Visa, Mastercard earnings on deck: Check for value-added services growth, guidance

What happened

Visa and Mastercard are preparing to report earnings. The article says retail sales rose 5.5% year over year in the third quarter, and personal consumption spending grew 5.9%, while inflation rose 3.4%, suggesting higher spending is not just from higher prices.

Confirmed

Global impact / market context

Visa and Mastercard earn a fee each time a card is swiped or tapped, so steady consumer spending supports their revenue. Because banks, not the networks, absorb losses when cardholders do not pay, the networks collect fees regardless of a cardholder's credit risk.

Analyst inference

American Express reported its network volume rose 8.1% year over year, but it serves higher-credit-quality customers. Visa and Mastercard process larger volumes across a broader range of cardholders, so their results may show how spending holds up among consumers with different credit profiles.

Analyst inference

What to watch

1. Watch whether growth in value-added services, which are extra offerings beyond basic card processing, is reported alongside payment volume when Visa and Mastercard release results. Confirmed
2. Investors should compare any company guidance, meaning management's forecast for future results, with the strong retail sales and spending figures cited in the article. Proposed
3. Watch whether card fee pressure from merchants, who have sued banks and networks over fee sizes, shows up in revenue or costs for the payment networks. Analyst inference

Evidence

• seekingalpha.com