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Andrew Willis: Surprisingly, despite our aversion to handling cash in the pandemic, the fallout from the Coronavirus has had a material impact on credit card transaction volumes. But investors may want to be around when they come back, especially when travel starts again.
Cross border transactions in particular are lucrative for networks such as Visa, and as you might expect, they've endured dramatic declines. But senior equity analyst Brett Horn says history suggests travel may make a full recovery and even longer term structural changes stand to increasingly benefit credit card companies. Digital payments on a global basis surpassed cash payments only just a couple of years ago, which has us thinking that trend still has a lot of room to run.
The potential for Visa, which is the long-time established leader in this space has investors optimistic about the company, perhaps a little too optimistic however, as we remind investors that the recovery in travel could take a few years and profit margins on a gross revenue basis have stalled in recent years. But with such a scalable business, the company could improve those margins which are already ample while collecting fees on future payments, regardless of whether by credit, debit or mobile.
For Morningstar I'm Andrew Willis.
