Visa reported Tuesday (July 28) that its second-quarter results suffered from plummeting consumer spending amid COVID-19, although the pandemic did boost online spending and contactless cards.
“Tap to pay is likely to accelerate post-COVID, especially as consumers start going back to the office where they tend to conduct smaller transactions for their commute, paying for public transit fares and buying food and drinks,” CEO Al Kelly said during the company's earnings call with analysts.
Visa said it added 80 million contactless-enabled cards in the United States in 2020's first half. Kelly said that number seems almost certain to grow as germ-concerned consumers begin to favor contactless payments for an additional layer of safety.
Online transactions were another area of fairly solid growth for Visa, with card not present transactions spiking up 25 percent every week since the start of April — roughly double Visa’s online transaction rate since the COVID-19 outbreak. The company said that trend works in its favor, as Visa credentials active in eCommerce excluding travel spiked 12 percent among U.S. consumers between January and June. Total spend per active credential also increased during that time by more than 6 percent.
Kelly also noted growth of the company's instant-disbursement product Visa Direct during the quarter, which saw U.S. transactions spike up 75 percent. Kelly said that strength was specifically evident among gig-economy workers, particularly those working in the food- and grocery-delivery category, which saw a roughly 50 percent gain in Visa Direct transactions from pre-COVID levels.
All in, Visa managed to come out ahead of analyst expectations for both revenues and earnings. The company reported net income of $2.4 billion ($1.07 a share), down from $3.1 billion ($1.37 a share) for the same period last year. Adjusted earnings per share came in at $1.06 a share, whereas analysts surveyed by FactSet were expecting $1.03. And while the company’s revenues fell to $4.84 billion from $5.84 billion a year earlier, the FactSet consensus had only called for $4.82 billion.
The big revenue declines stemmed from the fact that Visa’s payment volume dropped 10 percent during the quarter. Cross-border payment volume also plummeted 37 percent — and a full 47 percent when one excludes transactions between European countries.
But the spending crunch was far from evenly distributed, Chief Financial Officer Vasant Prabhu told analysts.
Among U.S. consumers, home improvement and food stores have seen overall growth above their pre-pandemic levels during each week since mid-April, Prabhu said. But retail services and healthcare both saw declines of between 10 percent and 50 percent early in the pandemic period. However, he added that both categories have begun to see spending improve and returne to positive year-on-year growth recently.
Similarly, he said entertainment, fuel and restaurant spending all remain depressed from their 2019 levels, but have begun to show early, slow improvement from the worst of their crunch, when spending fell more than 50 percent. But unsurprisingly, travel remains the sick-man category of spending, still down more than 50 percent.
Like almost everyone else this reporting season, Visa declined to offer guidance for its 2020 performance as a whole, citing ongoing uncertainty from the pandemic. But Kelly told investors that despite the demonstrable difficulties the company endured during the second quarter, Visa remains confident of its long-term growth path.
“There is some uncertainty in the near term for sure, [but] we remain confident about our long-term strategy and growth prospects and our ability to make a positive difference in the world," he said. "On one hand, net revenue, EPS, overall payments volume, cross-border volume and process transactions declined this quarter. Yet we saw growth in debit and in eCommerce volumes in Visa Direct transactions, growth in tap-to-pay and click-to-pay enablement and value-added services revenue.”
(This article has been updated.)