Q3 2020 Visa Inc Earnings Call
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Welcome to Vcs fiscal third quarter 2020 earnings conference call. All participants are in listen only mode until the question answer session.
Conference is being recorded if you have any objections you may disconnect. At this time I would now like to turn the conference over to your host Mr., Mike Military <unk> Senior Vice President Investor Relations Mr. militants you may now begin.
They could Jordan.
Good afternoon, everyone and welcome to visas third fiscal third quarter 2020 earnings call joining us today, our al Kelly visas, Chairman and Chief Executive Officer, and Patheon, Prabhu, Bces, Vice Chairman and Chief Financial Officer.
This call is being webcast on the Investor Relations section of our website at Www Dot investor Dot VSOE Dot com.
A replay will be archived on our site for 30 days.
As slide deck containing financial and statistical highlights has been posted on our IR website.
Let me also remind you that this presentation includes forward looking statements. These statements are not guarantees of future performance and our actual results could differ materially as a result of many factors additional information concerning those factors is available and our most recent reports on forms 10-K, 10-Q, an 8-K, which you can find on the.
Ccs website, and the Investor Relations section of our website.
For historical non-GAAP financial information disclosed in this call the related GAAP measures and reconciliation are available in today's earnings release.
And with that let me turn the call over now.
Mike Thank you very much.
The past few months, certainly continued to be challenging and our focus has and will always remain on the wellbeing of our employees clients in the communities in which we operate.
Even with significant impacts to the economies around the world. Many aspects of visas business have proven to be resilient and have continued and we've continued to invest to propel the this growth well into the future in consumer payments, new flows and value added services.
Today after discussing our results I will then provide an overview of the ways Cobot 19 is shifting the ways consumers businesses and governments want to pay in the paid and in turn on how these is helping them.
I will close with some notable deal highlights for the quarter that demonstrate how we continue to enable the movement of money globally.
So to start our third quarter results net revenues in the fiscal third quarter were 4.8 billion, a decrease of 17% or 16% in constant dollars.
All of the business drivers were significantly impacted by the pandemic.
Payments volume this quarter declined 10% globally or 9% excluding China.
Cross border volume, excluding intra Europe, which drives our international transaction revenues declined 47% on a constant dollar basis, driven primarily by the lack of travels including intra Europe volume was down 37%.
We processed at 30.7 billion transactions are over 337 million per day through the quarter on our network a 13% decrease over the prior year.
However, in each case the business drivers improved each month throughout the quarter meaningfully for payments volume and process transactions and only marginally for cross border volume.
In new flows visa direct grew global transactions in the mid Sixtys per year year over year and our value added services revenue grew in the mid teens year over year.
We also effectively managed our expenses which declined 5%.
More importantly, this was achieved without affecting investments in our primary growth initiatives.
Our non-GAAP EPS declined 23%.
Well Cobot 19, certainly impacted our fiscal third quarter performance. There are many trends that are accelerating the demand for consumer payments, new flows and value added services, which will help our business as we look ahead.
And consumer payments, even with all the success fees as had electronifying payments, there is still $18 billion transacted in cash and check globally.
In today's environment people are sensitive to touching surfaces, including cash in check and we are seeing this manifesting interest and usage and tap to pay which we know helps digitized cash at the low ticket level and has historically increased transactions by an average of 20% over time in mature markets globally.
From second quarter to third quarter, we had nearly 50 countries improved cap to pay penetration by more than five percentage points and over 10 countries increased by 10 percentage points or more.
We have helped more than 55 countries to increase the tap to pay limits, reducing the share of transactions that require consumer caught backed by more than 40% in several of those countries.
In the United States, we added more than 80 million contact with cards in the first six months of calendar year 2020, as a number of our financial institution partners accelerated their issuance schedules.
Tap to pay is likely to accelerate post cobot, especially as consumers start going back to the office, where they tend to conduct smaller transactions for their commute paying for public transferred transit fares and buying food and drinks.
Another positive trend has been a shift to ecommerce.
This works in our favor because these a share of digital commerce, where cash is not an option is approximately three times greater than the physical point of sale.
In the United States visa credentials active in ecommerce in excluding travel we're over 12% higher in June than in January.
In addition to the total spend per active Prudential also increased during that time by over 6%, which is notable considering new adopters typically spend less than those used to shopping online.
In fact, when you isolate the active credentials who tend to be more significantly engaged ecommerce the spend per active credential increased by over 25%.
And these trends are not unique to the United States. During this period in the UK active E. Commerce credentials increased 16%, we'll spend per active credential increased 3% in Brazil active ecommerce credentials increased 11%, we'll spend per active credential increased.
12% in.
In markets, where E. Commerce is not as developed they are examples of dramatic changes and adoption, Argentina experienced active E commerce card growth of over a 100% and Romania, 70%.
In new flows we continued our focused on addressing 185 trillion dollar opportunity in b to B. The opportunity is across card based accounts payable and receivable and cross border payments.
We will be to be volume is down during this work from home and very limited travel period, we're continuing to build out our capabilities and relationships to fuel future growth.
A couple of quick points from the quarter. We recently established a global partnership with UK Fintech conform a pay which enables companies to provision virtual visa commercial cards to employees digital wallets, enabling tap to pay and simplifying expense reimbursement.
For our large ticket cross border B to B solution called these at BTD connect we continue to build the network out many banks are in the implementation phase and when they are all live by the end of the visa will be process in cross border transactions in half of the 80 markets, where these as b to B connect capability is avail.
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Let's look at the remainder of new flows in the United States PDP is up almost 80%.
