NEW YORK - Visa Inc and MasterCard Inc, the world's largest credit card networks, are counting on foreign markets for the growth that recession-bound U.S. consumers have been unable to provide.

Overseas markets have contributed to the bottom line at both Visa and MasterCard with double digit revenue growth rates in recent years, helped by a shift among consumers worldwide to using plastic where they once used cash and checks.

But foreign markets became truly crucial last year -- sustaining the revenue and earnings of both firms, despite a steep decline in credit card use in the United States -- still by far the largest market for both companies.

In comparison, emerging countries from Mexico to South Korea -- and even economies such as Japan and Germany that are developed, but are underpenetrated by credit and debit cards -- could become the engines of growth ahead.

In Russia, in Brazil, in the United Arab Emirates, in Taiwan, even in China and Japan, while we see some good activity or strong activity, it's potentially much stronger when those economies start to do better, Visa's Chief Executive Joseph Saunders said in an interview.

We are very entrenched in every one of those places and we are looking to get a lot more of attraction.

Visa's revenue from abroad increased to 39 percent in the second quarter from 35 percent two years ago and could rise to 50 percent in the next three to five years, Saunders said.

MasterCard's chief executive Robert Selander said in an interview with Reuters earlier this year that the company was considering increasing investments in emerging markets despite the global financial crisis.

Foreign markets represented 55 percent of MasterCard' purchase volume in the second quarter, up from 50 percent in 2007. Analysts estimated those countries could represent 60 percent of the company's annual purchase volume of $2 billion in five years.

Visa and MasterCard are partially insulated from the credit crisis because they process transactions rather than lend funds. However, both companies have seen a slowdown in activity as U.S. consumers use credit cards less.

In the first three months of 2009, Visa's payment volume grew 2 percent, boosted by a 10 percent increase in the Asia Pacific region and a 15 percent jump in Latin America.

In the second quarter, MasterCard's purchase volume declined, hurt by a steep contraction in the use of credit cards in the United States. But the Asia Pacific region grew 16 percent and Latin America 11 percent.

Foreign markets have helped both companies stick to earnings targets. Visa has said its adjusted EPS will grow over 20 percent, while MasterCard expects net income growth of at least 20 percent in 2009.

For both companies to grow much faster than 5, 6 percent they need that international growth, said Greg Smith, an analyst at Duncan-Williams.

$4 TRILLION OPPORTUNITY

Analysts at JPMorgan Chase estimated in a recent report that under-penetrated developed countries and emerging markets could represent a $4 trillion purchase volume opportunity, almost as much as Visa and MasterCard's annual purchase volume combined.
Among developed countries, Japan, Germany, Italy and Spain hold low payment penetration rates, offering bigger growth opportunities than the United States or the United Kingdom.

Brazil, Russia, China, India, Mexico and South Korea seem to be the most appealing emerging markets for growth, given their size, growing middle class and underdeveloped electronic payment network.

In China and India there is half a card per person, while in the United States there is something close to 5 cards per person, so you can see the difference in penetration; plus the number of people make China and India big opportunities of growth, said David Koning, an analyst at Robert Baird.

In a statement on Monday, MasterCard said it could keep expanding through organic growth, partnerships and acquisitions.

The world's second largest credit card network has launched its first platinum debit card targeting affluent consumers in Mexico and its first debit card in Poland.

Analysts said the appointment of Ajay Banga, former head of Citigroup in Asia, as president of MasterCard is a sign of how closely the company is looking abroad for growth.

Early this year, the company acquired Dublin-based software provider Orbiscom and, most recently, it created a joint venture with French hotels and services group Accor SA (ACCP.PA) to expand in the prepaid card business.

In addition, bigger rival Visa has invested in British mobile banking and payment service provider Monitise Plc (MONI.L) and has started a program to pay by mobile phone in Malaysia.

Visa also launched a venture in Singapore with a software provider to offer prepaid and debit processing services.

International markets are going to grow faster, more sustainably and for a longer period than the U.S. for both Visa and MasterCard, said Robert Dodd, an analyst at Morgan, Keenan & Co.

(Reporting by Juan Lagorio; editing by Andre Grenon)

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