Visa posted second quarter fiscal year earnings results that showed continued momentum in debit spending and tap to pay, some lessening of the headwinds in cross-border payments — and green shoots emerging in credit.
Revenues of $5.7 billion were down 2 percent year over year but were better than the $5.5 billion analysts expected. Earnings of $1.38 beat Wall Street estimates by 11 cents.
Total payments volume within the quarter was up 11 percent year on year. The company said the total value was $2.4 trillion. Drilling down a bit, debit transactions were up 26 percent in nominal dollar values to $1.3 trillion; credit was up 2 percent to $1.1 trillion.
Supplemental materials provided by the company show that cross-border volume in constant currency, excluding Europe, was down 21 percent but improved 12 points from Q1.
Total cards stood at 3.6 billion in the most recent quarter, up 4 percent year on year. Credit cards grew by 2 percent to 1.1 billion, with debit up 5 percent to 2.4 billion.
CEO Al Kelly said on a conference call with analysts that we are “at the beginning of the end” of the pandemic. And against that backdrop, the stage is increasingly set for a continued rebound in spending. Management noted on the call that gains in debit remain entrenched and should continue to grow, but credit may recover as restrictions lift and, especially, transactions in the travel and entertainment verticals resume.
Visa Direct Surges
In the meantime, according to details on the call, Visa Direct volumes were up roughly 6o percent, boosted in part by payouts, push payments functionality and the benefit of having a single point of connection to streamline money movement.
At a high level, according to commentary on the call, we’re seeing the digitization of cash, as debit cash volumes were down 7 percent, but total debit volume was up 11 percent. Card-not-present (CNP) volume growth was up more than 30 percent across several markets such as the U.S., Canada and Brazil. Total tap-to-pay transaction growth was up 30 percent in March versus a year ago. Kelly stated that in the U.S., one in 10 transactions are tap to pay. Even card present transactions are gaining ground, according to remarks, up 11 points in March versus February.
Kelly stated that the company has reached a 2 billion token milestone; that tally had been 1.4 billion in September 2020.
Chief Financial Officer Vasant Prabhu told analysts that the net revenue decline comes on the heels, in part, of improving cross-border volumes. In that segment, an improvement in travel — especially personal travel — would continue to boost results. CNP transactions were up 55 percent from a year ago. Card present transactions were up 4 percent from 2020 and gained 3 percent from 2019’s comparable period. All told, cross-border results stood at 75 percent of 2019 levels.
In terms of new payments flows, Kelly stated on the call that the firm has identified $185 trillion of new opportunity, a significant amount that could be captured by Visa Direct and B2B offerings.
Cross-border activity should also see increased use cases for Visa Direct, said management, beyond remittances and payouts. Through the next few years, the single point of connection should make it easier for users to send money across borders.
“We are continuing to make progress in connecting more banks around the world to B2B Connect,” said Kelly, and driving high value transactions.
In reference to cross-border results, Prabhu said that before the pandemic, two-thirds of the company’s business was travel related and one-third was eCommerce related. Now, two-thirds comes from eCommerce, and the remainder comes from travel.
“There is a substantial amount of personal travel that is going to come once borders reopen,” he said.
As for eCommerce, he said “as more people move online, they become somewhat less sensitive to where the product is shipped from.”
One use case that is significant for cross-border transactions comes through the use and continued adoption of cryptocurrencies, stablecoins or bitcoins among them, in the long run.
Within the digital coin and crypto space, Kelly said there are two emerging market segments — one with bitcoin and other options that are primarily held as assets, and then there are digital currencies such as stablecoins and offerings backed by fiat that run on blockchain and operate, essentially, as additional networks. Converting digital currency to a fiat on a Visa credential, he said, makes those funds available to spend at any of the 70 million merchants on the Visa payments network globally.
“We’ve got over 35 digital currency platforms or wallets that have chosen to work with us,” said Kelly, citing Coinbase and Crypto.com among them, and Visa is also seeking to enable FinTechs to offer crypto options for their customers.
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