U.S. Credit Card Purchases Cross $847 Billion In Q3, Should Reach $900 Billion In Q4
U.S. credit card purchase volumes scaled a record high of $847 billion in Q3 2017 thanks to the continuing surge in cashless transactions. This represents a 9% jump from the figure of $779 billion a year ago, and is also marginally higher than the $844 billion in purchases for the previous quarter. Given the sharp jump in e-commerce sales this Thanksgiving, and the expected high levels of holiday season purchases over the coming weeks, the figure should easily cross $900 billion for the fourth quarter. This points to total credit card purchase volumes for full-year 2017 of nearly $3.4 trillion.
Visa remains the undisputed leader in the payment industry, with the company capturing a 53% share of the market in each of the last two quarters. We maintain a price estimate of $99.50 for Visa’s shares, which is about 10% below the current market price.
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The payments industry is seasonal, with purchase volumes peaking in the fourth quarter of the year due to the impact of holiday season shopping, before falling sharply in the first quarter. The figure then increases steadily over the second and third quarters. This trend is seen clearly in the table below, which captures the changes in credit card purchase volumes for these companies over the last five quarters.
Visa’s dominance in the industry is also evident from the table above, as the company continues to process more credit card payments than its three rivals combined. While MasterCard and Discover have not been able to match Visa’s higher growth rate, American Express’s card purchase volumes remain well below the peak level of $185 billion seen in Q2 2016 due to the company’s sale of its Costco and JetBlue co-branded card portfolio.
You can see how changes to American Express’s U.S. card purchase volume impacts our estimate for the company’s share price by modifying the chart below. Note that this figure only captures the purchase volume for Amex’s proprietary cards in the U.S., and excludes purchases made using Amex-branded credit cards issued by other banks.
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