Q4 2022 Visa Inc Earnings Call
Across 60, plus use cases and over 2000 programs helped by more than 500 enablers over half of our clients utilized five or more value added services in 2022, and a third use 10 or more.
All of this helped to drive fiscal full year net revenues up 22% year over year, and non-GAAP EPS of $7 50 up 27%.
Now, let me transition to our fourth quarter performance and key highlights and then make a few comments about 2023 fourth quarter net revenues grew 19% year over year and non-GAAP EPS was $1 93 up 19% total Q4 payments volume was up 10% year over year or 135% versus three years.
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And one point from Q3, excluding Russia, and China payments volume was up 16% or 145% of 2019.
U S Q4 payments volume was up 12% year over year or 145% of 2019 down one point international volume was up 9% year over year or 126% of 2019 down one point versus Q3, excluding Russia and China.
National volume was up 20% or 146% of 2019 flat to Q3.
Q4 cross border volumes, excluding intra Europe were up 49% year over year at 130% versus three years ago up seven points from Q3, excluding Russia Cross boarder year over year growth was higher by about five points.
Travel related cross border volumes Rose 12 points from 104% of 2019 in Q3 to 116% in Q4 as travel continued to recover.
Processed transactions were up 12% year over year of 140% versus 2019, and we processed 553 million transactions a day during the quarter.
Now I'll provide an update on the drivers that have propelled this growth in consumer payments, new flows and value added services.
Our consumer payment strategy has three components to it growing credentials, increasing acceptance and deepening engagement total consumer payments revenue for the fourth quarter and the year were both up more than 20% in constant dollars on the credential side, we signed several significant deals with financial institution clients co brands that fintech.
In the fourth quarter.
Starting with financial institution clients in our Asia Pacific Region, We signed with China Construction Bank Bank of Communications, and Shanghai Pudong Development Bank, leading banks in China throughout fiscal year 2022, we have renewed with eight of our top China issuers.
In our EMEA region, we signed with National Bank of Kuwait, The largest bank in Kuwait and Adi be the largest Islamic issuer in the UAE in Latin America, we renewed and expanded our partnership.
<unk> relationship with the second largest bank in Colombia, Banco DWP under including credit debit commercial and visa direct.
Other key renewal in Latin America. This quarter was with dock one of the reasons a few full stock enablers, providing bin sponsorship issuer processing acquiring as a service and program management via a single connection already servicing more than 100, Fintech and Brazil, Doc will expand across new markets, including <unk>.
<unk>, Colombia, Peru, Argentina, the Dominican Republic and Ecuador.
Europe , we renewed and expanded our relationship with UBS the largest issuer in Switzerland.
We've made excellent progress in Germany, with our share growing significantly since 2018, adding more than $12 million debit credentials in the market. These are debit is now offered by three of the most significant banks in the market <unk> Dk B and come direct.
And we're also pleased to announce that <unk>, Germany will begin issuance in 2023, making visa the single scheme of choice for Santander in that country across debit and credit.
Altogether across the European continent, our quarterly active credentials were up 18% year over year.
And the co brand space.
Continued to expand our position in several countries with two recent wins and an extension.
First in India with the Samsung co brand card targeting existing and prospective Samsung users.
Second in the U S visa and calls with capital one is the issuer recently entered into agreement to launch at Kohl's co branded visa credit card and also in the U S. We're excited to share that visa signed a multi year co brand agreement extension with Disney for cards issued by JP Morgan Chase.
Now moving to Fintech and wallet clients in Egypt Mobile network operator at this a lot Egypt with more than 28 million customers had signed a deal for virtual and physical card issuance.
First digital banking Iraq. These are rock Islamic bank seeking to digitize payments and drive a cashless society through visa credit debit and prepaid card issuance across their 400000 customers.
And large crypto currency exchange fts with over 5 million registered users have signed on to expand issuance of visa credentials beyond the U S to over 40 countries, bringing our total number of issuing partnerships with crypto platforms to more than 70.
Finally go Henry group as the U S UK and Europe based Fintech that provides prepaid cards in our financial education App for children, aged six months to 18.
Over 2 million members, they will be expanding their UK visa issuance to continental Europe and the U S.
On the acceptance front, we signed an agreement with flywheel, a global payments enabler in software company that supports the higher education industry to grow card acceptance at mainland, China, Hong Kong and Korea.
