Q4 2021 Visa Inc Earnings Call
Dot com.
A replay will be archived on our site for 90 days.
A 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 in our most recent reports on forms 10-K, and 10-Q, which you can find on the SEC website and the Investor Relations section of our website.
For 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 to al.
Jennifer Thank you very much and good afternoon, everyone and thanks for joining us today in the fourth quarter and throughout fiscal 2021 visa has delivered strong results against the backdrop of economic uncertainty and the lingering impacts of the Covid pandemic in doing so we demonstrated the resiliency of our business and validated our growth strategy as we continue to.
Drive the rapid growth of digital payments and enable innovation and money movement globally.
A quick summary of Q4 results fourth quarter payments volume was 121% of 2019 up about 0.8 points from Q3 and up 17% year over year. Despite the backdrop of a global pandemic. This quarter. We also set a record with total global payments volume of $2 eight trillion.
Yeah.
Cross border volume, excluding intra Europe was 86% of 2019 four points better than Q3 and up 46% year over year.
And processed transactions, where 124% of 2019 up four points from Q3 and up 21% year over year.
Net revenues grew 29% year over year, and non-GAAP EPS was $1 62 up 44%.
And talking to many of you over the last few months I know you're wondering what the head for visa in the payments ecosystem as we emerge from the pandemic so rather than doing my usual report card on the quarter I'm going to speak more broadly today about the four key reasons why we believe that visa is even better positioned for growth than before the pandemic one theres still in.
Enormous opportunity ahead in consumer payments to we continue to enhance our network of networks capability to facilitate money movement more seamlessly and securely for all players in the ecosystem and accelerate the penetration of new flows.
Third value added services simultaneously help our clients to leverage our scale and sophistication, while diversifying visa's business and driving more volume.
Four we enable much of the disruption and innovation in the payments ecosystem, which helps to accelerate visa's growth.
So let me start with number one the enormous opportunity in consumer payments, we see that the pandemic has helped to further digitize cash in the last 12 months global debit cash volumes, which are primarily the amount of cash withdrawn from visa debit cards has increased 4% while debit payments volume has grown 23 person.
Both on a constant dollar basis.
In 2021, the number of monthly active e-commerce credentials and spend per active Prudential continued to grow strongly for example in the United States monthly active credentials and active spend per credential, both grew by more than 20% on average versus 2019.
We've grown credentials for both traditional and new players to $3 7 billion up 7% year over year.
After renewing client contacts that represented 55% of our payments volume in the previous two years, we renewed contracts that represented nearly 20% in 2021, let me just highlight a few of those deals in Q4, and our Asia Pacific region, We renewed three of Visa's top 20, issuers, including China merchants Bank and bank.
A China and in North America, we renewed three of the top 15 issuers PNC renewed the prepaid consumer credit and debit commercial credit at small business credit and debit portfolios regions also renewed the prepaid consumer credit and debit commercial credit at small business credit and debit portfolios.
And RBC and visa have entered into a renewal of their agreement with respect to the issuance of credit debit and prepaid cards in Canada.
Fintech have also fueled our growth in the last year, nearly 30% more fintech issued visa credentials and they have more than doubled their payments volume. Furthermore, fin techs are scaling.
We've also grown acceptance to more than 80 million merchant locations up 14% year over year and when you include small businesses behind players like stripe and square the number is north of 100 million merchant locations.
We've grown tap to pay to 70% of all face to face transactions globally, excluding the United States. If we have more than 70 countries with over 50% contactless penetration.
U S penetration is now over 15% more than doubled from just a year ago with 400 million cards quadruple what we had two years ago. We know from other markets that tapping brings increased spending in transactions, while digitizing cash.
We also continue to innovate to make it easier for partners to access and utilize our platform's capabilities. One. Recent example is visa cloud connect which enables clients to connect to visa via the cloud eliminating the need for investment in local datacenter is telecommunications infrastructure and any specialized payment hardware.
To summarize consumer payments as an opportunity and its visa credentials acceptance and innovation that make us feel confident about our ability to accelerate growth in the future.
Moving now to our network of networks, we continue to enhance our capabilities to facilitate money movement seamlessly and securely for all players in the ecosystem, while accelerating the penetration of new flows.
The total new flows opportunity is 185 trillion dollars payments infrastructure regulations and settlement systems are all very local in nature, which creates a lot of complexity in a world of global trade our network of networks capability enables visa as the single connection point to help clients to move value.
Stickley and cross border overall networks, including Visa's own networks, Rtp's, ACTH and new networks in the future like stable clients and public blockchain.
In FY 'twenty, one we continued to build out visa direct global reach surpassing 5 billion transactions across 500 programs that nearly 550 enablers such as acquirers processors banks and Fintech in the U S alone nearly 120 million cards have sent or received funds using visa.
Direct visa direct is is unique as it is more has more endpoints and more use cases compared to the next competitor and offers flexible technology.
Our growth plan for visa direct focuses on four key levers first entrench existing use cases.
<unk> is our largest use case and in FY 'twenty, one we surpassed 200 PDP programs globally insurance disbursements as another use case in this quarter, we added nationwide to begin distributing claims.
Second we want to capture the cross border opportunity for cross border P to P. During the fourth quarter, we added pace and and soon western Union's U S customers will be able to send funds to eligible visa cards in the Philippines, Thailand, Colombia in Jamaica, followed by a robust expansion play out for other countries the odd remittance.
We're also leveraging our cross border capabilities for marketplaces supplier payments student tuition payments and more.
Yeah.
Our third lever to grow and scale. The over 25 use cases. Recent examples include tipping fund raising brokerage account funding an airline vouchers and in the fourth quarter, we added you're already in the rental space area.
