Companies are reporting first-quarter earnings now, but the next round of results are expected to reveal the effects of tariff-driven volatility that began in March. Investors will be looking for clues that payment volume is stagnating or even declining.
"This is the most unique earnings season set-ups that we've been a part of," Jeffries said in a research note on Tuesday.
Early research into the
GlobalData attributed the lower growth to
"We're not making a call on a recession yet, but we are looking at areas that are exposed," Tien-tsin Huang, an analyst at
, said during a webinar this week on the trade war's impact on payments.
Exposure to payments
"In isolation and in volatile spending environments, we generally assign higher value to names where spending is less central to the growth formula,"
"Given the uncertainty around U.S. policy, there could be concerns from non-U.S. businesses wanting to work with U.S. payment providers," Huang said. "They may be looking for a local scheme."
Other analysts were more bullish on Affirm, which offers buy now/pay later lending among its products.
In a research note, Evercore ISO said, "Affirm's superior risk management platform is part defense and part offense: it enables them to grow faster because they can approve more transactions and enter into new verticals and markets more aggressively without elevating the portfolio's aggregate credit risk profile to keep its growing list of lenders happy."
The payment companies are keeping an eye on the White House but don't appear to be worried yet.
Western Union currently does not have a position on tariffs, the company's public relations office said in an email.
"At this time, the ones that have been enacted are in such early stages, it is difficult to correlate any impacts. Secondly, many of the tariffs announced have either been changed or delayed, so that makes it equally as difficult to recognize any impacts," Western Union's PR office said.
Affirm's public relations office forwarded commentary from its chief financial officer, Robert O'Hare, on the subject of tariffs.
"Ultimately, part of Affirm's job is to both drive conversion for merchants and also help with affordability on the consumer side. If tariffs cause higher prices for consumers, we're there to help. And so I do think that if affordability becomes an issue for the U.S. consumer at large, financing products like Affirm may benefit," O'Hare said.
PayPal did not respond to a request for comment. Bread did not comment, citing a quiet period before its earnings report.
Payment giants Visa and Mastercard are likely to be able to sustain their growth targets for 2025, though slower payment volumes may start to create headwinds toward the end of the year or early 2026, according to
"Despite the macro concern, we expect trends to look OK through April, and a weaker U.S. dollar and foreign exchange volatility are incremental helps — driving our belief that full-year guides are unlikely to change. With how defensively the networks have acted YTD, all-else-equal, we expect stable trends in April," Jeffries said in a separate research note on Visa and Mastercard.
Economic drags
Trump said
The tariffs are likely to cause an economic slowdown, a recession or worse, depressing payment volume and thereby hurting the payments industry, Eric Grover, a principal at Interepid Ventures, told American Banker.
Highly profitable cross-border business and consumer payments will fall, Grover said. "And payments protectionism will surge, with many countries that heretofore wouldn't have given it a second thought now seeking to control critical domestic payments infrastructure rather than relying on U.S.-domiciled payment systems."
In its report, GlobalData said, "Economic forecasts for many markets, including the U.S., were seen as positive until the beginning of the year due to expected economic recovery and reduced inflation. However, the current situation is now considered uncertain again. The trade wars have already disrupted financial markets and caused businesses to face uncertainty, potentially leading to weakened economic growth."
While tariffs pose challenges for all players in the economy, the main impact on the card payments will be via inflation, and depressing retail activity, the research firm said, adding that as a result, both both payment volumes and average transaction values are expected to see slowdowns, ultimately hurting the revenues of card issuers, payment processors, networks, and acquirers, including any business segments involved in the value chain.
In past recessions, dollar volumes decreased, while transaction counts increased, as consumer managed cash flow more aggressively, and the balance of volume shifted somewhat to debit, Aaron Press, research director for worldwide payment strategies told American Banker. The result was lower interchange revenue for banks but increased or stable click fees for acquirers and networks.
"This time around, assuming the uncertainty remains, I think we may see transaction counts decline as well," Press said.
Following the 2008 recession, Visa, Mastercard and other large payment companies such as PayPal, Block and American Express have increased their reliance on revenue that's not from payment fees, using value-added services such as security, business products, technology or consulting to offset revenue streams that are strained due to regulatory or economic pressure.
"We prefer names with more diversified revenue drivers beyond consumer or business spending,"
The trend toward diversification predates the current tariff talk by a long time, Press said.
"The value of diversification in a downturn will depend on the nature of the services," Press said. "Adding lending and embedded financing, for example, may well drive revenue, but will also increase risk, and current players in the space are likely bracing for increased write-offs."
Other features and function extensions may be seen as optional. Even with an expected ROI, companies may wait to implement them to avoid short-term costs and associated risk, according to Press.
"It's wishful thinking that value-added services, many of which are discretionary, will really insulate payment firms from a recession's effects," Grover said. "Providing nondiscretionary domestic payments will be the safest place to be in the coming self-inflicted economic storm."
During the 2008 downturn, there was an absolute decrease in payment volumes, which hurt companies that make money from transaction fees, Aaron McPherson, Principal at AFM Consulting, told American Banker.
"Tariffs magnify the effect by making consumer goods more expensive, reducing purchase activity," McPherson said. "So I do think it would be better to have a diversified revenue mix."
