A Cross-Border Comeback

Pummeled for nearly two years by the coronavirus pandemic, payments networks have lately found cause for optimism in a key market: cross-border travel. Hit hard by pandemic restrictions, that business is staging a comeback.

Mastercard Inc. reported in mid-April its cross-border volume in March climbed above numbers last seen in 2019. Earlier, Visa Inc. said its March-quarter growth in cross-border volume “remained robust,” with a 38% increase in transactions over the same period last year. Excluding transactions within Europe, the volume increase was even more robust, at 47%.

An easing of travel restrictions has had much to do with the improvement, said Sachin Mehra, Mastercard’s chief financial officer, during an earnings call this spring to discuss the company’s first-quarter results. The improvement, he added, has occurred “faster than we expected. We are off to a strong start to 2022 with the recovery of cross-border travel.”

For Visa, too, the recovery “was stronger than we expected,” said Vasant Prabhu, Mehra’s counterpart at Visa, during that company’s earnings call. The comeback in the business is particularly notable, he added, because cross-border transactions tend to be highly profitable for the network. Disruptions caused by Russia’s invasion of Ukraine have not impacted cross-border traffic “so far,” Prabhu added. But for Visa, at least, the level of transactions is “still below” that seen pre-pandemic.

Cross-border transactions—those in which the issuing country is not the same as the merchant country—matter to the card networks as a barometer of the health of their international, markets and of the networks’ ability to serve those markets. The onset of Covid-19 two years ago threatened that ability, though it also had the effect of boosting e-commerce traffic globally.

With respect to the Ukraine war, much the same can be said of Mastercard, which reported its cross-border volume was up 53% compared to the first quarter of 2021. But excluding Russia, where both Visa and Mastercard have shut down processing following the imposition of sanctions on that country, the increase was still 52%. For April through the 24th, Mastercard said its volume increased 60% compared to that period last year, while the increase excluding Russia was 65%.

In sum, “cross-border [activity] is still fundamentally sound,” pronounced Mehra. In fact, he pointed out, improved consumer spending overall is helping to drive the cross-border trend line back to pre-pandemic normality. Unsurprisingly, much of the improvement in cross-border business can be attributed to a lessening of restrictions put in place early on to combat the spread of Covid, both card networks said.

Maybe, just maybe, the industry can now begin to put the bad news of the last two years behind it.

—John Stewart, Editor, john@digitaltransactions.net