global corporates which registered a decline of 44% YoY in Q1 2021.

Adding to this AmEx CFO noted, “small business lagging that a bit and then large and global corporation travel still being well below its 2019 levels”. The company saw a silver lining in its goods and services commercial billed business seeing a rise of 5% YoY.

As per the company’s report, its T&E billed business segment dropped from $64 billion in Q1 2020 to $32 billion in Q1 2021, of which large and global corporate segment saw a dip in total share from 20% to 8% respectively while SME saw its share being same at 24% of overall T&E billed business.

On the other hand, Visa’s CEO, Al Kelly noted in its company’s Q1 2021 earnings call that “the decline in travel is temporary” and the company is “starting to see some early signs of recovery”. The company’s vice chairman and CFO, Vasant Prabhu said that “cross-border travel-related spend declined 55% year over year and was at 39% of 2019 levels”.

Adding to other things, Parbhu told in the company’s earnings call said: “B2B remains a huge opportunity, and [they] are committed to our three-pronged approach to drive growth, cost-based, cross-border, and large enterprise accounts receivables and payables, with many capabilities scaling or launching in the new future”.

Mastercard dominates in press reporting in Q1 2021

Mastercard was all in news coverage in launching its services globally in the first quarter of 2021 particularly in the Middle East and Africa. The company first teamed up with PayCentral in early January this year to digitize SME payments in South Africa. Then it forged a separate partnership with EnKash to expand its B2B payments and Razorpay for digital payments in India. It teamed up with Form3 for real-time payments in Europe and with Deutsche Bank on a global scale to develop a digital platform for corporates.

But the company primarily was in news for its fast expansion in the Middle-East where it had partnered with Network International for expansion of its services into MEA back in November 2020 but the company stepped up to form an alliance with UAE based financial institution, First Abu Dhabi Bank by having a five-year strategic partnership deal. The company also partnered with Saudi Arabia based National Commercial Bank to launch corporate cards.

Its rival, Visa also had partnered with First Abu Dhabi Bank for B2B virtual cards in December 2020. The company partnered with Billhop for commercial cards in Europe while it teamed up with TransferWise for global expansion. Visa also had a setback when it had to abandon its $5.3 billion bid to acquire Plaid after a Department of Justice antitrust suit.

In the travel and expense management segment, American Express acquired Egencia, which is Expedia Group’s corporate travel arm. Mastercard tied with Amadeus for virtual cards in travel while Visa signed a partnership with TripActions for expense management solution.