In Mexico, we renewed our relationship with clip and important payment facilitator, which will aid in the expansion of acceptance to micro small and medium merchants in Mexico, we have more than doubled acceptance since 2019 to nearly 3 million merchant locations are.
Our efforts across Latin America to grow acceptance and win processing share have paid off outside of Brazil, we have expanded our processing penetration by more than 20 points since 2019 with the migrations of domestic transactions in Argentina, Chile, Ecuador, Colombia, and most recently Uruguay.
Customer engagement is very important in tap to pay is one of the best ways to pay in the face to face environment in Q4, the U S reached 28.
<unk> penetration and so are more than 1 billion tap monthly transactions for the first time ever in July .
Surpassing the U K is the largest country for tap to pay transactions and this is nearly double the number of transactions from last year and more than five times the number of transactions from two years ago.
Now moving on to new flows, which grew fourth quarter and full year revenue over 20% in constant dollars. Our <unk> business had nearly one five trillion in payments volume for the full year growing 30% in constant dollars in the fourth quarter BTB payments volume was almost 400 billion growing <unk>.
21% year over year in constant dollars within B to B. Our strategy is focused on card based payments cross border payments and accounts receivable and accounts payable.
Payments and we've made progress across all three this quarter.
<unk> has signed a long term agreement with European payments as a service provider modular.
Issue visa virtual costs to support <unk> travel clients issuing out of Europe .
Also in Europe . These are on the credit card portfolio credit didn't door and conferencing.
Hey, Generale in addition to renewing customer credit consumer credit and debit portfolios in both industries.
We also recently reached a new fleet products partnership agreement with Ed Ed and Brad Eden Red I'm, sorry, which is making their even read essentials product available to commercial and public sector organizations with vehicles in the United States.
In cross border flows we signed an agreement with visa BTB connect with TD Bank. Our first bank in Canada. We also signed bags for the first time in Switzerland, and Korea, and recently, our Samira region signed five banks across Kazakhstan.
Qatar in Azerbaijan.
And the accounts receivable and payable space mineral tray, a U S automated invoice payment solution provider for the middle market and enterprise businesses recently enhanced their relationship with visa to support cards for their payables customers.
For other new flows. These are direct grew transactions, 36% this year, excluding Russia, reaching $5 9 billion transactions in the fourth quarter visa direct had $1 7 billion transactions and grew 42% up seven points from Q3.
In addition to growing the existing visa direct business our strategy for growth includes one scaling new use cases with a particular focus on cross border to expanding existing use cases to new geographies and three accelerating through enablers.
In terms of scaling new use cases, I'm pleased that E Bay, one of the largest third party marketplaces in the World has enabled faster payouts for sellers via visa direct in the U S. We.
We recently signed a deal in the U S with go pump, a consumer goods and food delivery service with millions of customers across hundreds of U S cities to provide their delivery partners the ability to cash out their earnings balance in real time.
In terms of bringing existing use cases to new geographies. In addition to some of the issuing deals I mentioned earlier, we have also signed visa direct deals with China construction Bank and T select Egypt.
Other new geographies also include Norway, Norwegian mobile payment application Vps will offer users access to visa direct for all domestic payments. This will improve the card based experience for <unk>, roughly $4 3 million users covering over 80% of Norway's population.
On the enabler strategy square has expanded their instant transfers to Canada offering their business as a way to have faster merchant settlement opportunities.
Money movement automation platform Astra is using visa direct to let developers add real time transfer functionality to their application. So millions of its end users can fund cards wallets and demand deposit accounts with their eligible debit cards.
These are direct has extensive reach including more than 3 billion cards at over $2 billion of cats recently visa direct defined with Singapore based payments infrastructure platform tunes.
Network, a mobile wallets across 44 countries and territories, our partnership will add a send to wallet capability with these are direct through tunes is b to b payment platform and provide access to 78 already integrated digital wallet providers, representing over one 5 billion digital wallets glow.
So with this partnership will expand our total reach to nearly 7 billion endpoints covering cards accounts and wallets.
As part of new flows aligned with our global network of network strategy. We're focused on building the infrastructure that enables our clients to deliver cross border products and services for their customers.
