Visa & Mastercard released their Q4 2021 financial results on the 27th January. The results highlight the continued growth of International Card Spend as the world economy recovers from the Covid-19 pandemic. Covering the period from October – December 2021, the combined figures paint a healthy picture for International Card Spend with a positive outlook for the remainder of 2022.

Total Cross-Border Card Spend now ~110% of 2019 levels

Both Visa & Mastercard reported that their aggregate cross-border transaction activity is now consistently surpassing pre-Covid levels, which is a remarkable turnaround from the depths of 2020 when cross-border spend had fallen by over 50% and global travel halted. The cross-border transaction rebound has been strongest in North America & Europe, driven by a return to international travel and the continued growth of eCommerce. Intra-Europe cross-border spend is now >20% higher than pre-pandemic levels. The continued easing of travel restrictions across major economies is expected to drive further growth through 2022 and beyond. Competition between card issuers and Merchant Dynamic Currency Conversion (DCC) acquirers for cross-border spend FX volume & revenue will shape the income picture for the payments industry for the foreseeable future.

Travel Spend is the largest component of the recovery

The largest component of the cross-border transaction recovery is in travel spend, which has experienced nearly a complete rebound during the second half of 2021. Travel spend is expected to continue its growth this year as evidenced by the Visa CEO, Alfred Kelly, stating that “cross-border travel will continue to recover” over the remainder of 2022.

International eCommerce Spend Growth Remains Robust

The Visa and Mastercard financial results highlight the continued strength in international eCommerce spend. Both card organizations recorded year-on-year growth, with international eCommerce spend now at 154% of pre-pandemic levels. These figures reinforce the view that this trend is sustainable and, in Alfred Kelly’s words, “likely to persist as the convenience of e-commerce is indisputable and its growth continues to be robust, even as card-present begins to return.”

154% - Cross-border eCommerce spend is now at 154% of pre-pandemic levels

2022 Outlook: 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’s international transaction fees typically range from 1.5-3.5% of the transaction value, so the income opportunity for issuers is very significant. Of course, such income is directly threatened by the bank cardholder use of 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 assess what leakage they are currently seeing to DCC and Cash, and (ii) identify future proposition/pricing developments that engage consumers to use the Issuer’s FX services over other providers, such as FX rate discounts, multi-currency wallets and greater transparency tools.

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