B2B And Contactless Drive Visa Earnings

Cross-border results slowed, and various currencies were headwinds to at least some international results, but spending on cards continued as Visa posted earnings that topped — and revenues that met — fiscal Q2 expectations. CEO Alfred Kelly pointed toward long-term opportunities in Europe, India and B2B markets.

In posting earnings results for its fiscal second quarter, which ended in March, Visa showed continued growth in card use across both debit and credit, though slowing from previous periods. Management pointed toward traction in B2B offerings and contactless payments.

In terms of headline numbers, the $1.31 in adjusted earnings per share outpaced the $1.24 that analysts had expected. Total top line was $5.5 billion, which was on par with forecasts, and up 8 percent year over year.

Stripping out the impacts of currency volatility, the company said that payments volume was up 8 percent year over year to just under $2.1 trillion. Drilling down into those metrics, credit was $1.1 trillion, up 7 percent in constant currency, and outpaced by debit growth at 10 percent. Overall transactions were up 9 percent, and processed transactions were up 11 percent to 32.5 billion.

Supplemental materials provided by the company, in tandem with the earnings release, showed that total cards were up 3 percent to 3.3 billion. Credit and debit card growth both logged 3 percent to respective 1.1 billion and 2.2 billion tallies.

Net revenues grew 8 percent, while client incentives at 1.5 billion made up 21.2 percent of revenues. Management has guided that line item to be between 22 percent to 23 percent of gross revenues.

On the conference call with analysts, CEO Alfred Kelly and CFO Vasant M. Prabhu said the slowdown in cross-border — which had been in the high-single digits in previous quarters — was in line with expectations. They stated that cross-border activity showed the impact of currency fluctuations, where a number of currencies, such as the euro and Argentinian peso, weakened against the dollar.

Yet, within certain markets, said Kelly, activity remains robust. Growth, as measured in constant dollars, was on the order of 22 percent for Europe, the Middle East and Africa (EMEA), 14 percent within Latin America and as much as 10 percent for Asia, with the exception of China.

Indeed, the earnings supplementals from Visa also showed that international markets outpaced the U.S., which gained around 7.9 percent for the quarter. To get a bit more granular: Growth in constant dollars for Visa credit was up 6.8 percent, led by international showings of 7.2 percent growth. Similarly, debit growth in constant dollars was up 10 percent, outpaced slightly by international at 10.3 percent.

Kelly said Europe is showing “good momentum,” and noted that Visa has a concentration in markets such as the U.K., but added that there are 12 other markets across the continent that collectively account for a payments volume of about $200 billion. In India, Visa continues to gain share, and now has 4 million acceptance points in that country. The Reserve Bank of India has also approved tokenization, and pilot programs are in place for installment payment offerings.

Speaking more generally about tokenization, Kelly said that method of replacing and safeguarding sensitive data now covers more than 100 of Visa’s markets, representing about 90 percent of its payments volume. In addition, authorization rates and conversion rates for transactions both improved.

Cross-Border Slowdown

Cross-border volume (tied to transactions where the issuing country is different from the merchant country) was a particular area of focus for this quarter’s earnings results, and among management and analysts’ observations. Cross-border volume was up 4 percent, though, excluding the impact of an eCommerce-related platform reorientation (which shifted acquiring within Europe from cross-border to domestic classifications), that number came to 6 percent. The impact to revenue was minimal, said management.

Kelly also said that cross-border payments represent an attractive market for Visa, with an overall estimated market size of between $6 trillion and $7 trillion. In one example of recent initiatives in that arena, he noted Visa’s announcement last month of a partnership with Remitly, through which money can be sent to Visa debit cards, utilizing the Visa Direct push payment service.

He added that B2B represents a significant opportunity for the payments giant, through virtual cards and B2B Connect, the distributed ledger technology (DLT)-underpinned initiative that seeks to give banks speed and transparency to process cross-border corporate payments. That service is on track to debut in the coming weeks, said management.

Noting continued growth in contactless payments, Kelly said that “tap to pay” outside the U.S. has been seeing a wide embrace. He noted that about 48 percent of transactions done face to face are done through contactless means, and that as many as 50 countries have seen 10 percent or greater growth in this option as measured year over year.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

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