Global Card Spending Plummets via Covid-19

Global card spending growth started to unwind in the fourth-quarter but the catastrophic worldwide impact of the coronavirus will be stunning for the first-quarter and far beyond. Business spending on travel could fall by more than $150 billion in the first three months. Consumer spending on travel will likely decline by $300 billion in Q1. Disruption to supply chains will only make matters much worse.

According to PYVNTS, several payment conferences have either been postponed or cancelled till next year, especially those in the Asia-Pacific region. However, the Covid-19 spread will likely affect attendance at nearly all conferences globally.

The Global Business Travel Association’s (GBTA) survey of 401 companies found nearly two-thirds reported that they had canceled at least some already scheduled meetings, events or conferences due to concerns about the conferences. The virus has had a major impact on business travel to Asia. Of the respondents, 95% report that their companies have canceled or suspended “most” or “all” business trips to China.

A majority of respondents have taken similar steps for events in Hong Kong (73%) and Taiwan (54%), and a substantial number of companies (45%) have also canceled or suspended travel to and meetings in other Asian Pacific countries (e.g., Japan, South Korea, and Malaysia). Almost one-fourth of respondents report their company has canceled or suspended at least some trips to European countries (e.g., Italy, Germany, and France). Only 8% report having canceled or suspended “most” or “all” of their European trips, however.

Revised Global Forecasts

Before the coronavirus the global economy was expected to grow by 2.9% this year. However, Organization for Economic Cooperation and Development (OECD), has revised its projection to 2.4% which it says is very optimistic. For the U.S., the OECD projects a mild slowdown this year, with gross domestic product (GDP) expanding by 1.9% as against a previous forecast of 2%.

OECD Chief Economist Laurence Boone said: “The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions. Governments need to act immediately to contain the epidemic, support the health care system, protect people, shore up demand and provide a financial lifeline to households and businesses that are most affected.”

Greater Recession ?

The ducks have been lined-up since July for a downturn leading to a mild recession for 2021 and 2022, but a major event like a war or pandemic could easily push it off the cliff, says Robert McKinley, Senior Analyst for CardData, PYRPTS and The RAM Reports. He also noted the upcoming release of the “2020-2025 Outlook for the U.S. Payment Card Business” is being delayed by a week to March 24th to adjust all projections

Before the Covid-19 panic, the Federal Reserve central tendency of U.S. PCE and inflation metrics showed a figure of 1.45% in 2019, and growing to 1.85% in 2020, 2.05% in 2021 and 2.10% in 2022. However, the sharp decline in U.S. real GDP growth underway since 2018, from 2.93% to 2.32% last year, was projected, pre-pandemic, to drop to 2.20% in 2020 and 2.00% for 2021. The unemployment rate is expected to rise to 3.7% in 2021 and 4.2% in 2022.

Sinking U.S. Payment Card Growth

Meanwhile, fourth-quarter card U.S. GDV (gross dollar volume) for credit/charge card products, among the Major 4 payment networks (Visa [V], Mastercard [MA], American Express [AXP], and Discover [DFS]), lost momentum, growing 7.5% year-on-year (YOY), compared to an 8.2% YOY gain for the prior quarter, and 8.6% YOY for the year ago quarter, reports Bankcenter.

The Major 4 reported $1083 billion in U.S. credit card gross dollar volume (GDV) for the fourth-quarter (4Q/19), compared to a revised $1039 billion for the prior quarter, and a revised $1007 billion for 4Q/18. In the fourth-quarter of 2015 the Major 4 posted $777 billion in U.S. credit card GDV, according to figures collected by CardWeb.

The Major 4 payment networks posted an 7.5% YOY increase in the fourth-quarter U.S. credit card GDV, compared to an 8.6% YOY gain for 2018, a 10.1% YOY increase for 2017, and an 8.4% YOY gain in 2016. The four-year current CAGR (compound annual growth rate) for the Major 4 credit card GDV is running at 8.66%, compared to 8.56% in the prior quarter, based on analysis by CardBuzz.

Sliding Global Payment Card Growth

Globally, the three largest U.S.-based networks began eroding in 2019, with Visa down by 210 bps (basis points) YOY; Mastercard down by 200 bps YOY; and American Express also down by 200 bps YOY, all currency adjusted (FX), according to RAM Research and CardTrak.

Visa reported FX YOY global payment card (credit+debit) GDV grew by 6.1% in 4Q/19, compared to 6.8% YOY FX in the previous quarter, and compared to 8.2% YOY FX for the year ago quarter.

Mastercard reported a FX YOY global payment card (credit+debit) GDV grew by 12.3% in 4Q/19, compared to 14.5% YOY FX in the previous quarter, and compared to 14.3% YOY FX for the year ago quarter.

American Express reported a FX YOY global payment card GDV grew by 6% in 4Q/19, compared to 6% YOY FX in the previous quarter, and compared to 8% YOY FX for the year ago quarter, according to CardFlash.