Area for property managers to distribute the security deposits.
Finally scale new markets visa direct has scaled rapidly in several markets, but there are many more where the market conditions are right for acceleration for example in Peru, we have a strong P to P footprint and are now, adding new use cases like the innovative payroll solution.
Solution launched in partnership with just so to swell, though we have salary on demand provider that also seeks to improve financial inclusion globally, we have more than quadrupled. The number of earned wage access providers on our platform since 2019.
In short we are just scratching the surface on visa direct and expect to drive rapid growth in the years ahead. The capture the 65 trillion dollar market opportunity.
We also have many examples of partners utilizing visa direct and our BTB capabilities. This quarter. We're pleased that beam will offer their 400000 plus business customers the ability to make the to be payments via visa direct and through visa virtual cards. We also have wins with creditor racks in Europe for travel virtual cards.
Mission and standard Bank and for me and fleet and an exclusive agreement for physical and virtual cards with ramp our PDP finance automation fintech here in the United States.
We also continue to strengthen and expand our relationship with J P. Morgan commercial card through a new commercial card agreement and through J P. Morgan's participation in visa's commercial.
<unk> solution. These initiatives will support virtual card capability spur growth and new payment flows and drive incremental volume over time.
<unk> connect now operates in more than 100 markets and offers a multilateral network with distributed ledger technology that addresses the pain points of existing solutions, which include transparency and speed.
We're also pleased to have launched a partnership with city to be a global settlement bank for visa BTB connect which broadens. The endpoints are available for clients to include cities business accounts for moving money cross border and they're clearing capabilities for banks that have not yet been integrated into the b to B connect network given the <unk>.
And breath of city and our role in facilitating money movement. We're very excited about this capability to expand the visa b to B connect network.
Looking ahead open banking plays an essential role in the network of networks. We believe he's that can accelerate the adoption of open banking in Europe with our pending acquisition of tank together, we can provide a secure reliable platform for innovation that can be expanded globally.
Whether it's leveraging account data for value added services are facilitating account to account or pay by bank money movement open banking creates opportunities for visa to offer our clients and partners a one stop shop for money movement security data and valuable customer experiences.
Blockchain is also well continue to expand our network of networks or settlement capabilities and our continued innovation around crypto API and services have been key to winning new partnerships. We have nearly 60 crypto play our platform partners with the capability to issue visa credentials.
Already capturing over $3 5 billion of payment volume in FY 'twenty one.
The third reason, we're even better positioned for growth post COVID-19 as value added services, where our scale and sophistication simultaneously help our clients be more successful, while diversifying visa's business and driving more value.
Our value added solutions differentiate visa's network enable our clients to adapt to the changing payments ecosystem and deliver valuable services across other rails, enhancing our network and network capabilities and 2021, 40% of our clients use five or more value added services and nearly 30% us 10 or more.
Which is up from 20% in 2020.
Let me highlight a few services that have grown significantly in 2021, Cybersource added 28, new acquirer partners at 45000 merchants as a result, and as a result, we're growing payments volume twice as fast as our broader client base and our and our risk solution.
Odd cyber swaps called decision manager grew over 30%.
We have doubled the number of tokens over the past year to $2 6 billion and enhance the capabilities to manage them through visa cloud token across more than 8600 issuers and 800000 merchants tokens have led to a two 5% increase in approval rates and a 28% reduction in fraud rates.
These advanced authorization and visa risk manager utilize artificial intelligence and machine learning capabilities, which help reduce fraud by $26 billion screening, 30% more transactions in 2021 than in 2020.
All of our efforts and authentication risk identity and authorization optimization have led to cross border card not present approval rates, increasing by nearly 2% in the past year.
Therefore, our value added services revenue grew 25% in Q4 and also drove additional volume since the pandemic began our vas revenue has averaged a quarterly growth rate in the high teens and with approximately $5 billion in FY 'twenty one.
Finally, the fourth reason that we that we believe we have great room to grow that we can enable much of the disruption and innovation in the payments ecosystem, which helps accelerate visa's growth. These past present and future of about fostering innovation and enabling new partners capabilities and use cases, we enable the disruptors.
We help them scale Disruptors are good for payments are good for visa given our role in the ecosystem, we don't pick winners and losers and we're well positioned for growth across many potential outcomes, let's take wallets as an example, while it's they've done a tremendous job of building a user base in some cases building acceptance, but at some point they reach of <unk>.
Point, where they are seeking additional growth in many of them are embedding visa credentials in their wallet. So the consumer can use it anywhere visa is accepted as well as receive and send cross border PDP payments.
<unk> pays an excellent example, with four portfolios totaling $5 6 million visa credentials across three countries, including a new co brand in Thailand that was launched in the fourth quarter.
Buy now pay later or be NPL is a newer example, but we think we'll have a similar outcome. While installments are fast growing they are just a fraction of the total industry is payment volume estimated to be about 100 to 150 billion, but we are bringing scale to disruptors. We have a two pronged strategy, where we provide a network solution as well as solutions for <unk>.
PL Fintech partners. The network solution offers issuers the ability to extend installments to their existing credit clients and merchants to offer a seamless installment option to their customer with flexible terms.
We continue to expand our partnerships in Q4 with HSBC in Malaysia, but they are I think cat minera as Canada's largest payment processor by volume and a and Z in Australia with 2022 large plans. We also partner with Fintech and a number of ways, we generate revenue as customers pay their installments, where the visa card through virtual cards.
For b to b or consumer payments and through value added services. The majority of the installment payoffs are on cards. Today for example in Canada over the last year. The number of visa cards used to repay installment has grown more than 300%.
