Visa’s Weakness in Mobile Payments Post-Coronavirus Examined

March 9, 2020         By: Steven Anderson

It’s no secret that the COVID-19 coronavirus is having a negative effect on markets all up and down the spectrum. It’s perhaps one of the biggest reasons behind the recent massive drop in the Dow, and companies from Apple to Tesla are all alerting investors that the next little while is going to be something of a disaster. The folks at Keefe, Bruyette & Woods (KBW) took a look at Visa’s own issues in this time of troubles, and discovered some noteworthy points about the overall development.

First, the bad news. Visa previously announced a lose of 2.5 to 3.5 points lost than expected in the first quarter of 2020, thanks to the coronavirus. While coronavirus concerns weren’t likely to affect online or mobile device shopping, they were likely to hit the brick and mortar front hard. In both directions, too; not only would there be fewer people out shopping, but also, there would be fewer things to buy as the supply side gets hit almost as hard as the demand side.

The impact Visa projected was based on what had already appeared in February, and assumed that some relief might start to appear in March as the virus ran its course. There is some validity in such a concept, as warmer weather with greater sunshine and fresh air opportunities tends to hamper viruses, but it’s just a projection.

For its part, KBW altered its earnings per share projections down from $1.39 for the second quarter to $1.33, and cutting the full-year projection $6.08 to $6.02. However, KBW’s current estimates for Visa’s fiscal year 2021 remain unchanged, suggesting that coronavirus may prove a temporary problem. With cross-border issues on the decline, though, there may be larger problems to come.

That’s not exactly a bad stance to take; you effectively have one of two options at this point. Either coronavirus is a temporary problem, like the flu, that burns itself out over time or it’s the end of the world as the real-world equivalent of Stephen King’s Captain Trips takes hold and most of us are walking to Nebraska. If it’s the first, a return to comparative normalcy may be in the offing. If not, we likely have bigger problems to face down.

Mobile payments will likely survive going forward, thanks to the field’s sheer versatility, but the near-term could be a little rough. It all depends on how the latest threat to public health boils down.