Credit card spending continued to accelerate in 2018 as consumers increasingly relied on electronic payments for everyday purchases. Strong economic conditions, rising consumer confidence, and ongoing growth in card acceptance helped drive record purchase volumes across the U.S. payments industry, reinforcing the dominance of card-based transactions over cash and checks.
While Visa maintained its commanding lead in purchase volume, the battle for the second-largest card network intensified. American Express narrowed the gap with Mastercard through sustained double-digit growth, highlighting how competitive dynamics among the major card networks can shift as issuers expand their cardholder base and increase transaction activity.
U.S. credit card volumes grew nicely in 2Q, and 2018 will likely be a banner year for credit card transactions.
The U.S. credit card processing industry resumed its growth trajectory after a seasonally slow first quarter to reach a record $927 billion in purchase volume over Q2 2018.
This represents an almost 10% jump from the figure of $844 billion in Q2 2017 and $846 billion in Q1 2018.
This article in Forbes expects to see a shift between the second largest network and the third, Mastercard and American Expresss, respectively.
Visa remains the undisputed market leader with a market share of over 53% – a figure that should continue to increase, as the company’s credit card payment volumes are growing at a faster rate than the industry.
However, a shakeup in the rankings among the four incumbents is also in the cards for the first time in decades, as American Express is closing in on MasterCard’s #2 spot.
Visa delivered $493 billion in transaction volume for 2Q2018, representing a 10.5% increase over 2017. Mastercard volume hit $202 billion, with an 8% increase. American Express grew by 10% during the same period, bringing in $195 billion in spend. Discover carried only $36 billion of the total $927 billion; their growth was 9.0%.
Though American Express and Mastercard are neck-and-neck for the second ranked position, Amex reduced the gap from $9 billion to $7 billion.
While MasterCard and Discover have not been able to match Visa’s higher growth rate (which regularly exceeds 10% year-on-year), American Express has reported a growth rate of 10% for each of the last two quarters.
This has helped the company nearly close the gap with rival MasterCard.
The positioning shift will likely happen in 1Q19. A billion dollars in transaction volume will not make much of a shareholder impact, but for American Express, the move will be “Priceless.”
Rising credit card purchase volumes underscore the continued strength of electronic payments and the importance of network scale in the payments industry. Although Visa remains the clear market leader, the close competition between American Express and Mastercard illustrates how sustained growth can reshape market positioning over time. As consumer spending and card usage continue to evolve, network rankings will remain an important indicator of competitive performance within the payments ecosystem.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