One of our newest capabilities in this space currency cloud signed 35, new partnerships this quarter, including pace and a global end to end payment platform with over 7 million customers and 17000, Smes pace and intends to expand capabilities of its pace and business platform for clients to collect.
And hold up to 34 currencies and seamlessly convert funds back to the required currency at competitive FX rates.
Now moving to value added services, which had $6 billion in revenue for 2022 up 20% in constant dollars.
For the fourth quarter revenues were up one seven were $1 7 billion and grew 20% in constant dollars as well.
Our strategy here is also threefold, one to deepen client penetration of existing products to to build new products and launch new solutions and three to extend geographically on the first deepen client penetration of existing products, let's explore two of our largest value added services businesses Dps debit processing serve.
<unk> and Cybersource Dps, our issuer processing business hit a major milestone exceeding two trillion.
And annual authorization volume in FY 'twenty. Two Dps has also renewed with nearly 30 clients representing over $600 billion in annual Dps processed authorization volume.
Cybersource remains a compelling gateway solution for merchants and most recently signed Mcdonalds Little Caesars and Jetblue. We also continued to expand cyber source relationships with acquirers first with the bank of New Zealand, New Zealand's largest acquirer.
Gather with Japanese acquired SMC Cybersource continues to provide payment processing solutions for more than 100000 terminals in both card present and card not present environment.
<unk> is also leveraging fiber sources capabilities for value added services, such as fraud management. Most recently cyber source's powering <unk> expansion of the <unk> transit acceptance and supporting commercial and pilot launches with 24 different transit operators across Japan Deutsche.
The bank will offer cyber sources decision manager to its merchants so that they can receive a risk value for each e-commerce transaction using rules and AI to help prevent online retail fraud.
The second strategy build new products and launch great Great New solutions. Our recently acquired capability tank is a real example, take recently signed audiences to offer white label pay by bank.
<unk> banking solution on a single platform.
<unk> will utilize takes payment initiation technology, so businesses can enable account to account payments.
<unk> open banking integration, we'll launch first in the U K with plans to expand to multiple markets during 2023.
Last quarter I mentioned, our newly developed risk as a service capabilities powered by our network level data AI capabilities and our risk experts recently Navy federal in the U S and several banks since EMEA signed engagements for the service, which aims to deliver enhanced fraud prevention and management.
On our third strategy is to extend geographically in many cases through tailored solutions.
Our acquisition of visa Europe , we have made significant effort to bring value added services to our clients across us across Europe clients enrolling onto visa advanced authentication and visa risk management products tripled between October 2019, and September 2022, and these clients spanned across <unk>.
<unk> different European countries.
And for me. These are risk manager launched a network agnostic pilot with Emirates, NBD, a leading issuer in the UAE as part of these this network of network strategy network agnostic VRM will allow clients to manage card payment risks across their entire portfolio.
We recently.
Brought our buy now pay later solution to Canada and have continued to make progress, adding some of Canada's largest merchants, including Simons and Canada computers, and RBC and visa have entered into an agreement to launch the visa installment solution on eligible RBC consumer credit cards.
In conclusion, our 2022 performance was very strong and demonstrated that our strategies for each of our growth levers are delivering we see new flows as a way to drive additional volumes and transactions and value added services as a way to drive additional yield on existing volumes and transactions the sop.
It's going to go into a lot more detail, but let me make four points about 2023, one in the year ahead, I see significant opportunity for the business across all three of our growth our growth areas consumer payments, new flows and value added services to we faced some headwinds in particular lapping visa and a challenging FX environment three we did not fat.
After a steep economic downturn or a recession into our numbers to the one to the extent one occurs it will have some impact.
Four we will continue to manage our business for the medium and long term and we will invest in initiatives that are compelling and we will provide future growth.
That said, we recognize that some economies around the world could face increased pressure. So we will be monitoring things very closely we will as we have in past periods, the flexible and prudent in the management of our expenses.
As a leadership team, we have demonstrated <unk> ability to manage through many different environments and I remain confident that our strategy will continue to position visa at the center of money movement for years to come with that over to facade. Thank you al. Good afternoon, everyone. Our fiscal fourth quarter results reflect sustained strength in domestic spending and continue.
Recovery in cross border travel.
<unk> revenues were up 19% and GAAP EPS was up 13% non-GAAP EPS was up 19%.
Strong dollar was a stiff headwind dragging down reported net revenue growth by four points and non-GAAP EPS growth also by four points. This.
