In January, Visa's (V -1.15%) CFO pointed out a sharp recovery in cross-border activity late last year until omicron took hold. That's important because those transactions -- swipes in a country different than the country the card was issued in -- are especially profitable.

With the variant retreating, he expected international travel to rebound in February. That was before events in eastern Europe cast a shadow over the old continent. Now, management and shareholders are wondering when the lucrative transactions will return to normal. And the longer it takes, the more effect it will have to shareholders.

Two people at a sidewalk cafe table  paying with a credit card.

Image source: Getty Images.

Everywhere you want to be

Visa's payment network facilitates the movement of money across more than 200 countries and territories. That means that for decades, travelers across the globe have relied on Visa's payment network to facilitate spending no matter where they decided to go. And the complexity of dealing with different banking jurisdictions and currency exchange rates makes those transactions more expensive for customers due to fees. Those fees are extremely profitable for Visa.

That's why global travel is so important to the company's strength. When restrictions went into place to limit the spread of COVID-19, that travel collapsed. And profits collapsed with it. Operating income for its fiscal 2020 was down 9% from 2019. 

A graph of international tourist arrivals by year, showing large drop in 2020.

Find more statistics at Statista

Same problem, different reason

When COVID-19 cases dropped this February, so did many of the travel restrictions throughout Europe. This opened the door for a potential resurgence in international travel -- and those cross-border fees. International transaction revenues had already approached their previous peak by the end of last year. But the world is unpredictable.

Chart showing Visa's international transaction revenue falling in 2020 and then rebounding.

Data source: Visa. Chart by Author.

Only a few months after adding Sberbank -- the largest bank in Russia -- to its network,  management was having to break out the percent of revenue coming from the country and its neighbor, Ukraine, after the former invaded the latter. For the record, it's 4% for Russia and 1% for Ukraine. Visa's CFO had already said he didn't expect international travel to return to pre-pandemic levels until mid-2023. Now the uncertainty around sanctions, inflation, and travel has the potential to delay the return of cross-border volume even further. 

Sentiment and rising prices could be a potent combination

A recent survey by travel agency MMGY shows that half of American travelers want to wait and see how the situation evolves before making plans to travel to Europe.  The heads of several other small ticketing agencies have seen that translate to a small drop in ticket sales, as well as some cancellations and postponements. 

That's not even counting the effect of higher fuel costs. Earlier this month, executives from Delta, American Airlines, United, and JetBlue all said they expect to raise prices due to higher fuel costs. Ed Bastian of Delta specifically pointed to international flights as a target.  The concerns over safety and higher prices could make it hard for international travel to rebound anytime soon. 

Not all bad news

There is a potential silver lining. Of the company's revenue, 60% to 65% of it is linked to volumes. That means it is solely tied to the transaction amount. With inflation soaring across the globe, Visa will see higher volume on its network, resulting in higher revenue. But it is a double-edged sword. As prices rise, the demand for products and services falls. 

Wall Street may be seeing through those dark clouds. The stock is now only 10% off its high after being down 24% less than a month ago. Since it benefits from inflation, Visa is in a unique position to weather that storm. But until international travel returns to pre-pandemic levels, profits will lag. As a shareholder, I'm not selling shares, but I wouldn't add to my position unless the stock revisited recent lows.