As Payments Firms Disclose Russia Exposure, Wall Street Takes Stock

Wall Street hates uncertainty, goes the saying. One key uncertainty investors hare is what happens in times of geopolitical crisis and in times of military action.

More companies than ever, of course, are international in scope, particularly payments firms, as commerce itself is becoming a borderless pursuit.

And on Wall Street, investors are focused on revenues, and the ways in which the conflict in Europe can (and will) impact near-term results.

To that end, companies with exposure to the region have started to give some insight into their Russia/Ukraine exposure as they cut off ties with financial institutions there, and as they comply with sanctions.

To that end, Visa said Wednesday (March 2) in a filing with the Securities and Exchange Commission (SEC) that 4% of its annual top line — equivalent to about $964 million — was derived from Russia, and 1% came from Ukraine.

Spending Continues to Recover Elsewhere

That same document also noted significant transaction volume growth in other regions. Visa said in the filing, known as an 8-K, that U.S. payments volume in February outpaced 2019’s levels, at 145% of that same month three years ago. Drilling down a bit, credit was at 135% of 2019’s levels; debit stood at 154%.

Those data points show that the recovery in consumer spending, as measured in key markets, is recovering and that a freeze on transactions in the war-torn region should be somewhat minimal. All else being equal, as the math implies, a 4% drop in revenues — were the impact to carry through an entire year — would imply a 4% hit to earnings, and whether or not stock prices adjust accordingly to reflect that risk (on, say, price to earnings or price to sales ratio) depends on where you stand.

As for other companies that have been disclosing Russia and Ukraine related exposure, Mastercard said in its own SEC filing that 2% of revenues are tied to the Ukraine and 4% come from Russia-related payments.

Of course, for the consumers in these countries, making cross-border purchases becomes problematic. Beyond the payment network giants, a slew of other companies and services have paused transactions for Russians — including PayPal, Google Pay and Apple Pay. Western Union is on track to stop internal (domestic) money transfers within Russia. Netflix is hitting pause in the country. Wise and Remitly have suspended services in Russia, too.

Read also: Netflix Suspends Russia Projects, Acquisitions

Thus far we’ve yet to see similar disclosures with the SEC from those aforementioned firms. But, if and when they do start to illuminate their business dealings in Russia/Ukraine — especially if required to do so by the SEC (they are not yet required to disclose those details) — investors will be better able to parse risk. We might expect that many firms, as evidenced by Mastercard and Visa, may opt for a proactive approach.