Discontinuation of operations in Russia reduced net revenue growth by about five points.
A few key highlights.
In constant dollars global payments volume was up 10% year over year and 35% about 2019 excluding.
Excluding China and adjusted for Russia, Global payments volume was up 16% year over year and 45% higher than 2019.
U S payments volume was up 12% year over year, and 45% above 2019 in constant dollars international payments volume, excluding China, and Russia was up 20% year over year and 46% about 2019.
The cross border travel recovery continues however, the pace of recovery has moderated as most models are now open except China Index for 2019 Cross border travel volume excluding transactions within Europe Rose 12 points in the fourth quarter versus a 22 point gain in the third quarter.
Our three growth engines consumer payments, new flows and value added services all grew revenues in excess of 20% in constant dollars.
In fiscal year 'twenty, two we bought back 11 $6 billion of stock at an average price of $205 97.
Contributions to the litigation escrow account, which have the same effect as a stock buyback added another $850 million.
We also paid out $3 2 billion in dividends.
At the end of September we had $5 $1 billion remaining in our buyback authorization.
In October our board authorized a new $12 billion stock buyback program and increased our dividend by 20%.
Now onto the details.
In the U S credit grew 17% year over year to 36% over 2019 helped by travel and entertainment spending.
Debit grew 7% relative to 2019 debit was up 54% sustaining significantly above the pre COVID-19 trend line, even as credit has recovered.
U S card present spend grew 11% year over year and was 27% above 2009.
Card not present volume, excluding travel grew 10% year over year and was 68% higher than 2019.
E Commerce spending remained well above the peak over trend line, even as card present spend continued to recover.
On the international front.
Latin America was up 33% year over year, and 109% higher than 2019.
<unk> region, excluding Russia grew 32% year over year and was 105% higher than 2019 growth in both regions was fueled by client wins cash digitization and acceptance expansion.
Europe was up 12% year over year, and 34% higher than 2019 impacted by our portfolio conversion underway in the U K.
Ex U K Europe volumes grew 30% year over year and was 67% of our 2019, reflecting share gains in multiple markets.
Asia Pacific, Excluding China continues to recover up 26% year over year and 32% of our 2019.
Global process transactions were up 12% year over year, and 40% over 2019 levels.
Constant dollar cross border volumes, excluding transactions within Europe , but including Russia in prior periods were up 49% year over year and 30% over 2019, excluding Russia year over year growth was higher by approximately five points.
Cross border card not present volume growth, excluding travel and excluding intra.
Intra Europe grew 12% year over year and was 60% of our 2019.
Cross border travel related spend excluding intra Europe grew 101% year over year and is now 16% above 2019.
Cross border travel index for 2019 went from 112 in June to $1 15, and July 2018 in September .
While the recovery continues the rate of improvement from month to month has slowed as modest ex China are now open.
Travel in and out of Asia recovered sharply in the quarter up 16 points from the high <unk> to the mid seventies index for 2019.
It is more of a recovery to come in Asia, especially when China starts to lift restrictions.
Summer travel in and out of Europe was also very strong with a travel index for 2019 in the $1 <unk> up 13 points from the third quarter.
European travel appears to have benefited most from the strong dollar.
Travel outbound from the U S to all geographies continue to pick up steam rising to the mid one <unk> index for 2019 up 10 points from the third quarter.
However, the inbound travel recovery was sluggish still indexing in the low nineties and up only four points.
The strong dollar and delays in visa issuance from some countries appear to be impacting travel into the U S.
Travel into Latin America, and the Caribbean remained very strong and stable indexing around 150 to 2019 levels.
Finally travel in and out of EMEA indexed in the mid 100, <unk> relative to 2019 up 10 points in the quarter.
Moving now to a quick review of fourth quarter financial results.
Service revenues grew 11% versus the 12% growth in Q3 constant dollar payments volume exchange rate drag more than offset growth from utilization of <unk> benefits.
Data processing revenues grew 10% versus the 12% processed transaction growth. The primary reason is that our data processing revenues are impacted by Russia. However, our transactions growth is not.
Adjusted for Russia data processing revenues were up 15%.
International transaction revenues were up 52% versus the 49% increase in constant dollar cross border volumes, excluding intra Europe .
