Pandemic ‘Pulled Forward’ E-Commerce Investments ‘by a Decade’: Visa

The digital commerce investments that the COVID-19 pandemic “pulled forward” were investments that “the ecosystem needed” for moving “small businesses online who previously only had face-to-face shops,” said McInerney. “You had e-commerce delivery services that were sprouting up seemingly overnight all around the world,” he said.

Visa saw “literally entire economies that retooled themselves to enable digital commerce,” said McInerney. “In hindsight, it became kind of a necessity for these economies to continue to thrive,” but the speed at which it happened “surprised me,” he said. “If you look at the timing of it, it's possible that we accelerated these investments in the ecosystem by a decade.”

With the infrastructure now “in place,” the investments that have been made on the “buyer side” and the “seller side” of the ecosystem allow Visa to “accelerate the digitization of an enormous amount of cash that still remains all around the world,” said McInerney. “So we look out and we see a ton of opportunity. Cash digitization and the shift to different forms of payment is still in the very early innings globally. Given this kind of rapid acceleration of infrastructure investments, we can now move faster to digitize commerce because the groundwork has all been laid.”

The “best way to describe consumer spending right now” is that it’s “remarkably stable” in the U.S. “and for the most part around the world,” said McInerney: “That’s what we see in our numbers.” Amid the macroeconomic headwinds, there have been “some shifts in the way consumers are spending, what they're buying, where they're spending,” he said.

One recent trend on Visa’s books has been in the shift in spending from goods to services, he said. “Early in the pandemic, spending on goods surpassed services, which was very different than the historic trends.” Even as spending on services has rebounded in the past six months, “the percentage of spending on goods in our payments volume still remains higher than pre-pandemic levels,” he said.

Another trend Visa sees is a “strengthening in discretionary segments,” said McInerney. “If you look at U.S. travel spend,” though it was not back to the pre-COVID “trend line” in Q3, it grew more than 40% versus last year, he said.

A third shift is that “we continue to see very strong spending from affluent customers,” said McInerney. “We've seen especially strong spending in restaurants,” he said. “People are back out, going to concerts, going to theaters, going to see movies.” Non-affluent spending remains “relatively resilient,” he said.

Mastercard is observing “very low levels of unemployment,” coupled with rising wage levels and “high levels of consumer savings,” Chief Financial Officer Sachin Mehra told the same conference earlier Thursday. “All of these are, in our view, at least positive as it relates to the overall health of the consumer,” he said. That inflation “seems to be persisting” at very high levels “is no surprise to anybody,” he said. But that could have a “detrimental impact" on consumer spending” if it persists for “significant periods of time,” he said.

Mastercard continues to believe that “card-not-present” transactions will “perform” well during this year’s holiday selling period, said Mehra. “As more in-person transactions take place, you tend to see a little bit of a pullback take place in card-not-present,” he said. “But honestly, the long-term fundamentals still continue to be very sound there.”