Visa’s fiscal first-quarter results showed an acceleration of cross-border volumes, while contactless payments continued to gain ground in the U.S. and beyond.
Headline results showed earnings per share of $1.46, which missed consensus by a penny.
Net revenues of $6.05 billion were up 10 percent year on year and were also lower than consensus, which was $6.08 billion.
The company said that payments volume was up 8 percent year over year to $2.3 trillion. However, management noted on the conference call following results that volumes were up 10 percent, excluding the impacts of China and the U.K.
Drilling down into the payments volume, and as shown in supplemental materials from the company, total credit transaction volumes were $1.3 trillion, up 6 percent in constant dollars; debit was $1 trillion, up 11 percent. The total transaction count was up 10 percent to 54.8 trillion.
Cross-border volume growth was up 9 percent, which represents an acceleration of prior quarters when that rate had been 7 percent in each of the periods that ended in September and June of last year. International transaction revenues were up 9 percent to $2 trillion.
Total cards were up one percent, while processed transactions continued a year over year pace seen earlier in 2019, at 11 percent, to 37.8 billion transactions.
In the conference call with analysts after results were announced, CEO Alfred Kelly said that in the quarter, holiday spending was similar to what had been seen in previous years in the United States. He noted that overall, eCommerce spending has been running at a pace three to four times greater than that of non-eCommerce spending, and now is one-third of all consumer spending, up 2 percentage points compared to last year. Travel and restaurant spending growth slowed, said Kelly.
Credit growth was better than last year and debit growth slowed slightly due to lapping tax reform, which had a positive impact on debit growth through all of last year.
During the holidays, continued Kelly, “Brazil and Canada saw slightly stronger growth” than last year, while the U.K. showed similar growth to last year.
“We are growing our core payments business in three ways,” Kelly said on the call: Through large clients and markets, with additional progress in emerging markets (with partnerships in wallets and FinTechs) and by reducing friction in payments. He noted that the firm renewed its issuing agreements with Capital One and with DKB, its largest issuing bank in Germany; has grown in Latin America; and made traction in Africa as mobile money wallets have gained ground. He also noted that the company had been selected for the Venmo co-branded credit card.
Tap To Pay
“In the card-present environment, we continue to see meaningful momentum in tap to pay,” Kelly said, as he pointed to growth within contactless payments. “We consider this to be the most friction-free way to pay in person.” He said that one in every three card-present transactions that comes over Visa’s network is tap to pay, where that ratio had been one in four a year ago.
This past year has been one where Visa doubled the number of countries where contactless payments are at least two-thirds of transactions. Mass transit remains a key driver of adoption, he said.
Kelly said that within eCommerce, click to pay had launched in October, and into the holiday season more than 40 merchants had adopted the new solution. Now that the holiday season is over, the firm completed the migration of 5,500 U.S. merchants to click to pay and the migration will be completed in the U.S. over the coming months.
Additionally, all 50 million consumers who had been enrolled in Visa Checkout will be automatically converted to click to pay. Tokens have expanded into 107 countries since 2014, equating to six billion tokenized transactions in 2019, said Kelly, who added that there are more than 750 million tokens worldwide – and all told, with the eCommerce traction in place and card on file activity tied to tokenization this equates to $1 trillion of transactions.
Beyond C2B, the company continues to grow its B2B business, said Kelly, with new business in Singapore and Hong Kong for virtual cards. Visa Direct, said Kelly, has served B2B and small business transactions with over 700 million transactions in the fiscal first quarter of 2020.
“We wanted to highlight significant progress in the B2B cross border space,” said Kelly, who highlighted its pact with Transferwise and that MoneyGram has now gone live with international transfers that rely on Visa Direct.
He said that the recent acquisition of Plaid would deliver value in multiple ways, and said “similar to [Visa], they have a usage-based revenue model. Pricing is structured on a pay per API call basis.”
Chief Financial Officer Vasant Prabhu said that through Jan. 28, U.S. payments volumes were up 10 percent, with credit up 9 percent and debit up 12 percent. Cross-border volumes on a constant dollar basis grew by 8 percent, with some negative impact from the shift in the Chinese New Year tied to the coronavirus.
In reference to China, CEO Kelly said that it is “too early to know” the impact of the coronavirus on results. There also may be some impact as planes are kept from coming into and out of China, and where even for eCommerce firms, employees — especially those who pick out the goods and ship them — are being kept home.