Revenue growth was helped by high currency volatility and pricing actions more than offsetting the impact of the strong dollar.
Other revenues grew 13% led by travel related programs and pricing actions.
Client incentives were 26, 9% of gross revenues in line with expectations.
Revenue growth was robust across our three growth engines, each growing more than 20% on a constant dollar basis.
Consumer payments growth was led by the recovery in cross border volumes high currency volatility and continued strong domestic volumes and transactions.
New flows growth was driven by carded <unk> recovery.
Commercial card volumes grew 21% year over year and are up 43% versus 2019 and.
And excluding Russia visa direct transactions grew 42%.
Value added services growth was driven by higher volume increase client penetration and select pricing actions.
Currency cloud and ink added about half a point to revenue growth.
GAAP operating expenses grew 20% non-GAAP operating expenses grew 18% the.
The inclusion of currency cloud and pink added about three points.
Exchange rates were about a 405 point benefit.
We stepped up investment in our business in the second half of the year as the recovery trajectory accelerated.
Personnel costs were also higher due to annual salary increases granted a quarter earlier than our normal cycle and higher incentive compensation accruals.
We recorded losses from our equity investments of $122 million, excluding investment losses, non-GAAP nonoperating expense was $99 million benefiting from higher interest income due to rising rates.
GAAP EPS was $1 86, non-GAAP EPS was $1 93 up 19% over last year inclusive of a four point drag from the strong dollar.
For the full year net revenues increased 22% and non-GAAP EPS of $7 50.
Was up 27% with exchange rates, reducing reported revenue and non-GAAP EPS growth by over two points each.
We are now in fiscal year 2023, and through the first three weeks of October business trends have remained strong and stable.
On a year over year basis U S payments volume was up 11% with debit up 9% and credit up 14%.
<unk> spend growth versus 2019 was up 47% with debit up 57% and credit up 39%. These trends are consistent with the fourth quarter ended performance in major markets around the world.
Processed transactions grew 12% year over year up 40% versus 2019.
Constant dollar cross border volume, excluding transactions within Europe grew 42% year over year and was 33% over 2019.
Card not present non travel growth was 61% about 2019 travel related cross border volumes were 18% above 2019.
Moving now to our perspectives for the coming year.
Forecasting full quarters ahead has been difficult through the core videos, while COVID-19 impact is now largely behind US as you. All know we are in a very uncertain macroeconomic and geopolitical environment as.
As we've said before we are not economic forecast shows.
Clearly there is a high risk of a global recession, but we do not have a specific point of view on if when are the kind of recession, we might have.
For internal planning purposes, we are assuming no recession.
Of course, we will stay very vigilant closely monitoring our trend day-by-day.
We will stay very flexible.
We will have contingency plans in place should we have an economic or geopolitical shock that impacts our business and we will be prepared to act passed should we need to.
So that is the context for our planning assumptions, which I will walk through now.
Starting with revenue drivers.
Payments volume and processed transactions index for 2019 have been very stable in the U S and globally for the past three quarters in other words, we believe the recovery from Covid is behind us when it comes to domestic spending.
We're assuming this stability sustains through fiscal year 'twenty, three with normal year over year growth rates in the low double digits for both business drivers.
On payments volumes, Russia will impact growth rates in the first half.
Russia will not impact reported processed transactions growth.
Cross border E Commerce trends have also been stable, especially when you adjust for Russia and crypto related volatility.
Assuming cross border e-commerce growth rate sustained in the mid teens, excluding Russia, and crypto and in the low double digits with Russia and crypto impact included.
Cross border travel excluding intra Europe has continued to recover but at a slower pace up six points from 112 to 118 index for 2019 between June and September .
For planning purposes, we are assuming that this recent month to month peso recovery sustained through fiscal year 2023.
As was the case last year, there will be periods of deceleration and acceleration.
Hopefully China starts easing restrictions as we enter calendar year 2023.
Do we remove will have a significant impact on our reported revenue growth in fiscal year 'twenty three.
<unk> and the dollar which has strengthened to extraordinary levels through fiscal year 'twenty two.
Since we discontinued operations in late March Russia will reduce first half fiscal year 'twenty three revenue growth by over four points with four points in the first quarter and as much as five points in the second quarter, but as you might recall, we recorded two quarters' worth of service fees in fiscal year <unk>.
'twenty two.
