Visa: Tap-To-Pay Gains Steam As B2B Volume Hits $1T, Annualized

Visa posted fiscal Q4 earnings results that topped expectations, driven by high single-digit percentage growth in payments volume and cross-border transactions — and where management said that B2B transactions topped $1 trillion on an annualized basis. In terms of the high-level numbers, revenues were up 13.1 percent year on year to $6.1 billion, besting estimates by $60 million. Adjusted earnings per share came in at $1.47, above the Street by $0.04.

Drilling down into the numbers, supplemental materials offered by the payments giant showed that total payments volume was up to $2.2 trillion for the quarter. Within that figure, debit payments were up 11 percent in constant dollars to $1 trillion, while credit transactions were up 7 percent to $1.2 trillion. Total transactions and processed transactions were both up 11 percent to a respective 53.2 billion and 36.4 billion.

Cards in the field, so to speak, were up 4 percent year on year to 3.4 billion, as measured company wide. Visa said that international transaction revenues gained 11 percent to $2.2 billion.

The Power Of Partnerships

In remarks to analysts on a conference call after the Q4 earnings results were released, CEO Alfred Kelly said the company was strengthening its reach and offerings through “the power of partnerships.”

He noted that growth accelerated over last quarter in every international region. For the full year, the firm processed transactions representing about $9 trillion in commerce. Total merchant locations for the year were up 14 percent from 2018. For the year, he added, illustrating new payment flows, B2B payments crossed the $1 trillion mark at 12 percent of the business.

Kelly noted that the company continues to grow Visa Direct, which supports a number of transaction types in triple-digit growth to over 2 billion transactions.

He said Visa had seen “unprecedented levels of renewal activity” in Q4 across its relationships with traditional clients. Agreements signed in the fiscal fourth quarter with traditional clients represented more than 15 percent of the company’s payments volume.

“This brings our full-year number to about 30 percent of our global payments volume,” he told analysts, substantially higher than the average of the past five years of 20 percent.

He cited deals — such as those with Bank of America (BoA) in the U.S. — with debit and credit businesses in place, with the bank and new business coming from BoA’s cash rewards consumer credit cards.

In addition, the firm broadened its expansion with large banks into corridors such as Africa and Russia, and renewals with banks across more than 15 countries in Latin America.

The FinTech Partnerships

He said, too, that new partnerships with FinTech firms are critical to expanding acceptance globally. He cited the agreement with Revolut to be the firm’s issuing partner, and a debit deal with N26.

Separately, a deal with Remitly allows users to leverage Visa Direct to make P2P international money transfers from the U.S. Merchant acceptance continues to grow in Mexico, as well, through mobile point-of-sale (POS) initiatives.

Platforms, Too — And SRC

Kelly told analysts that the company seeks to improve the POS experience and reduce friction. The card-present environment, he said, has seen growth. Tap-to-Pay has gained traction, especially in the United States, where eight of the largest 10 issuers have been issuing contactless cards, and where there are 100 million of those cards currently in circulation — that number will grow to 300 million cards by the end of the next calendar year.

Turning to the card-not-present (CNP) environment, secure remote commerce (SRC) “is a way to streamline the digital payment experience across networks, offer greater security and improve sales,” he said. Kelly added later in the call that Click-to-Pay will see broader merchant adoption after the holiday season.

“The network players really have not done good job in terms of the eCommerce checkout experience,” he told analysts. “The fact that we put merchants in a position where they have to have a connection via each [of the] networks, and everybody has their own version of checkout, it’s difficult for merchants. It’s confusing for consumers, and it leads to some unpleasant friction in the eCommerce situation.”

Against that backdrop, he said, “We’re going to abandon our proprietary offerings, but because those proprietary offerings are out there like Visa Checkout, it’s going to make for a much more streamlined way to get to the critical mass fairly quickly. As a reminder, in the case of Visa, we have 52 million Visa Checkout users. We have 350,000 merchants on Visa Checkout.”

Installment solutions through the Visa Next platform (and API) show Visa’s efforts to bring new payment options to consumers.

B2B has seen acceleration through partnerships, such as with Intuit, that allow for instant disbursements to eligible debit cards using Visa Direct, he said. The “network of networks” effect allows for the movement of money to anyone, anywhere, he told analysts — “through a single Visa connection.”

Elsewhere on the call, CFO Vasant Prabhu said that macro conditions remain favorable, and management noted that most corridors saw transaction growth.

In further Q & A on partnerships, with focus on digital wallets and tech firms that, in the words of one analyst, “could look less like competitors and more like partners,” Kelly noted that “a lot of players started out in a different business. Then, they realized that because of unbanked parts of the population, they started developing wallets.” As those players become bigger, Visa can help with global reach and cross-border payments, along with tokenization that can improve eCommerce. “They can help us grow by being an issuer and acquirer for us,” he said.

Later, amid questions about FinTech partnerships and ancillary business lines, Kelly was asked about managing conflict with channel partners.

“We have 15,000 financial services clients around the globe. They come in all kinds of shapes and sizes,” he said. “The reality is that many of the new players … are attracting new segments of the markets. And, in many cases, we are opening up the capabilities for our existing traditional clients to get their credentials involved in places that they otherwise would not have been able to get them.”