Issuers are taking it on the chin headed into the final hours of stock trading on this historic Friday post Brexit. The payments companies are not faring any better. Those firms with hopes of cross-border transactions as reliable revenue streams also face rocky shoals.
The overarching worry is that consumer spending will pull back, which of course hits the card firms right where they live, and it is possible the slowdown in spending would be widespread. With less fluid conduits to trade and goods that span basic to luxury items, as consumer spending slows, so too does GDP growth.
In Europe, GDP growth is less than stellar and stands at a meager 0.6 percent. That’s likely to hit a bit of a speed bump, with a sort of vicious circle forming where there once had been a virtuous circle.
The cross-border transactions that make up roughly a quarter of MasterCard’s revenues, as they slow, could reduce some momentum of the top line. Visa has taken on Visa Europe at what looks to be a rough time, and prior to that deal, the payments giant garnered roughly the same percentage contribution from cross-border. Travel between the continent and the U.K. is likely to scale back.
A larger impact across many verticals (but especially among international transactions) will come as the weaker euro and pound, as measured against the dollar hit earnings (yes, the issuers again). After all, the business that comes from those areas will generate less once translated back to dollars. Cross-border shipments of physical goods will no doubt get more complicated.
For FinTech in general, public or private, the difficulties of hiring freely moving talent (that is, between regions or countries) will become apparent. Down the line that could impact innovation.
Look for a long saga to play out.
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