Shares of payment-processing companies jumped today after Pfizer and BioNTech announced that early results from clinical trials of their COVID-19 vaccine candidate showed 90% effectiveness in preventing participants from contracting the virus. The public health crisis has had broad macroeconomic impacts that have reduced payment volumes, and progress on a potential vaccine is sparking hope that payment activity will soon recover.
Here's how several major payment-processing stocks finished today's session:
- Mastercard (MA 1.60%): Up 10%.
- Visa (V 2.48%): Up 7%
- WEX (WEX 2.11%): Up 25%.
- Euronet Worldwide (EEFT 1.20%): Up 21%.
The U.S. economy officially entered into a recession earlier this year at the onset of the pandemic, and millions of Americans have lost their jobs due to the crisis. Those factors contributed to a broad decline in payment volumes, and payment processing companies primarily derive revenue from taking a cut of those volumes. As the economy has started to reopen, those volumes have been starting to recover in recent months.
Mastercard and Visa both reported quarterly results in late October that showed modest improvements. Mastercard was able to squeeze out a 1% gain in worldwide gross dollar volume (GDV), while Visa's payments volume increased by 4%. The payments giants reported steady weekly improvements as transactions processed climbed.
"Volumes improved throughout the third quarter," Mastercard CEO Ajay Banga said on the conference call with analysts. "In fact, if you exclude travel and entertainment, which has been particularly hard hit, our switched volume growth rates in September were similar to what we saw before the pandemic in Q4 of 2019."
Visa also noted that it benefited from the increased adoption of e-commerce and digital payments that the crisis is spurring. "Helped by the accelerated shift to e-commerce and the shift to digital payments even in face-to-face transactions, the domestic business has experienced a V-shaped recovery," Visa CFO Vasant Prabhu commented.
WEX offers corporate card payment services to enterprise customers, as well as vehicle fleet management and healthcare administration services. Payment processing is the largest revenue source and declined 24% in the third quarter. While many parts of the business, particularly WEX's travel customers, remain under pressure, management was encouraged by a 10% increase in business-to-business (B2B) payment volumes.
Electronic payment provider Euronet said last month that all three of its segments delivered stronger-than-expected growth, with the electronic funds transfer (EFT) business benefiting from "a much quicker return to travel than we initially anticipated" in certain regions. "Even without a cure for COVID-19, we saw domestic transactions come back very quickly once the shelter-in-place restrictions were lifted," CEO Michael Brown said.
The pharmaceutical companies hope to achieve required safety milestones for the vaccine candidate and plan to submit for Emergency Use Authorization from the Food and Drug Administration shortly thereafter. Pfizer and BioNTech expect to produce 50 million doses in 2020 before increasing production to 1.3 billion in 2021 for wider availability.