We believe we are currently experiencing D. N P. L 1.0, individual fintech and companies are cutting individual deals merchant by merchant eventually we believe the business model will evolve to be NPL, two data with Fintech partners issue visa credentials to leverage our acceptance it platforms to overcome the difficulty of ski.
Ailing acceptance globally merchant by merchant, we're already seeing this evolution begin to take shape. Just this quarter Claude I signed a global brand deal to accelerate expansion at scale and to several markets.
So to close visa is better positioned than before the paring down in Denmark to capture the opportunity ahead supported by the strong growth in consumer payments the scale of our platform network and capabilities in new flows and value added services, becoming a greater portion of our revenue and is cross border volumes return over the next two years. It will only help to further drive our grow.
Furthermore, over the history of our company, we have demonstrated that our innovation willingness to partner and compelling and competitive offerings have made our business resilient and successful with that I'll now turn it over to beside to review Q4, and also provide a view of what we believe these all of these opportunities mean for visa financial performance in the coming year the soft overdue.
You.
Thank you al good afternoon, everyone.
2021 was certainly a year of two very different hubs.
In the first half net revenues declined 4% and non-GAAP EPS was down 2% as we lapped a prequel this first half of 2020.
In the second half the recovery was well underway and we were lapping some of the <unk> 2020 COVID-19 impacts.
As a result, net revenue grew 28% and non-GAAP EPS was up 43%.
Fiscal fourth quarter results were better than we expected with net revenues up 29% driven by strong U S. Domestic trends robust value added services growth and higher cross border volume from a faster than anticipated recovery in travel.
How do we recognize service revenue on current quarters inventory Williams net revenue growth would have been approximately 22%.
GAAP EPS grew 70%, including equity investment gains and a onetime noncash tax expense last year.
Non-GAAP EPS rose, 44% helped by a lower tax rate.
Exchange rate shifts increased both net revenue and EPS growth by approximately half a point.
In constant dollars global payments volume was up 17% led by continued strength in debit as well as improving credit spending.
Third to the fourth quarter of 2019 global payments volume was 21% higher.
<unk> eight percentage point acceleration from Q3, when debit slowing one point and credit improving by three points versus Q3.
Excluding China total payments volume growth was 18% or 26% higher than 2019, and a one point acceleration from the third quarter Chinese domestic volumes continued to be impacted by dual branded card conversion, which have minimal revenue impact.
U S payments volume was up 30% over 2019, consistent with the third quarter.
<unk> improved three points to 17% about 19 helped by consumer small business and commercial spending debit slowed four points, but remained very strong at 44% about 2019 without much benefit from economic impact payments.
Present spend improved three points to 15% above 2019, it's highest level yet in the pandemic driven by higher fuel and restaurant spending.
Card not present volume, excluding travel slowed six points to 53% over 2019 at some food and drug spending shifted back to a card present and retail spend was not as strong without the benefit of stimulus payments.
International constant dollar payments volume improved three points from Q3 up 15% over 2019 levels a.
A few regional highlights.
Latin America was up 58% from 2019 accelerated 10 points from the third quarter with robust performance across the region fueled by cash utilization and client wins.
Our EMEA region remained strong up 48% from 2019 levels consistent with Q3 also fueled by cash Digitization and client wins.
Europe was up 20% from 2019, improving three points from Q3, due mostly to strong performance across Continental Europe.
Asia Pacific remains our weakest region up 5% from 2019 and consistent with Q3, excluding China.
Many countries have instituted restrictions in the quarter, including Australia, New Zealand, Japan, and Singapore, but all have started to recover in the past few weeks.
India payments volume has fully recovered from the severe COVID-19 outbreak in Q3.
Global process transactions grew 24% over 2019, improving four points from the third quarter as transactions include faster than volume.
Dr penetration increases in many markets and ticket sizes, starting to return to normal in the U S.
We go direct transactions grew 35% down from the <unk> in the previous three quarters. This quarter, we lapped a very strong Q4 of fiscal year 'twenty when visa direct hit 1 billion transactions for the first time.
Stimulus payments have ended and we are lapping the COVID-19 related spike in B to B, which is moderating U S growth rates. Meanwhile, the international business is ramping nicely as well as growth from use cases, such as cross border remittances earned wage access and marketplace payouts.
The cross border volume recovery continued as more countries open their borders while e-commerce spending excluding travel remains strong.
Instant dollar cross border volume, excluding transactions within Europe was at 86% of 2019 volumes a four point improvement from Q3, driven by the continued recovery in travel that started in may.
Cross border card not present volume excluding travel continue to be very strong at 43% above 2019 declining 13 points from the third quarter, but consistent with Q2.
As a reminder, the boost we saw in Q3 was primarily from cryptocurrency purchases.
Cross border travel related spending excluding intra Europe versus 2019 improved 13 points from Q3 to Q4. It has risen from 40% of 2019 in April to 50% in June to 61% in September.
In terms of air travel related spending is improving.
Aside from Asia Pacific outbound spend in each region is indexing at similar levels versus 2019, and each improved by between 10 to 20 points in Q4 versus Q3, the largest improvements were in Canada, the middle East and across Europe.
Europe inbound spend improved by 24 points versus 2019 as popular travel destinations, such as France, and Italy relaxed the border restrictions.
As we have seen consistently during the pandemic that is pent up demand for travel as bookings accelerated when the borders opened.
Latin America remains by far the strongest destination well over 2019 levels U S to Mexico travel remained robust, but spend more than 60% about 2019 levels in Q4.
Asia Pacific remains mostly closed and did not meaningfully improve in the fourth quarter remaining below 30% for 2019, both inbound and outbound.