And in Latin America, we saw progress with PDP apps in Peru, where there was nearly a 400% increase in transactions in Q3 versus Q2.
These is also excited to announce a global partnership with pay Pal, including its venmo Braintree resume eyes that'll and Hyperwallet brands.
This is an extension of a longstanding regional partnership with pay Pal. This this new global agreement will allow pay Pal and all of its brands to offer fast visa direct enabled domestic and cross border payments and indexes and expand Paypals real time transfer capabilities globally.
In the gig economy food in grocery delivery category, we have seen a nearly 50% growth in transactions from free cobot levels and have continued to add new program launches such as such as Instacart for shopper earnings payouts in Canada.
Gee to see government to consumer use cases are gaining momentum employing both visa direct and prepaid cards cards. This quarter. Let me highlight some of the card examples in the US the treasury distributed nearly 4 million economic impact payments visa prepaid cards.
We also work with tighter bank of Spain on three projects issuing 330000 prepaid visa cards with government allocated funds to support vulnerable families across the region.
In France, not Texas partnered with visa issue 15000 cards as a thank you to frontline hospital workers financed by the government.
In value added services, we've seen more clients turned to us for help.
As ecommerce has expanded and new sellers are looking to offer omni commerce payment capabilities that are safe and secure our cybersource and fraud risk capabilities have seen growth.
Let me named two recent examples.
Our recent win in Saudi Arabia without regime Ramsey Bank, the largest acquiring bank in the country will leverage cybersource to enable E commerce payments platform for all Saudi Arabian government services through a centralized interface with the country's ministry of finance.
Buying online picking up in store has become very popular among consumers and as a way for sellers to operate in this environment.
However, this use case does bring a higher potential for fraud.
One home improvement partner chose decision manager, our Cybersource fraud offering to quickly review online orders for fraud risk and meet customer expectations for two hour pickup. This resulted in a massive increase in decision manager transactions in may alone at this merchant.
Across all Cybersource risk products in Q3, we saw nearly 50% year over year growth in transactions.
Interest also has grown in RFM education products.
Cargo Commerce, which provides network agnostic products for sellers in issuers to leverage the Threed secure standard has seen accelerated growth in transactions this quarter versus last year.
Threed secures, making steady progress in Europe, as well, where the ecosystem is ramping up in advance of the secure customer authentication mandate beginning in December for most of Europe.
We continue to work with the ecosystem part participants as the deadline approaches given that some are not ready for the deadline.
MVC Threed secure transactions in Q3 has grown over 100% compared to Q2.
Data and consulting continued to be valuable to our clients as they navigate this environment clients utilized our consulting services at an accelerated eight with almost 60% more projects completed than the third quarter of last year.
The the plays a critical role in providing data analysis to help clients manage their business through the pandemic and the client activity on our visa analytics platform increased 60% just from Q2 alone.
Now, let me talk to new deals, where we've made very good progress this quarter first our momentum in Europe continues we renewed with one of the largest banks in the Nordics nordea to grow debit portfolios across the region, we expanded our partnership with permanent TSB a large issuers.
And our Pearland without.
800000 and for US make these the primary card in most wallets in Ireland.
We recently extended our partnership with you, yes in Switzerland debit.
And we're winning processing in Spain, we secured a significant deal to expand our processing capabilities for domestic transactions.
Banco coming notes will migrate their issuing and acquiring volumes from their local processor to visa.
Europe was certainly not the exception into hoping and renewing partnerships quarter in Singapore, we renewed our partnership with second largest debit issuer owes CBC bank to remain the preferred debit cards issued to owed CBC banks personal savings and current account customers.
In Korea, we recently secured a renewal with South Korea, as Dave tissue or extend Hopper car.
We renewed our credit and debit partnership with Banco de Bogota, our largest issuer client in Colombia.
We recently won started with cash the bank one of the largest retail banks and Cadsixty on the bank is 100% to be the over the next few years.
And our leadership position in co brand also continued this quarter visa renewed and expanded its strategic partnership with best buy include extended the my best buy co brand relationship.
For the and ease of collaborate on Ford's new for the past rewards.
The visa card available to their 4 million Ford pass rewards members and other Ford customers.
Another recent co brand Wynnewoods with horizon to launch of visa credit card to provide savings on Verizon industry, leading products and services along with benefits for everyday essential purposes.
Thank you cited brand deal with Tiki, one of the leading E commerce platforms in Vietnam.
A key component to building issuance and acceptance is within tax and this quarter, we secured many wallet and Neil Bank wins globally, Let me make a few.
Sorry, the biggest ride hailing app in the Middle Eastern Africa will drive or payouts with visa direct as well credentials to over 35 million user base.
Digital transit card Octopus will accept these a wallet top ups allow commuters to pay for transport tend to pay 35000 retail outlets.
In Saudi Arabia, we signed a strategic partnership with Hala of rising Challenger Bank that has the potential to penetrate and on bank population of up to 7 million people.
Neil Bank, David money announced its official launch in Germany, offering visa debit cards all in one more platform to in an off the one mobile application, including innovative savings and cash back.
And the U.S. and USA chime with 8 billion accounts launched access to under the secured credit card, which allows consumers to build that while spending on everyday purchases like groceries and monthly subscriptions.
As often said.
Your ships are fundamental to these business model and these renewals and new deals will certainly help drive growth into the future.
Before I close I would be remiss, if not to comment on the race situation in this country and around the world.
For centuries, Black and African American women and men have experienced many forms of two interested and discrimination.
Offensive it is frustrating and unacceptable it must stop.
A decent we are committed to doing our part visa recently announced the next steps in our journey to drive inclusion and diversity across our company, we've announced a number of actions including.