Strong quarterly earnings

The giant payment processing companies (IYF)—Visa (V) and Mastercard (MA)—posted strong results for the June quarter, outpacing analyst expectations for revenues and EPS. The primary drivers were positive momentum in the US economy stemming from lower unemployment and strong global spending patterns.

Consumer Confidence Boosts Payment Processors, Consumer Finance

Mastercard’s gross dollar volumes in the United States rose from $419 billion in the first quarter to $442 billion in the second quarter. Visa posted net operating revenues of $5.2 billion in the second quarter, which implies a YoY (year-over-year) growth of 15%. On a currency-neutral basis, Mastercard’s net revenues were $3.7 billion, a rise of 18% YoY.

Moving forward, payment processors are likely to be negatively impacted primarily by trade worries, which can reduce consumer confidence. These headwinds are currently under Mastercard’s watch.

Performance of consumer finance companies

Credit card loans for consumer finance companies Capital One Financial (COF) and Discover Financial Services (DFS) rose sequentially in the second quarter. Capital One had credit card loans of $109.7 billion compared to $107.5 billion in the first quarter. Discover Financial had credit card loans of $67.8 billion in the second quarter and $65.5 billion in the first quarter.

Discover Financial’s payment services business also saw strong momentum in the second quarter compared to Q2 2017, as evidenced by volume growth. Proprietary volumes increased 9% YoY in the second quarter compared to a YoY rise of 8% in the first quarter. The sequential increase was mainly due to gas prices and customer participation. The company also saw an increase of 14% YoY in PULSE volume growth to $44.3 billion.

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