Moving now to a quick review of fourth quarter financial results.
Service revenues grew 41% consistent with 39% nominal growth in third quarter payments volume and helped by small pricing modifications.
Data processing grew 20% in line with 21% processed transactions growth with a small impact from unfavorable country mix.
International transaction revenues were up 41% seven points lower nominal cross border volumes, excluding intra Europe due to lapping high currency volatility last year and unfavorable regional mix.
Other revenues grew 36% led by consulting and data services as well as travel benefits.
In total value added services revenue grew 25% led by security and identity as well as consulting and data services, but some benefit from COVID-19 related lapping effects.
Client incentives were 26, 7% of gross revenues in line with our expectations.
The 90 basis point increase from Q3 was primarily driven by strong performance in the U S and Latin America, and fewer adjustments for underperformance in certain geographies, partially offset by improving cross border volume.
Operating expenses grew 15% in line with our expectations.
Marketing expenses grew 58% in the quarter as we stepped up spending and also lapped reductions in Q4 last year.
Personnel and professional services spend also accelerated as we continued to invest in our growth initiatives.
We recorded gains from our equity investments of $101 million, excluding investment gains non-GAAP nonoperating expense was $118 million.
Our non-GAAP tax rate of 16, 5% was lower than expected due to the resolution of a tax matter.
GAAP EPS was $1 65, non-GAAP EPS was $1 62 up 44% over last year.
We bought 13 2 million shares of class a common stock at an average price of $231 33 for.
So $3 1 billion this quarter.
Including our quarterly dividend of <unk> 32 cents per share we returned over $3 7 billion of capital to shareholders in the quarter.
On October 22nd these are the board of directors authorized a 17% increase in the quarterly dividend to <unk> 37, five cents per share.
For the full year net revenues increased 10% and non-GAAP EPS of $5 and <unk> 91 was up 17%.
We returned $11 5 billion in capital to shareholders by repurchasing $39 7 million shares of class a common stock at an average price of $219 34.
$4, $8 7 billion and by paying dividends of $2 8 billion.
Before we discuss the year ahead, let me share performance through the first three weeks of October.
U S payments volume was up 32% above 2019, consistent with September with debit at 44% and credit at 22% about 2019.
Processed transactions grew 26% above 2019.
Cross border volume, excluding transactions within Europe on a constant dollar basis was 94% of 2019, which is up eight points from Q4 and two points from September <unk>.
Travel related spending versus 2019 improved four points compared to September to 65% of 2019.
Card not present non travel was 49% about 2019 up six points from the fourth quarter and down two points from September.
Looking at looking ahead to fiscal year 2022.
Our business has been on a recovery track for the past three to four quarters.
However, we are not back to normal yet globally. There are many factors to consider as we project the trajectory of the recovery.
Debit and ecommerce have outperformed and stayed resilient, even if credit recovered and in store shopping returns.
The full impact of stimulus payments and support programs ending remains to be seen.
Cross border travel is recovering well, but still well below pre COVID-19 levels, but the peso recovery depend on cross border on border openings.
Asia has not reopened to the degree the rest of the world has the timing of reopening in key countries across Asia, both domestically and for cross border travel is a key variable.
Most importantly, COVID-19 variance are still with us and vaccination rates remain low in large parts of the globe.
With these factors as the backdrop forecasting the trajectory of the return to normalcy remains difficult.
Visibility four quarters out while improved it is still not great.
For the past few quarters, we have been providing you our best sense of the business one quarter at a time and we will continue that practice in fiscal year 'twenty two.
Assuming current trends are sustained through December you would expect first quarter net revenue growth in the high teens.
Client incentives as a percent of gross revenue are likely to be in the 26% to 27% range in line with the fourth quarter of fiscal year 'twenty one.
<unk> investment spending combined with low Comparables last year leads to operating expenses continuing to grow in the mid teens.
Nonoperating expense is expected to be in the $120 million to $130 million range and tax rates in the 19 to 19 into hospice and dreams.
Looking four quarters out projecting growth revenue growth poses the greatest challenge it is significantly dependent on the pace of the cross border travel recovery as well as the other factors I just mentioned.
It is all a function of your assumptions for these variables.
In order to be helpful. We will share the assumptions, we are making for internal planning purposes.
For domestic volumes and transactions were assuming no disruptions from Covid related lockdowns.
As such we assume that the recovery trajectory underway in payments volume and processed transactions stays intact through fiscal year 'twenty two.
So cross border travel, we assumed a recovery underway continued steadily through fiscal year 'twenty two to reach 2019 levels in the summer of 2023.
I assume the indexed to 2019 clients from around 60 currently to around 80 by September 2022.
We also assume the strong growth in cross border E Commerce continues.
We expect new flows and value added services growth in the high teens.
We expect client incentives as a percent of gross revenues to range between 26% to 27% for the year consistent with the fourth quarter fiscal year 'twenty one levels.
Pre COVID-19 this percentage increase by 50 to 100 basis points each year due to the impact of new deals and renewals.
Fiscal year 'twenty, two we expect to benefit from revenue mix improvement as cross border travel continues to recover partially offset by the lapping of incentive reductions we had in fiscal year 'twenty, one due to the Covid impact.
These assumptions result in high end of mid teens Metro revenue growth for fiscal year, 'twenty, two including over half a point of exchange rate drag from the strengthening dollar.
First quarter growth in the high teens will moderate through the year as we lap the recovery in fiscal year 'twenty one.
As I said these are the assumptions for internal planning purposes, we will continue to provide our outlook for the business one quarter at a time through fiscal year 'twenty two.
