Standard and Poor - "The companies have not been run very tightly"Reuters is reporting that Visa and MasterCard are slashing expenses and increasing prices. I
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 and MasterCard Inc 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 or Bank of America Corp, 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
"The companies have not been run very tightly and there is room to cut," said Standard & Poor's analyst Stuart Plesser.The article goes on to say that Visa, which slashed expenses as part of a restructuring plan to integrate the former U.S., Canada and international operations into one company, has accelerated the pace and expects to finish that plan -- which will save $300 million in 2009 -- a year earlier than expected.
Editor's Note: I didn't see where they stated they'll increase prices, however, that usually happens in April anyway when new Interchange Rates come out. It'll be interesting to see what happens this year when the new rates are released. Regardless, if you'd like to save up to 100 basis points off of Interchange, you can make the switch to HomeATM's E2EE Internet PIN Debit platform.
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