As high borrowing prices restrained consumer spending, Visa’s third-quarter revenue growth below Wall Street projections, marking a rare loss for the largest payments processor in the world. As a result, its shares slumped 4.6% in extended trading.

Interest rates have reached their highest point since the 2008 global financial crisis as a result of the U.S. Federal Reserve’s attempts to control inflation, placing a strain on the finances of Americans with lower incomes who live pay cheque to pay cheque.

Chief Financial Officer Chris Suh told analysts, “In the U.S., we saw a slight moderation in the lower-spend consumer segment, while growth in the high-spend consumer segment remained stable compared to prior quarters.”

Last week, rival credit card giant American Express reported second-quarter revenue that fell short of forecasts.

“Visa was priced for perfection back in March but has eased since then as unemployment, payment and loan delinquencies, and continued consumer disposable income concerns tick higher,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

“There is room for business and consumer spending growth, especially if Fed interest rates decline.”

LSEG data shows that Visa’s quarterly net revenue of $8.90 billion was less than analysts’ projected amount of $8.92 billion. Since early 2020, this was the company’s first major misstep.

Payments volume growth in its Asia-Pacific region slowed, mostly due to mainland China’s macroeconomic conditions. Visa had anticipated a faster rebound in travel demand in the area following the epidemic, but it is happening more slowly.

In the quarter, Visa’s payments volume increased 7% on a constant dollar basis. Meanwhile, cross-border volumes, which do not include transactions within Europe, increased 14%, indicating a strong demand for foreign travel.

For the fourth quarter that ends on September 30, it anticipates net sales growth in the “low double-digit” percentage range, up from the 10.6% recorded the previous year. Additionally, the business confirmed its yearly sales and profit increase.

In line with estimates, Visa earned $2.42 per share on an adjusted basis for the third quarter.

(Adapted from Reuters.com)