Russia will obviously have no impact in the second half.
Russia will reduce full year net revenue growth by five points.
We face very stiff exchange rate headwinds as we enter fiscal year 'twenty three.
Based on where the dollar is today and the forward curve exchange rates will reduce reported net revenue growth in fiscal year 'twenty three by around four points.
Since the dollar strengthened through fiscal year 'twenty two the impact is greater in the first quarter at around five points.
<unk>, four and a half points in the second quarter and moderate through the year.
When you pull all this together.
Lining assumptions get us to mid teens constant dollar net revenue growth on a run rate basis I E adjusted for Russia.
With a two point, Russia impact and a four point exchange rate headwind reported nominal dollars fiscal year 2023, net revenue growth would be in the high single digits climb.
Client incentives are expected to be in the 26 into half two 2027, 5% range as a percent of gross revenues.
With a full point, Russia drag and a stiffer exchange rate headwind first half reported nominal dollar net revenue growth is expected to be lower than the second half.
Lowest growth in the second quarter, which has the largest Russia impact and stepping up in the third and fourth quarters with no, Russia drag and hopefully a moderating exchange rate headwinds.
Moving on to operating expenses.
We are managing expense growth in line with our revenue growth expectations rigorously prioritizing investment plans.
As you know this is a long cycle business investments, we make today will have revenue growth two to three years three years out.
It is important for us to continue to fund key growth initiatives across consumer payments, new flows and value added services as al said, we have extraordinary growth opportunities and need to ensure we are investing to realize their potential.
Our current plans are for low double digit non-GAAP operating expense growth in constant dollars high single digits in nominal dollars.
And currency cloud, which closed during fiscal year 'twenty to add about one point to expense growth.
<unk> by the discontinuation of Russia operations and exchange rate changes, which are expected to be about a one five point benefit each.
non-GAAP operating expense growth will be higher in the first half for two reasons first thinking currency cloud at two points to expense growth in the first half.
Also in the first half we lap a lower expense base last year since we stepped up investment spending through the year as the cross border recovery accelerated.
As such non-GAAP expense growth in nominal dollars is expected to be in the low double digits in the first half and at the high end of mid single digits in the second half.
Highest during the first quarter, which was also impacted by the FIFA World Cup and moderating through the year.
Should there be a recession, all the geopolitical shock that impacts our business slowing revenue growth below our planning assumptions.
Of course adjust our spending plans by re prioritizing investments scaling back or delaying programs and pulling back as appropriate and personnel expenses marketing spend travel and other controllable categories in a business like ours. This always requires a careful balance between short and long term considerations.
<unk>.
As interest rates have risen nonoperating expense will benefit from higher interest income from our cash balances.
We currently expect nonoperating expense to be in the 200 $250 million range for fiscal year 'twenty three.
We will provide quarterly updates through the year.
Our tax rate is expected to remain in the 19% to 19, 5% range in FY 'twenty three.
Honing in on the first quarter based on everything I just walked through we expect reported nominal dollar net revenue growth in the high single digit range with client incentives on par with the fourth quarter of fiscal year 'twenty two.
Nominal dollars non-GAAP operating expense growth is expected to be in the low teens.
The tax rate could be lower than the 19% to 19 in the 5% range in the first quarter, depending on the resolution of some items.
Second quarter net revenue growth is expected to be lower than the first quarter because of the Russia impact which is higher.
Second quarter operating expense growth is also expected to moderate to the low end of double digits.
In summary, we've assumed stable conditions through fiscal year 'twenty, three but are prepared to act fast should circumstances change.
<unk>. This a near term uncertainties, we remain uncertain as we've ever been about our extraordinary long term growth opportunity.
There is still plenty of cash to digitize core consumer payments, we're accelerating volume growth by vastly expanding the use cases, we can serve through our new fluids business, while enhancing the yield on transactions in our network by layering on value added services.
With that I'll turn this back to Jennifer.
Thanks, Hassan and with that we're ready to take questions Holly.
Thank you if you would like to ask a question. Please.
Please press star one.
Earphone and clearly record your name will be announced prior to asking your question.
To ensure all questioners I heard we ask you please limit yourself to one question.
Once again to ask a question. Please press star one and with <unk> request. Please press star two.
Our first question comes from Lisa Ellis with Moffat Nathanson you May go ahead.