In terms of the other elements of the P&L, we expect operating expenses to grow in the low teens in fiscal year 'twenty two as we step up investments across all three lines of business to lay the foundation for sustained higher growth post COVID-19.
<unk> already increased marketing investment, we will invest heavily in our technology platforms to continue to enhance functionality flexibility security and reliability, we will invest to sustain the high growth we have in our new flows and value added services business and we will continue to add resources in market to help our clients.
All of our new capabilities.
Expense growth will be higher than the first half and moderate in the second half as we lap the resumption of investment spending in fiscal year 'twenty one.
Nonoperating expense is expected to be in the $120 million to $130 million range, each quarter and our tax rate for the year is also expected to stay in the 19 to 19, 5% range.
None of these assumptions include tanker currency cloud, which we expect to close in the first half of the fiscal year, they will not be material to fiscal year 'twenty to revenue or non-GAAP EPS.
Visa remains a network of choice for innovators and money movement, we enable the innovators and Disruptors, we help them scale and in turn the innovator to drive our growth with.
We are continuing to enhance the functionality and flexibility of our network to substantially expand the money movement to use cases, we saw supporting the new generation of Fintech as well as driving growth in our new fluids business.
Value added services and differentiation and create more value for our clients than alternative networks gum.
Network of networks strategy substantially increases our nodes, which we believe can create more value for all network participants than any closed loop or geographically geographically limited network.
As we said at our Investor Day, we have a cemex growth opportunity ahead of us and we are well positioned to capture it.
We ended fiscal year 'twenty, one with good momentum a high growth resilient debit and ecommerce business BRCA.
Recovering credit and cross border travel.
And new flows and value added services on newer growth engines driving further acceleration.
With that I'll hand, it over to Mike for Q&A.
Thank you Hassan and we're ready to take questions Michelle.
If he would like to ask a question. Please press star one and clearly record your name will be announced prior to asking your questions to ensure all questioners are heard we ask that you. Please limit yourself to one question once again to ask a question. Please press star one to withdraw your question Press Star two.
Lisa Ellis from Moffett, Nathan you May go ahead.
Hey, good afternoon, Thanks for taking my question.
I wanted to follow up on number two on your list that was related to beef was network of networks and you highlighted the open banking as one area that you as a positive for corporate corporate renewable new flows and value added services, it's often perceived though actually that open banking is a negative for visa because it can.
Shifts volume away from that but can you just elaborate on this point.
He said benefits from open banking thank you.
Well, thank you Lisa.
I think first of all open banking as you know is.
In its early stages, we believe by jumping into the middle of it that we can help the ecosystem determine.
What is the best routing for different transactions. There. There are certainly are transactions that will lend themselves to a to a kind of a.
Our approach, which we know is one of the things that people would think about it as a threat, but theres an awful lot of transactions, many many transactions where people.
I appreciate the.
Protections that are provided by a network like these a dispute resolution fraud security and the like.
Money has moved instantaneous way that's nice at one level, but it's once it's moved it's awfully hard to get it back and it's it's.
Much more about other elements than just speed.
Speed, we also think by getting involved with tank.
We're right at and we have the opportunity to really learn as we go and we think that there's an opportunity to potentially provide value added services, even on transactions that might route.
Over a different network. So I would say at least at the bottom line is you could see some transactions that.
Our incremental that might move off or off of our normal rails, but what the way. We look at it is by leaning in we're going to learn more about it and we're gonna be able to influence what's happening and we'll also be able to make sure that we can provide other.
Capabilities and value added services to the various transactions.
Thank you thank.
Thank you.
David Koning from Baird you May go ahead Sir.
Oh, Yeah, Hey, Thanks, guys, Hey, what one thing I noticed.
The last six years and I looked at the fiscal years and every year U S volumes grew the same or faster than the rest of the world volumes, maybe discuss a little bit I know COVID-19 the last year.
Generated some of that but as we look over the next five or 10 years, a does that reverse and be as part of the U S growth just all the new Fintech stuff. That's happened in the U S. Just creating a lift that is allowing kind of outpacing.
Well I think David it's a combination of things it certainly is.
The explosion of some of the neo banks and Fintech, although you're seeing those.
Really develop all the way around the World I would also say, though that.
Our our visa direct platform is much more mature in the United States than it is in other markets. Besides somewhat alluded to that point in his his remarks and that has certainly.
<unk> helps spark.
Some of the growth as well I also think that the U S.
Prior to the Covid pandemic at least was more advanced.
In ecommerce capabilities and was much adjusted even more quickly than other markets might have as we saw a rapid move towards cash digitization.
As Covid set upon us and in March of 2000 and.
And 'twenty.
All that said.
We are setting out to invest around the globe and we want.
Our business to grow in all markets and territories in which we do work we are we're.
More than happy to have the U S continue to grow but I think as I look at the future of the business over the next five to 10 years.
That's still a healthy growth in the United States, but I do expect our.
Our volumes to continue to grow in a nice way.
Around the World I mean, you saw this prior quarter as good as the growth was in the U S. In the quarter, both Latin America, and EMEA had very very strong quarters and our international growth was really held back by Asia Pacific, which is really been hit very very hard by.
Lockdowns and restrictions as a result of the pandemic.
And then wanted to one other thing I might add as you look ahead.
I mean, all the things outside.
But even internationally is a little held back right now is because Asia, which is almost 20% of our payments volume is only growing at the levels. The low single digit levels, because they're largely still not open. The one thing to think about as we look ahead is as we said earlier as al said in his comments.
These statements are already 70% penetrated outside the U S.
So that's still a growth engine in the U S that is just beginning to take off and given the size of the U S that will be a meaningful contributor to transaction growth and we also know that that tap to pay digitizes cash and allows us to capture a much larger share of transactions at the point of sale.
