Mizuho: Visa (V.US) and Mastercard (MA.US) growth is slowing in the US

Analysts at Mizuho recently reported that the share of Visa (V.US) and Mastercard (MA.US) in consumer spending has been declining for several quarters as opportunities for cash-to-card transactions in the U.S. near saturation.

Dan Dolev, an analyst at Mizuho, wrote in a report last week: "We believe the share of personal consumption expenditure growth is a key measure to assess the growth trajectory of Visa and Mastercard in the U.S."

Last Thursday, the U.S. Commerce Department reported that personal consumer spending grew 0.3% in September, or $105.8 billion, slightly higher than the 0.2% increase in August, in line with economists' consensus.

Dolev noted that cash-to-card transactions drove about 45% of Visa's revenue growth. While Mastercard did not disclose this metric, he believed it was similar to Visa.

Historically, Visa captured 61% of the U.S. personal consumption expenditure growth, measured by the change in Visa's payment volume in the U.S. relative to personal consumption expenditure. From the third quarter of 2019 to the third quarter of 2024, Visa's share of the five-year consumer spending growth was 47%, slightly lower than in the second quarter, while the average in the first half of 2013 was 52%.

Historically, Mastercard captured 22% of the U.S. incremental consumer spending growth, with its share in the five-year consumer spending growth at 20%, slightly lower than in the previous quarter, and the average in 2023 at 22%.

After Mastercard reported its third-quarter earnings on Thursday, Dolev noted that one of Mastercard's advantages was its increased share in the U.S. debit card market, with the spread between the two credit card networks widening by about 20 basis points. Mastercard and Visa's U.S. debit card growth expanded to 8% and 5%, respectively.

"More importantly, Mastercard expects a 400-basis-point sequential growth in U.S. volumes in October, while Visa expects only 200 basis points," Dolev said.

Meanwhile, the companies' cross-border growth was similar. Dolev added that Mastercard's cross-border business grew 200 basis points in October from September after a stable third quarter.

After analyzing the impact of PCE on the two credit card payment networks, Dolev raised his target price for Mastercard to $532 from $496 and for Visa to $292 from $279.

Mizuho rates Mastercard as "Outperform" and Visa as "Neutral."