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The recent swine flu outbreak is having an effect on the payments industry. But the disease's impact will be short-lived, says one industry observer who focuses on health issues.
"The swine flu discourages travel, which will affect charge volume on airlines and cross-border transactions," Red Gillen, senior analyst at New York-based consultancy Celent LLC, tells ATM&Debit News. "People are not using their cards because they are staying home."
American Airlines announced Tuesday that it is cutting its flights to Mexico because of falling demand sparked by fears about swine flu.
The Dallas-based airline said it would cut daily round trips from the U.S. to 31 from 42. The cutbacks will start Friday and are scheduled to end after June 10, the airline says.
Gillen could not estimate how much transactions might decline. "It's too early to say at this time," he says, noting banks and the payment networks charge about 3% of the sale in cross-border transaction fees.
Another company being affected is Cardtronics Inc. The epidemic likely will reduce the Houston-based ATM independent sales organization's ATM-transaction activity in Mexico, but it will have minimal effect on the company's bottom line, Mike Clinard, president of global services, told analysts during a conference call last week.
Mexico is the epicenter of the outbreak, and Clinard said the expected drop in tourism to that country would reduce ATM use.
"We expect to experience a slowdown in transactions, especially in the tourist areas," Clinard said.
Mexico contributed only $342,000, or less than 2%, to Cardtronics' consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) during the most-recent quarter. Cardtronics owns Mexico City-based Cardtronics Mexico, which operates 2,094 ATMs throughout the country.
The ATM ISO has taken precautions to protect its employees, including allowing them to work remotely. If the outbreak continues to spread, Cardtronics will run major Mexican operations from Houston, Clinard says.
Cardtronics Mexico contributed $4 million in first-quarter revenue. That compares with $15 million Cardtronics' UK operation contributed and $97 million from its U.S. operation, J. Christopher Brewster, Cardtronics chief financial officer, said during the call.
Despite worldwide concern about swine flu, Gillen believes its effect on the payments industry will be a "blip."
"The payments industry needs to worry more about the general economy," he says.
Gillen also believes concern about the swine flu has been overblown. "There are 36,000 flu deaths every year," he says. "People were frightened of swine flu because there is not a vaccine, and they were not sure how it would propagate. But the payments industry will recover." ATM
