April 26, 2021 at 03:49PM

The big banks have reported – and now come the payment networks (and, by extension, the cards). This week, the earnings deluge continues, where a number of payments-focused companies will report their first-quarter results, giving insight into where consumers have been spending – and where they have not.

We’ve seen at least some foreshadowing of what’s to come. As reported last week, marquee names in banking, such as J.P. Morgan, Citibank and Bank of America, noted that debit spending has outpaced credit spending.

But an overall sense that consumers are past an inflection point seems to be in the cards – literally. Where those same banks had taken tens of billions of dollars of loan loss reserves through the pandemic to cover anticipated losses, those losses did not in fact materialize. In recent quarters, that has led to a (partial) release of those reserves, which gave earnings a boost. Perhaps more importantly, releasing those reserves indicates that banks’ management sees consumers’ buildup of savings and paying down of loans (including cards) as key to seeing us through to the end of the pandemic, and will ultimately see them spending on their cards again.

Visa and Mastercard, when they report this week, may show continued headwinds in cross-border spend, which in turn may translate into slight revenue declines year over year (analysts have top-line declines baked into their models for the period for both payment companies). The pandemic, travel restrictions – and the general downtrend in travel and entertainment spend that had been a hallmark of banks’ results – will be in evidence.

Some Headwinds – But Will Credit Rebound?

To get a sense of how widespread those headwinds were, last quarter at Visa, cross-border volumes – excluding intra-Europe activity – were down 33 percent. At Mastercard, details from the earnings supplementals and conference call revealed that cross-border volume was down 29 percent in the quarter. Though overall payments volume may have been up, with debit spending at the card networks rising double digits, credit slipped by low single-digit percentage points. But as economies reopen again and as vaccinations surge, that latter metric may improve.

Commentary on the conference calls may also point to some central themes of the great digital shift that are here to stay. Visa CEO Al Kelly stated on the most recent call that two-thirds of face-to-face transactions have been contactless outside of the U.S. Mastercard’s management noted on the call that contactless penetration reached 41 percent of in-person transactions globally compared to 37 percent in the second quarter — and 13 percent a year ago.

Beyond the payment networks, the growth in contactless and digital transactions should have a positive ripple effect on Fiserv’s results (analysts see a slight uptick in revenues for the first quarter, up 2.6 percent). As reported last quarter, the pivot toward digital commerce was a notable trend in the quarter, though overall revenues were down 5 percent. Drilling down into the numbers, global eCommerce transactions were up 25 percent in the quarter. Digital-first tools such as its BOPIS (buy online, pick up in-store) application were up 125 percent over 2019’s tally. Clover’s own payments volume was up 25 percent in the quarter as well.

“For Clover, it really is about market share in the eCommerce space, and then its market share gains on the SMB side,” said CEO Frank Bisignano on the call. “Clover has played a significant role in that.”

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