Coronavirus: Top payments execs weigh in on risks, responses

February 28, 2020 12:34 PM

By David Heun and Kevin Wack

With the world gripped in panic over the rapid spread of the coronavirus — and the stock market falling in response — payments companies have been left to speculate on what it all means to their operations in an increasingly global economy.

What the payments industry's key executives have had to say in the first weeks of the outbreak indicates the caution and uncertainty of the situation. Some have already lowered revenue forecasts for 2020.

This story was compiled from reporting by PaymentsSource writers including John Adams, Kate Fitzgerald, David Heun, Michael Moeser and Daniel Wolfe.

Ajay Banga, chief executive officer of MasterCard Inc., gestures as he speaks during a news conference at the Mobile World Congress in Barcelona, Spain, on Tuesday, March 3, 2015. The event, which generates several hundred million euros in revenue for the city of Barcelona each year, also means the world for a week turns its attention back to Europe for the latest in technology, despite a lagging ecosystem. Photographer: Pau Barrena/Bloomberg *** Local Caption *** Ajay Banga

Pau Barrena/Bloomberg

Mastercard wary of pandemic

Mastercard spoke up early about what most companies felt, but were afraid to say: Things were OK for now, but if coronavirus becomes a pandemic, all bets are off.

Because a major portion of Mastercard's business in China occurs through e-commerce, and the company is not hurt as much by canceled travel plans, president and CEO Ajay Banga is hoping for the best.

“If it becomes a much bigger crisis, then we’ll take a look at those numbers. Have to take that as it come; it’s the only way to look at this,” Banga said.

Regardless of how far the virus spreads in the coming months, Mastercard intends to stay on course with its plans to continue driving digital payments in and out of China, including working with Alipay and others to establish a market there when trade wars calm and Chinese regulations ease restrictions.

Visa is in same boat

Visa CEO Alfred Kelly also advised caution, acknowledging the uncertainty that surrounds all companies in contemplating how to counter the virus and keep business losses to a minimum.

"When we look at our numbers in China, we see some declines, but the Chinese New Year was a month earlier this year and spending slows around that holiday period," Kelly said.

But things could get worse before they get better, Kelly said.

"There is going to be an impact when planes are being halted in and out of China and you are constantly reading, as we are, that companies are telling employees to stay home," he said. "So even in the e-commerce world, if employees are saying home, who is picking out the goods and shipping them?"
Recent estimates from economic experts have indicated that many companies can expect delays of up to several weeks in products coming out of China.

Amex stung by travel spend

American Express CEO Steve Squeri recently told analysts that the New York-based company, a leading provider of cards for business travel spending, has seen significant reductions in spending in certain parts of Asia, including Hong Kong, Taiwan and Singapore, which have been harder hit by the coronavirus than many other parts of the world.

Amex derives 8% to 9% of its net revenue from the Asia-Pacific region, which also includes Australia.

Squeri said that Amex is likely to curtail its spending on coverage and promotions in the regions affected by the virus, according to a research report published Friday by Instinet analysts.

To the extent that coronavirus continues to spread in Europe and the Western Hemisphere, it has the potential to be more detrimental to Amex, Squeri said. Still, he remained bullish on the card brand's growth outlook.

Discover in 'wait-and-see' mode

Discover CEO Roger Hochschild said Friday that those card companies that are most exposed to the travel and expense category will likely feel the effects of the coronavirus outbreak first.

Discover has yet to see a customer impact, Hoschschild said, but indicated the Riverwoods, Ill.-based company will offer temporary credit line increases and hardship programs to any customers who suffer financially as a result of the outbreak.

“So to the extent our customers can’t work and have interruptions to their income, we will stand ready to help them,” Hochschild said during his remarks at an industry conference in Miami.

The Discover CEO also said that the card issuer is taking steps to prepare for a scenario in which the employees at its customer centers need to work from home.

Starbucks hit hard

Starbucks has been a pioneer of mobile payments technology, and it's taking a significant hit from the virus because it views China as a key market.

Starbucks reported a month ago that it was closing half of its stores in China because of the outbreak, casting a pall on its outlook for a market that generated$745 million in revenues for Starbucks in the last quarter of 2019.

The country has been a major testing ground for advanced mobile payment concepts, so that type of work is hurt in the process.

“At present we are unable to reasonably estimate the impact to the business. Notwithstanding the fact that our China business represented 10% of our global revenues in the first quarter of fiscal 2020, we expect that these events to have a material impact on our international segment and our consolidated results with the second quarter and full year of fiscal 2020,” Patrick Grismer, chief financial officer at Starbucks, said during his company's financial reporting.

Western Union is watching

Even with a recent deal with Du Xiaoman Financial to expand business in China, it remains too early for Western Union to declare the country as a trouble spot because of the illnesses.

Unlike other payments companies that heavily rely on face-to-face transactions or e-commerce shipping, Western Union has not felt a major impact on the minimal business it does in the country.

"China accounts for only 2% of Western Union business and most of that is on incoming money transfers," CEO Hikmet Ersek said. "Our main emphasis there is for the safety of our workers there."

MoneyGram is cautious

MoneyGram is in a similar position, having little exposure in China at this time. It expects that its digital channels will be favored by consumers who are wary of being exposed to the virus in public settings or travel.

"To date, we haven’t seen an impact on the business, but we could eventually if the virus starts to limit the ability for consumers to move to other countries for work," MoneyGram CEO Alex Holmes said. "Since consumers don’t necessarily need to leave their homes to receive money, this should further limit any potential exposure."

This article has been updated to clarify MoneyGram's expectation.