Thanks, guys great.
Thank you James Faucette from Morgan Stanley You May go ahead Sir.
Thank you very much.
I wanted to go back to one of the comments that you made as it relates to buy now pay later in the growth of that and how you see that as a growth Avenue for visa can you talk a little bit I think I conceptually get the idea of expanding acceptance and the advantages that visa can provide there but can you provide.
A little bit more color of like how you think that evolves and what those transactions will look like in a way that will benefit visa. Thank you very much.
Well I think in the short term.
James.
We're seeing many many of these players use us and use our credentials, whether they're virtual cards or debit or credit card to actually pay off.
The various instead.
Install mix and so we're getting a instead of one transaction, we're getting four transactions and certainly that's very good for us the point I was making is that in many ways.
NPL is a.
Is a closed loop.
Capability.
More akin to what wallets, where three years ago.
And you know close loops, just end up hitting a wall.
They they don't and they end up hitting a wall, where it it's hard to scale, it's hard to bring the level of.
A depth of.
Choice that you can to your customers and so what I think is going to happen is that the NPL.
Players will become issuers, who will issue visa credentials that will have the their value proposition for installment embedded within the product itself. So that they can therefore scale very very quickly by immediately having access.
To the 100 million merchants that I referenced.
In my in my remarks, and so.
So that that's what you know I I I believe based on history is going to happen and that's what I'm, referring to what I say.
The NPL to dot two dot out.
That's great color. Thanks al.
Thank you Sanjay is to Connie from K B W. You May go ahead Sir.
Thanks.
So the reopening of the U S border should be a pretty big catalyst for you guys. I'm. Just curious if you guys are seeing anything in terms of bookings that giving you any perspectives on the trajectory that you outlined.
And maybe what's assumed inside Europe.
Your expectations you know the U S model.
You know the inbound to the U S. We will refer to the fact that you know international revenues have not grown as much of the international volumes. Most of the reason is you know the.
The inbound travel has been quite strong into the similar region in Latin America, which have been quite open.
And it has improved quite a bit in Europe.
And because of the U S being largely restricted for inbound travel other than for U S citizens.
Inbound to the U S is still you know its better than Asia, but it is I'd say weaker than any of the other regions ex Asia. So that's a clear upside there.
Is a higher yielding corridor.
So clearly there will be benefit.
As you know as as the traveled from Canada travels from Europe is permitted.
You know in general I mean, it's hard to predict the mix. It is incorporated in our views of how cross border is going to improve cross border travel for it to go from what we said to the levels were assuming at the end of fiscal year 'twenty. Two you would have to assume improvement in inbound to the U S and Thats all part of the equation.
Thank you.
Hershey they'll roll it from Bernstein you May go ahead.
Hi, good afternoon, Thanks for taking my question.
I can follow up on your comments on enabling Disruptors I think are attractive.
Lisa.
As we have seen the.
Goodbye.
That's fine I'll pays Nathan.
Super apps, and you talked about them, becoming issuance to be the convention and something that's good holiday theme do you think Alex it puts at risk if they use a costco counting.
Banking and the funding mix.
In terms of.
Thanks.
Well.
Again.
My view on all of these new players has always been.
That we assume they can be additive to the ecosystem and we assume that we can be helpful to them and so we lean into all of these new players very very early it's one of the reasons why we have the position we have right now in crypto, where we have partnerships with over 60 players because we leaned in.
<unk>.
Right from the beginning and all of them have the capability and many of them are already issuing visa credentials.
I think some of these players will help continue to digitize payments and take.
Money away from cash I think that it's extremely likely that some transactions will be a day.
But the day to day transactions today, you know a lot of just regular bill pays for all types of purposes eight a M.
Sure.
That that new a big a deal but that said.
We think that we're in a far better position.
By leaning in and working with these players.
And if if we don't actually.
Have the transaction on our network or were added to the processing of the transaction overall, there's still the possibility of providing other capabilities from our toolbox of solutions and value added services to bring to the party. So.
How it's all going to play out we'll have to see but I'm optimistic that the.
The position that we're taking which is to lean into all of this is is going to.
Put us in the best place to be successful.
Yes.
Our approach our network of network strategy is fundamentally to go to people with solutions that can meet all their money movement needs and we've told you about how we do it with a variety of players whether it's cross border remittance providers. We allowed them to do you know account to account account to cod car to account any any which way they can.
We make it easy for them with one connection to get their money wherever it needs to go in effect, we get your money from point a to point B.
The entire xiaomi may not be on our rails, maybe parts of the journey or on some other deals, but we can get it there and we provide all the things you expect from visa, which is the trust her Brian brings the reliability of the flexibility of the security the dispute resolution and all of those capabilities. So fundamentally it's all about solution providing about <unk>.
Adding solutions and not just about rails.
Okay.
Thank you Darrin Peller from Wolfe Research you May go ahead.
Hey, Thanks, guys, it's kind of a two sided question, but first is on the medium to long term when we look at debit being stronger understanding obviously, an acceleration in E comm and just the other structural positives you've seen with cross border and 94% and 19, even with travel with only 65 services strong I'd just be curious if you can touch on what you.
Structurally sustainable about these.
These are higher than probably what you would expect pre pandemic trends sustaining versus not and then when you think about your 'twenty two qualitative look.
What would you say, where the areas you tried to build in the most conservatism into the outlook in terms of macro assumptions.
Yeah I'll take the first question first so in terms of.
You know the the structural changes that have happened that are sustainable.
The the cash Digitization engine is clearly extremely healthy and that is a big driver of debit because debit is the so the first gateways with digital payments that consumers use.
