Rising International Card Spending Continues to Surpass Post-Pandemic Predictions
As the global economy continues to recover from the pandemic, international card spending has seen significant growth. This is evident in the Q4 2022 results from both Visa and Mastercard, which show persistent growth in international card spending in both travel and e-commerce. As this major source of income for card programs bounces back, banks and fintech companies are looking to the future to secure their share of this growing market.
Visa and Mastercard's reports show continued growth in cross-border card spend, driven by the recovery in international travel and the sustained strength of eCommerce spend. Q4 Cross-border card spend grew by 22% and 31% from the previous quarter reported by Visa and Mastercard respectively.
International card spend has now exceeded pre-Covid levels every month since April 2022, leaving the market in a very strong position going into 2023. Visa and Mastercard's results indicate a steady rise in international card spending as the world economy gains back its footing. The resurgence is particularly prominent in North American and European markets, primarily driven by the return of international travel and the expansion of eCommerce.
Travel spend is a major contributor to the recovery of the international card spend. Q4 2022 travel spend increased by approximately 75% and 59% for Visa and Mastercard respectively, and it has now reached 123% of its 2019 levels. This trend of growth is expected to persist in the upcoming year, due to the resurgence of cross-border travel in Asia and the growth in inbound travel to the US.
“The Northern Hemisphere peak summer travel season finished on a high note. Considering the prevailing economic uncertainties, travel demand is progressing well. And the removal or easing of travel restrictions at some key Asian destinations, including Japan, will certainly accelerate the recovery in Asia,” said Willie Walsh, IATA’s Director General.
In addition to the growth of travel spend, international eCommerce spending remained robust during the holiday period. The latest reports indicate that international e-commerce spending continues to grow steadily, as it has done over the past 20+ years with online retail sales growing from 0.63% of total sales in 1999 to 13.3% in 2021. Mastercard demonstrate proof of this upward trend in their Q4, 2022 report, with an increase of 172% as a percentage of 2019 levels. These upward trends are predicted to persist throughout 2023.
2023 Outlook: Persistent Intensification of Competition for International Card Spend Revenues:
As cross-border transaction trends continue to rise in 2023, card issuers have the opportunity to generate more fee income as international card spending increases. Looking forward for 2023, US and Europe, fintech’s and banks should evaluate whether their card programs have captured their fair share of the recent growth in international card spend. They should also consider developing new strategies such as:
offering FX rate discounts
providing multi-currency wallets
and implementing more transparency tools, to attract consumers to use their FX services over other providers.
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 cambrist.com
References:
1) Visa Fiscal Third Quarter 2022 Financial Results
2) MasterCard Incorporated Third Quarter 2022 Financial Results Conference Call presentation
3) National Bureau of Economic Research: The Effect of E-commerce Expansion on Local Retail