International Card Spend Exceeds Expectations Post Pandemic

Visa & Mastercard released their Q1 2022 financial results on the 28th of April. The results demonstrate the continued steady growth of international card spend as the world economy rebuilds following the Covid-19 pandemic. Covering the period from January – March 2022, the combined figures provide a highly positive outlook for international card spend with an expectation of continued growth for the remainder of 2022.

Total Cross-Border Card Spend now ~130% Higher than 2019 levels

Building on the increased activity experienced in Q4 2021, both Visa & Mastercard again reported that their aggregate cross-border transaction activity continues to surpass pre-Covid levels. The North American and European markets are experiencing the strongest revival when compared with pre-pandemic levels, driven by the growth of eCommerce following the pandemic, and the return of international travel. The continued easing or removal of travel restrictions across global economies is expected to drive further growth through 2022 and beyond. The continued competition between card issuers and Merchant Dynamic Currency Conversion (DCC) acquirers for cross-border spend FX volume & revenue will undoubtedly shape the state of income for the payments industry for the foreseeable future.

Travel Spend continues to be the largest component of the recovery

The largest component of the cross-border transaction recovery is in travel spend, which has experienced a rebound over the second half of 2021. Travel spend continued growing in Q1 2022, with Card-Present and Card-Not-Present Cross Border Travel spend more than doubling vs. Q1 2021. Travel spend- growth is expected to continue for the remainder of 2022 with Stuart Green, Chief Revenue Officer at Cambrist noting that in Q1 of 2022, “Cross Border spend more than doubled in comparison to Q1 2021, with cross border travel spend growth further accelerating in April to almost triple the levels of April 2021.”

The significant growth in cross border card spend means that the Mastercard investor guidance from January 2022 which forecasted that cross border travel spend would return to 2019 levels by the end of 2022 has now been achieved l, ~9 months ahead of expectations.

International eCommerce Spend Growth Remains Robust

Both Visa and Mastercard financial results highlight the continued strength in international eCommerce spend. Both card organizations recorded continued growth, with international eCommerce spend now at 180% of pre-pandemic levels. These figures clearly bolster the view that this trend is sustainable.

2022 Outlook: Continuous Increased Competition for International Card Spend Income

As cross-border transaction trends continue through 2022, Card Issuers can benefit from the increased fee income generated as international card spend grows. Issuer international transaction fees typically range from 1.5-3.5% of the transaction value, creating a significant income opportunity.  That said, Issuer cross border fee income is directly threatened by Dynamic Currency Conversion (DCC) at the point-of-sale and foreign currency cash, with some estimates that issuers miss out on 30-40% of potential fee income from International Card Spend as a result. Competition is likely to be particularly fierce this year as the competing industries look to recover ground lost during the pandemic.

As the Northern Hemisphere summer approaches, Card Issuers should undertake two actions: (i) perform an assessment of their fee income from International Card Spend to determine what leakage they are currently seeing to DCC and Cash, and (ii) identify future proposition/pricing developments, such as multi-currency wallets and greater transparency tools, that engage consumers to use the Issuer’s card services over DCC & cash.

About Cambrist
Cambrist is an award-winning technology company enabling payment card issuers & processors to better manage the foreign exchange requirements of their card programmes. Our proprietary SaaS platform and advanced data analytics, combined with our team of industry veterans & experts, supports customers around the globe.

Learn more about Cambrist at www.cambrist.com or contact us at info@cambrist.com