Earnings

Visa CEO: FY 3Q, Acquisitions Continue Drive To Be ‘Network Of Networks’

Visa posted fiscal third quarter results that showed a rebound in cross border transactions, and continued gains in payments volumes overall.

Management also said on the post earnings conference call Tuesday (July 23) that recent acquisitions to spur cross border transactions are slated on track to close or contribute to results  by the end of year and tap to pay activity continues to see widespread adoption.

In terms of headline numbers, the company said that revenues grew 11.5 percent to $5.84 billion, beating the Street estimates by $140 million. Earnings per share came in at $1.37, beating the Street by a nickel.

Drilling down into the numbers, per supplemental materials released by the company, total payments volume was up 9 percent as measured in constant dollars to just over $2.2 trillion. Credit grew 7 percent year over year to $1.2 trillion, debit was up 11 percent.

Total transactions were up 10 percent to 51.6 billion, processed transactions gained 12 percent to 35.4 billion.

Total cards were up 3 percent to 3.3 billion, credit cards gained 3 percent 1.1 billion, debit cards were up 4 percent.

In terms of individual regions, the company saw the highest credit and debit activity in constant dollar volume at 8.9 percent in Europe, the Middle East and Africa.

In remarks on the conference call, CEO Al Kelly noted that the firm is “building an arsenal of value added” offerings that are “network agnostic” — meaning they can be extended onto networks beyond Visa’s own.

He said that against this backdrop, the recently struck acquisition of Earthport, which focuses on cross border payments,  closed earlier this month. Other deals include those to acquire Verifi, and Rambus tokenization and electronic ticketing operations. The deals may be accretive to results depending on when they close, he said.

In offering detail on Earthport he said that the combined company has reach into 88 countries, covering almost all bank accounts (99 percent in the 88 countries), including the top 50 markets, he noted. He said that the result is a “network of networks.” He said the company is on track to launch its first “fully integrated experience prior to the calendar year end,” which will provide a single connection to clients to push funds to cards through VisaNet and bank accounts via Earthport.

He said that prior to the acquisition, the company had reach into half of those bank accounts through combined offerings such as debit credentials and account to account activity.

“Through Earthport and Visa Direct,” he said, “we can address B2B transactions but low value transactions that are high volume also on a cross-border basis.”

He noted, too, that the company has been sharpening its focus on accelerating efforts and partnerships in the FinTech space in recent quarters. In one nod to those efforts, the acquisition of Payworks, announced in recent weeks, helps merchants integrate new payment options efficiently.

In reference to other FinTech deals, Kelly stated that Visa exists as a “natural partner” due to scale. In India, for example, the company launched a co-branded credit card with the largest cab application aggregator, Ola Cab.

The recently announced deals adding tokenization also boost network agnostic services and will be integrated with existing suites of tokenization and fraud management offerings.

The acquisition of the Rambus assets, he told analysts, will allow the company to extend tokenization to all types of transactions, including the ability to support domestic card networks, account based and real time payment systems. The prior ability to tokenize the 16 digits of a card will be enhanced so that the company can tokenize a bank account or a domestic card network credential, said Kelly.

Visa Direct continues to deliver transaction growth of over 100 percent, he said, and opens up opportunities for additional payment flows.  Roughly 60 million Visa credentials have sent or received funds via Visa Direct. Kelly added that 75 percent of that tally has completed more than one transaction using Visa credentials.

Tap to pay transactions are now at 50 percent of face to face transactions outside of the United States, said Kelly, up from less than 30 percent level two years ago. There will be as many as 100 million cards in the United States with contactless payment capability by the end of the year, he said. There are now nearly 50 countries where contactless is about a third of all face to face transactions, where that number had been 35 at the end of the last fiscal year, said Kelly.

Analysts asked on the call about Libra, and Kelly reminded listeners that the agreement with the crypto project backed by more than two dozen companies including Facebook is “non-binding.” He said that key factors include the satisfaction of regulatory requirements, and that Libra’s efforts are still in “early days.”

Analysts also asked about B2B Connect, newly launched, and where traction may be occurring.  Kelly responded that there might not sharable results for the next several months.  “There … still is work to make sure that people understand the capability,” he said.

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