Visa, MasterCard cut costs as revenue growth slows

[Joanne98]

NEW YORK (Reuters) - As cash-strapped U.S. consumers think twice before buying a coffee or a newspaper, and banks fight for survival, Visa Inc (V.N) and MasterCard Inc (MA.N) are cutting costs to sustain earnings.

In their latest quarterly results, the world's largest payment networks beat expectations by slashing expenses and increasing prices.

That contrasts with previous periods when the companies could rely more for growth on people switching to electronic payments from cash for an increasing number of transactions.

That trend had Mastercard and Visa in the sweet spot of the credit and debt card industry -- getting paid each time a transaction took place on their branded cards while not having to deal with the risks of consumers defaulting that are faced by the credit card issuers.

Rising defaults have led to mounting charges for the issuers, such as Citigroup Inc (C.N) or Bank of America Corp (BAC.N), which are major clients of Visa and Mastercard. American Express is both an issuer and a payments company.

Governments around the world have bailed out many of the battered banks, making it more difficult for the credit card-payment networks to raise the prices they charge them for transactions.

"Most likely, the bottom line will benefit from cost cuts (rather) than growth in volumes," said Michael Kon, an analyst at Morningstar.

Visa's payment volume growth slowed to 12 percent in the latest quarterly report from 15 percent in the quarter before, while MasterCard's volume increased at only a 3 percent rate from 14 percent. Continued...

http://uk.reuters.com/article/gc06/idUKTRE51E1PK20090215

[BlooInBloo]

1. Betcha it's just a teaser-rate cut.

[Angleae]

2. Visa & MC don't actually loan money.

They license their "brand" to banks who do in exchange the banks pay them a fee every time one of the "branded" cards are used. People are using their cards less so Visa/MC is getting less in fees. Cutting costs for them is the same as most companies, layoffs.