And we've seen the debit has sustained its growth almost globally.
Even as we've seen.
Card present come back and.
Reopening happened and stimulus payments go away you know theres been quite a bit of resilience to debit strength helped by visa direct too. So all indications are that the cash digitization engine.
Especially in emerging markets is really taken off because habits are being formed.
And people have gotten used to using digital forms of payment. So we think there's quite a bit of resilience there and as evidence of that even as things are starting to normalize the shift to E. Commerce to has been remarkably resilient. We have seen if you see the charts, we send out with a press release you can see <unk> has a pretty decent recovery in the past.
Quarters, and if you look at how well ecommerce has held up.
You know Gardner President has held up again theres been quite a bit of resilience there.
Many new categories people have gotten used to doing you know using ecommerce.
And the biggest thing is cross border E Commerce Cross border E. Commerce has been extremely resilient. If you look at it it's indexing in the 140 years, you saw a spike last quarter because of crypto currencies, but it's back into the 140 is as it was in the second quarter, which is very hefty growth compared to its trial.
Growth rate and it has held up even as cross border travel is coming back and even that is not present spending is coming back. So those two structural changes have shown quite a bit of resilience.
Once you once you look past those.
Our value added services have held up extremely well through the pandemic. If you look at the average growth in our value added services over the past six to eight quarters. When we had the pandemic it's been in the high teens.
And our new fluids businesses have been extremely high growth two we're expecting high teens next year or so so those two newer growth engines have shown quite a bit of resilience all the way through the pandemic and that's clearly lays a great foundation for the future as they become a larger and larger part of our business if they're growing faster.
In our core consumer payments business, so thats, a structurally higher growth rate.
They are a larger part of our mix.
Thank you Bryan Keane from Deutsche Bank, You May go ahead Sir.
Hi, good afternoon.
Some of your peers have decided to buy the HCA trails.
He says decided not to take that strategy and rely more on visa direct so I was just hoping you could give us your latest thoughts on not needing to own the ACTH rails and how it stacks up competitively versus what you guys have on visa direct.
Well, whether it's Brian whether it's a C H or RTP rails, there is available to us as they are there anybody else.
And we don't we don't believe that we have to operate them in order to.
To be successful in our network of network strategy. So we think there's other places to spend our our.
Time, and our our money and.
Core to what our view is is that we want to be the traffic cop and facilitator and enabler so that we.
Sender can.
Provide us the funds and tell us where the destination is around the world and through a.
Visa direct.
<unk> connect.
And utilizing for the first or last mile at a CH network or RTP networks.
You know gives us.
A great capability to reach.
What we believe is unprecedented level of endpoints around the world that we think are very very much.
A differentiator and.
Visa direct beyond its reach because we're using our visa net platform offers incredible operating scale.
It allows us to leverage our value added services that operate on a visa.
So.
We've had great success in commercializing.
The capabilities through the various use cases that I referred to.
In my in my remarks, so we think the place to investors and the capabilities to move put move funds seamlessly with great transparency and and and and good economics.
And continuing to invest there as where we think the smart thing to do.
Yes, I might just trying to.
Perhaps clear up what maybe a misconception in the question you asked.
Most of the actuarial the owned by Bank consortiums with central banks around the world.
You might be referring to if I think it is the competitor you're referring to.
They actually RTP rails are talking about and they don't they.
They don't own the rails. The RTP rails are typically always owned by bank consortiums with central banks.
They are in the business of building the rails and then handing them over and then in some cases operating the rails.
Which by the way are as Al said open to everybody to use a regulated rate. So the competitor you're referring to does not own RTP rails to the best of my knowledge anywhere they have in some cases the opportunity to operate them.
In return for building them in some cases, they just build them and move on.
And the non proprietary rail they are open to everybody including us.
And we looked at it hard and we concluded that the business of building. These rails is not an attractive business and the business of using these rails and the business of adding value added capabilities and intelligence to these rail is a good business and that's the business that we choose to be in.
Got it thanks for the clarification.
Thank you Trevor Williams from Jefferies. You May go ahead Sir.
Hey, good afternoon. Thanks for taking the question I wanted to ask on yields in data processing I know there are a few moving pieces in there, but it was a little surprised this quarter at least to see those tick down by a few percent.
From the September quarter, despite the improvement in cross border. So I think it'd be helpful. Just to get a sense of what the main variables or there I think from <unk> comments. It sounds like there was just some country mix, but.
As we look to <unk> and 'twenty, two just with the expectation that travel keeps working back towards the 2019 level like you guys have embedded just I mean, how much can that yield line benefit.
Next year and if there's any pricing that we should be thinking about rolling on next year with that thanks.
Yeah.
I'm not sure if there was any yield impact.
You just look at first of all on the data processing line, both volumes and revenues.
There is no lag right. So the revenue should move in line with volumes in the quarter and it did this quarter I believe it was 20 and 21% or something.
And then net revenues so they moved in line so there really wasn't.
Really any change in yields now clearly the cross border business is relatively speaking still recovering and below where it was and therefore the yields have been impacted by the mix shifting away from cross border and the mix improving is clearly, helping the yields but from one quarter to another.
The yields were relatively stable there was nothing unusual going on the I'm sure. After the call. If there's any confusion you know, Mike and Jennifer could cleared it up.
But my short answer would be the yields are just fine and there was nothing unusual there.
Okay. Thanks.
Thank you Tien Tsin Huang from Jpmorgan you May go ahead Sir.
Hey, Thank you so much I know, it's getting late I just wanted to ask as you put your internal budget and investments together for fiscal 'twenty, two aside from cross border recovering what products or initiatives.
All of a sudden are you most excited about.
