Iran war could hurt Global Payments, CEO says

• Key insight: Global Payments CEO Cameron Bready said the Iran war could create economic pressure due to the company's work with airlines in the Middle East. 
• What's at stake: The war in Iran could boost inflation, which could put pressure on consumers and reduce spending and payment volume. 
• Expert quote: "I would prefer that not to be happening for a variety of reasons," Bready said. 

President Donald Trump's war against Iran is starting to reverberate across the financial services and payments industries, with Global Payments CEO Cameron Bready the latest to sound an alarm. 

"On the margin, I would prefer that not to be happening for a variety of reasons," Bready said during a Wolfe Research event. The war has resulted in large-scale flight cancellations to Middle Eastern hubs, which serve both the local region and as a connecting link for travel between Europe and Asia.

The Atlanta-based Global Payments' clients include 12 of the largest Middle Eastern airlines, according to Bready.  "And every flagship that you can think of that flies in and out of the region are generally going to be clients for us. So the closed airspace in the Middle East isn't ideal," he said, adding that flight disruptions will create "modest headwinds" in the first quarter and the second quarter if the conflict continues. 

Global Payments is also monitoring the impact of oil prices, which have been volatile since the war began. But the payment company is not changing its full year outlook, which calls for revenue growth of about 5%. 

"The resilience around consumer spending has been surprising," Bready said, noting the labor market, which has also suffered recently, would drive consumer sentiment and spending in the U.S. "The wage growth that we're seeing continues to be quite good." Any external economic pressure is ill-timed for Global Payments.

The company is in the midst of a new strategy under Bready as it attempts to recover from an earnings slump in 2024. The company is adding Worldpay, a rival company Global Payments acquired, and is rolling out its Genius payment system. Genius is a combination of new payment technology and a reorganization of existing payment products, and is the focal point of the company's future strategy. Bready said the Worldpay merger conversion is on track, and Global Payments is on pace to draw $600 million in cost and revenue synergies from that transaction over the next several years.

In a research note, analysts at Jeffries said Global Payments is "on a good trajectory" and the Genius suite gives the company a "partial remedy" to a competitive liability. Global Payments faces competition from payment fintechs such as Stripe, PayPal and Block, as well as legacy payment processors and bank technology firms such as Fiserv. Bready's warning about the Iran war comes as other financial institutions express similar concerns. 

Navy Federal Credit Union recently closed three of its branches in the region, emphasizing digital banking for service members in the Middle East. And executives from Citi, Bank of Montreal and PNC warned the Iran war could have prolonged impacts on banking and the larger economy. JPMorganChase economists recently said the Trump administration has a short window to secure key oil shipping lanes before energy prices rise and create inflationary pressures. 

The bank is not resetting its forecasts because of the war, but the economists said there are war-related risks that will linger even if the war ends soon. 

"There's risks coming into the picture. And those risks don't have to be realized to have an impact on energy prices," Bruce Kasman, chief global economist at JPMorganChase, said during a recent JPMorganChase webinar. 

These risks include stresses on supply chains and rising energy costs, which could spark inflation and economic risks. "The big wildcard is whether these risks get reflected in oil prices and actually short circuit sentiment," Kasman said.