As had been the case with card and payment network peers that had reported earnings earlier in the week, Visa’s fiscal first-quarter results showed headwinds in cross-border spend, hampered by the pandemic and travel restrictions. But debit remained strong, contactless transactions gained traction, and Visa Direct volumes surged.
Net revenues were down about 6 percent year over year to $5.7 billion, while the Street had been at $5.5 billion. Adjusted earnings per share were $1.42, better than the $1.28 that had been expected.
The company said in supplemental materials that payments volume was up 5 percent year on year to $2.4 trillion. Drilling down a bit, debit volume as measured in total payments volume was up 17 percent. Credit was down 6 percent year on year. Total cross-border volume was down 21 percent. Excluding intra-Europe activity, volumes were down 33 percent. Total cards were up by 4 percent to 3.5 billion, with credit cards growing by 1 percent and debit cards growing by 5 percent.
CEO Al Kelly said on the call to discuss results, the company showed resiliency, driven by the legs of its business model that are tied to consumer spending, new payment flows and value-added services.
Resilient Domestic Spend, Will X-Border Rebound?
Domestic spending, he remarked in the call, has been holding up well even after the retail-heavy holiday period. Outside the U.S., spending in markets such as Canada and the U.K. up five points or more over last year.
He noted, too, that cross-border spend had improved, sequentially, in the quarter, up 8 percent from last year’s fiscal fourth period. Kelly pointed to U.S.-to-Latin America as among the notable standouts in sequential improvements. There will likely be pent up demand in consumer-related travel as restrictions ease.
Two-thirds of face to face transactions, he said, have been contactless, excluding the U.S. (where there are roughly 300 million contactless cards in place), driven by continued Tap to Pay adoption. He added that new payment flows represent a $180 trillion opportunity, with notable opportunity in commercial cards, and where Visa Direct transactions gained 60 percent year over year.
Visa Direct should continue to grow due to a number of factors, said Kelly, including peer-to-peer (P2P) payments, remittances and geographic expansion. The company has relationships with four of the five top money transfer firms, and one use case that will see some continued demand will be earned wage access.
There also was some discussion about cryptocurrencies on the call. Kelly said that Visa sees a “way to add value” in the space, and sees two distinct developments: Cryptos devoted to “new assets” like bitcoin, which could be thought of as “digital gold” (and where Visa would work with wallets and exchanges) and stablecoins/digital fiat, which function in mainstream commerce.
Chief Financial Officer Vasant Prabhu stated on the call that cross-border transactions were roughly 40 percent lower than they would have been had the pandemic not occurred. Through Jan. 21 (and thus subsequent to the end of the quarter), management said, U.S. payment volumes were up 21 percent, where debit spending is up about 30 percent, and credit is down about 6 percent. Cross-border activity through the same Jan. 21 timeframe was down 33 percent, sans intra-Europe activity.
Asked about the recent decision to abandon the merger with Plaid, Kelly said “we believe we have a lot of the assets already — what Plaid was going to do, was going to get us … specifically into the data extraction type of business which, would have added to our network of networks, but it doesn’t in and of itself, prevent us from doing more going forward. We also still have the ability in that space to, to partner with Plaid.”
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