Pandemic Hits U.S. Bancorp’s Merchant Revenues and Raises T&E-Related Expenses

U.S. Bancorp’s big payments operation that includes merchant acquirer Elavon Inc. is usually a reliable revenue generator, but the bank-holding company’s exposure to the big downturn in travel-and-entertainment and business spending because of the Covid-19 pandemic became evident in the first quarter.

Merchant payment volume declined 4.8% to $104.7 billion from $110.1 billion a year earlier, Minneapolis-based U.S. Bancorp reported Wednesday. Merchant-processing revenues fell 10.8% year-over-year to $337 million and were off 17.6% from 2019’s fourth quarter. And total non-interest income from payments fell by $58 million, or 6.9%, to $786 million.

The decline was “due to lower corporate payment products revenue and lower merchant processing services revenue driven by lower sales volume, particularly in March, due in part to the worldwide impact of the Covid-19 virus on spend,” the bank said in its earnings report.

In addition to the spending-related revenue hit, the company also reported a $100 million increase in non-interest expense “related to Covid-19 including increased liabilities driven by future-delivery exposure related to merchant and airline processing,” the report says. U.S. Bancorp, which is one of the few banks that serves as an acquirer for airlines, gets 28% of its merchant-acquiring revenues from the travel and hospitality industries. Flights and hotel stays often are booked far ahead of actual travel dates, which creates potential exposure for acquirers when trips are cancelled.

Plus, U.S. Bancorp is a big issuer of commercial cards for corporations and government. First-quarter volume on its corporate payments systems slipped 4.2% year-over-year to $16.2 billion.

Things were somewhat better on the bank’s consumer card side. Credit card volume rose 3.3% to $23.3 billion. Volume the company’s debit and prepaid cards increased 5.2% to $18.3 billion.