Three years into the pandemic, and Visa’s Tap to Pay continues its steady march, with real-time payments and faster payouts — through Visa Direct — also proving popular on an increasingly complicated global stage.
To that end, the payments network showed that total payments volume surged by 10% in its fiscal fourth quarter with credit outpacing debit. Supplemental materials released by the company show that debit volume was up 5% in constant currency to $1.45 trillion; that performance was far outpaced by credit volumes, which grew by 20% to $1.48 trillion. Drilling down into the particulars of U.S.-based spending, payments volume was up 12% year over year, or 145% of 2019 volumes.
Cross-border volumes, on a constant basis, excluding intra-Europe volumes, were 49% higher.
Total cards in force grew by 9% to a bit more than 4 billion in the most recent quarter. Debit cards grew by 10%, followed by credit card growth of 7%. Merchant locations including locations from payment facilitators grew 11%, indicating an expansion of network acceptance.
But within those spending patterns lies evidence of the continued digital shift — and a movement of the payments network well beyond simply enabling that spend, but towards making it more secure (and faster) too.
CEO Al Kelly said on the call that tokenized credentials increased 9% year over year and are up 13%.
“Excluding Russia, we crossed 4.8 billion tokens surpassing the number of card credentials,” he said, almost doubling the levels seen last year. And in response to analysts’ questions about that line of business, Kelly said that the company views tokenization as “critical to the security of the ecosystem and then ultimately the trust of the ecosystem as it relates card transactions,” adding that “we expect this to have very positive impacts on our issuers and merchants in terms of fraud.”
Tap to Pay
The digital shift is firmly rooted in store: As Kelly noted on the call, global tap-to-pay penetration grew 10% to a total of 54% of face-to-face transactions excluding Russia.
“This was helped by 20 additional countries crossing over the 50% penetration mark,” noted Kelly, who added that tap-to-pay transactions on global transit systems crossed the one billion transaction mark during the fiscal year — a first for the company. In the U.S., tap-to-pay garnered more than 1 billion tap monthly transactions for the first time ever in July, surpassing the U.K. as the largest country for tap-to-pay transactions.
“This is nearly double the number of transactions from last year and more than five times the number of transactions from two years ago,” Kelly said on the call.
B2B Growth – and Faster Payments
Kelly also spotlighted growth in the B2B segment, where Visa logged nearly $1.5 trillion in payments volume for the full year, growing 30% in constant dollars. In the fourth quarter. B2B payments volume was almost $400 billion, up 21% year over year in constant dollars.
“Within B2B, our strategy is focused on card based payments, cross border payments and accounts receivable and accounts payable payments, and we’ve made progress across all three,” said Kelly.
As for faster payments: Visa Direct had 5.9 billion transactions in the fiscal year, excluding Russia, up 36%. In the fourth quarter, Visa Direct had 1.7 billion transactions, up 7% from the third quarter — and now reaches three billion cards and more than two billion accounts. Management spotlighted cross-border remittances and account-to-account transactions as holding particular appeal.
As Kelly said on the call, Visa Direct’s robust security and added all of those capabilities “offer an awful lot of peace of mind to a consumer versus a transaction where the money is immediately moved from your bank account across an RTP network to pay somebody – and if there’s an issue, there’s nobody to turn to. There are no rules governing what happens.” Visa Direct, he said, thus offers a “strong alternative” to RTP networks.
Clients enrolling in Visa advanced authentication and Visa risk management products tripled between October 2019 and September 2022 and these clients span 14 different European countries.
Some Moderation
With some nod to at least some moderation of growth amid the continued recovery from pandemic lows, CFO Vasant Prabhu said that “the cross border travel recovery continues however, the pace of recovery has moderated as most borders are now open except China.” Cross-border travel volume excluding transactions within Europe, rose 12% in the fourth quarter versus a 22-point gain in the third quarter. “There is more recovery to come in Asia, especially when China starts to lift restrictions,” said Prabhu.
Looking ahead, while guiding to low double-digit growth rates in domestic spending and cross-border eCommerce growth rates in the high teens percentage rates, Prabhu said that “clearly there’s a high risk of a global recession, but we do not have a specific point of view on if, when or the kind of recession we might have,” adding that “for internal planning purposes, we are assuming no recession. Of course, we will stay very vigilant.”
For now, remarked Kelly, while there may be some substitution effect showing up in the goods consumers opt to buy, and thus some changes in consumer behavior going on, “they’re still spending the same amount of money and they’re still paying in the same way,” he told analysts.
Discussion on Routing Rules
Asked on the call about how the Federal Reserve’s rules mandating that there be at least two payment networks in place to process debit transactions might impact Visa, Prabhu maintained that “we’ll have to wait and see the pace at which the second network is enabled on cards and on eCommerce transactions,” and added that the impact in the current fiscal year would be minimal. “People come to us because of the value we create, and that value comes in the form of having a dual message network… and everything that goes with it. The security and the reliability we offer that is unmatched.”
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