This year I know you love with the four points about bigger picture growth, but I'm thinking about just near term products and initiatives that we should be focused on.
Well.
Besides responding well Tien tsin look I.
I think you know each of the last three or four quarters, we've seen.
Kind of a recovery take more shape and I think there is.
I feel very good about the.
The way the business is advancing right now.
Thank you.
Consumer payments is positioned to stay strong but in response to the question a few questions ago I think that E. Commerce is going to sustain I think got tap to pay is going to sustain.
We're starting to see some of the benefits of our acceptance footprint in places like Latin America grow and we're starting to see more of a shift to PV away from cash.
Throughout that region.
So consumer payments is still.
Bread and butter for our company and.
Growing credentials.
Rowing acceptance points and continuing to work with our issuing partners on an engagement and getting the most out of their existing customer base remain.
Very very high priority for us and I think we've.
We've gotten.
Really good.
Traction on our two other revenue streams in new flows and value added services in them.
We've got a new flows valued visa direct we've talked a bunch about and feel very good about that and I think as the world.
To see people return to the office and travel start to return I think that's going to help the the b to B space.
And I think.
Lot of what I commented on in terms of wins and advances in and value added services in fiscal 'twenty. One we'll will continue into fiscal 'twenty. Two so I think in short I like the fact that we've got.
A more diverse business model and more levers to pull.
Of course, we want to continue to plant flags in geographies, where.
You know the business is still.
Our payments and money movement is a little bit more more nascent.
But.
All in all of them.
Quite bullish on.
How the business looks as we enter fiscal 'twenty two besides you want to add anything.
Sure Tien tsin.
And just to sort of give you a sense of where all the investment monies going I mean, the broad broad team as we have substantially expanded the services we offer the use cases, we serve.
And so what that means is we are investing significantly to continue to make on network.
More flexible.
Add more functionality.
Every day, you know on that one because it gets more flexible and adds more capability.
We are we've got a substantially more services now to sell to our clients and there are many new types of issuers and new types of acceptance points. So we are significantly increasing the number of sort of the the boots on the ground closest to our clients. So there's a there's a big investment.
Some of the ground closest declines to make our clients.
Easily incorporate these services into their business and also to bring in all these new types of Fintech. If you want to call them you know the innovators into our ecosystem.
The third dimension also is the broadening of our brand.
You know you've seen our.
Our new brand positioning if you have watched the Olympics, you've kind of missed it it reflects where the future of visa is.
It's not just about consumer payments so there's.
Clearly on investment and making sure that that message that's across so broadly speaking, it's enabling new use cases, new geographies new clients.
And then repositioning the whole brand for you know essentially the leader in money movement.
I did see the Ed Thank you both fitbit.
Yes.
Thank you Timothy Chiodo from Credit Suisse. You May go ahead.
Thanks, a lot for taking the question I'll make this a little bit more of an industry question, but I would allude to something you mentioned earlier in terms of consumer protections charge backs dispute processes associated with card based transactions, maybe you could just talk a little bit broadly about in terms of of course, there are many account to account and bank based payment methods that are out there globally generally speaking.
What types of protections do they have if any and then the follow up to that is how can visa potentially work with some of those account to account <unk> bank based payment methods to help add some of this in terms of the scheme the process the protections security et cetera.
Well the protections are very important people tend to.
The biggest consumer protections that we think about are obviously.
Fraud.
Ensure that consumers are not liable for fraud, and chargeback protection that if you order a red large shirt and you get a blue medium one that.
The ecosystem will stand behind you and either get you.
A replacement or.
Get your money back to the best of my knowledge, Tim I don't think that they ate a options offer any of those kinds of protections to consumers today that that I'm aware of and I think we'll have to see is as a AA.
And as we go.
Get deeper into open banking, particularly starting in Europe, which is really ground.
Ground zero for open banking and obviously one of the reasons why we're excited about owning tank will have to see whether we think that there's a a way for us to step in to try to help provide some of those Ah Ah Ah protections.
Protections for.
A a or it could well be that.
Just how is it different.
Profile of Oh.
The profile.
Profile of protections or lack thereof for those transactions versus transactions on the run on a network like like visa.
Excellent I really appreciate that context. Thank you so much al.
We have time for one last question Michelle.
Thank you Ashwin Shoemaker from Citi. You May go ahead Sir.
Thank you.
So I mean lessons I think it was in your comments you mentioned sustained higher growth post Covid I E. Unpack. This along the lines of U S versus non U S and some of the debit versus credit parks.
So that was quite helpful. My question is what does the margin structure look like as the revenue structure discourse normalized and then possibly steps up beyond what was historical.
Yeah.
Looking at the average operating margins of the company as you've said before you know our general view is that our goal is to grow volumes and revenues based on the opportunities available, which we like because we've discussed our significant and then we invest what it takes to do that margins are an outcome not an objective.
Our business does tend to have a high fixed cost structure of the marginal transaction.
<unk>, a low marginal cost.
Our value added services businesses have good margins on new clothes businesses have good margins yields and margins of different new fluids businesses can have different yields than our core payments business, but given that it leverages the infrastructure and you know is very much a.
Our scale business does come with very good margin. So you saw what happened to margins. This year, we had a nice improvement from the you know the.
The drop we had in the Covid era. So net net I mean, we don't see anything vastly different from a margin perspective in the future. It will still be driven by the same factors.
As I said, it's an outcome not an objective.
Understood. Thank you.
Yeah.
Well. Thank you everyone for joining us today, if you have additional questions feel free to reach out to myself or Jennifer and we're happy to help you and thanks again and have a great evening.
Thank you. This concludes today's conference you may disconnect at this time.
Okay.