Oh. Thank you. Thanks for taking my questions Hey, Al I wanted to follow up on your comment in the prepared remarks about Zika now having $4 3 billion token.
Up doubling more than <unk> year on year.
Can you elaborate a bit on a couple of aspects of tokens Asian first have you made any progress or what level of progress that we made on selling your <unk> services as a value added service into other networks alternative networks.
And then also given that you don't monetize tokens directly what how should we think about the indirect benefits of choke invitation to visa now that the number of tokens exceeds card credentials out there. Thank you.
Yes. So it's four I think you said $4 three weeks at $4 8 billion.
We have had some but not a tremendous amount of success yet in terms of selling tokens into other networks, we view it as a.
We play a critical role in the ecosystem and we view <unk> as critical to the security of the ecosystem and then ultimately trucks.
The ecosystem as it relates to.
Card transactions that converge with our pants converted to two token so over time, we expect this to have very positive impacts.
Our <unk>.
Issuers and merchants in terms of.
Fraud.
<unk> got a few cases, the clearinghouse being one global payments being another where I know that we are.
Getting revenue today from the <unk> capability that we're building for them.
Our next question is from David <unk> with Evercore ISI you May go ahead.
Thank you very much could.
Could you gauge the impact on processed transaction growth for FY 'twenty three from U S. Federal Reserve's enforcement of two unaffiliated networks to process every online U S. Debit transaction beginning July one 2023 and related to that do you.
Any mitigation strategies.
To offset the impact for example, potentially adjusting prices.
Yes.
So the first part of the question I'm sure, we'll have more to add on the second part.
Obviously, we have to wait and see the pace at which.
The second network has enabled.
On on Cogs on E Commerce transactions, our current expectation given that our fiscal year. As you know goes through September is that the effect in 2023 will be.
Minimal if any.
But we will keep you posted.
More broadly.
Just in terms of our views about the impact longer term.
People come to us because of the value, we create and that value comes in the form of having dual message network.
The thing that goes with it the security and reliability, we offer that is unmatched.
As well as.
The dispute resolution and other sets of services organization.
All our risk management services that we layer on.
We've competed for business in the past and merchants have chosen us based on the value, we provide and I am sure you have more to add on this front, yes I think.
Our capabilities are just terrific.
And E Commerce were all David the liability for fraud sits with the merchant so theyre going to be very very careful about who they do business with and they've done business with us for years know that we have very very strong risk capability is very very strong.
Fraud prevention capabilities and those are the types of things that.
In our experience since Durbin in 2010 that have a good amount of merchants who.
So we stick with us they never route to the unaffiliated network because of those.
Security and fraud capabilities, we have plus the.
<unk> alluded to the fact that we.
We have.
The ability to.
The dual message, which makes a big difference in car rental hotel and in the online World will make a big difference when people order multiple items from a.
Our merchant it will allow the merchant to ship in.
And different shipments as opposed to wait until all the products are gathered and they can ship. It in there for us to ship at one time, if you are using.
Single messaging capability. So I think we have a lot of history and a lot of important capability differences.
And a lot of our merchants.
In the United States are very familiar with the strengths that they get from doing business with us.
Next question.
And our next question is from Darrin Peller with Wolfe Research you May go ahead.
Hey, guys. Thanks, your outlook and your budget you gave US was obviously helpful and it clearly underscores the resilience of the consumer so far but just to touch on the water for a minute and I think you have about a third of your revenues now coming from new flow services, many of which are in our early stages of Bruce so putting that together with higher inflation. Alan would you expect any type of difference.
Instead of outcomes on the top line, if we were to see a notable downturn and then besides just maybe you could touch on the flexibility you think you have on the expense side to help manage through any type of change.
So down just to be clear.
One third is about right for.
That's plus new flows not just right.
Not just new flows as you alluded to right.
Right now.
We're seeing nothing but stability.
And it's been true over the last.
Numbers of <unk>.
Quarters, and our business is very different than it was the last time there was a downturn we're much more into everyday spend categories E. Commerce has evolved tremendously there's been a lot more.
Cash Digitization, we have a very.
Heavy debit portfolio, which tends to.
Perform better.
These.
These downturns.
And frankly, I don't think any of us know what.
What the impact is going to be coming off of the pandemic, where there still seems to be a lot of pent up demand for travel for example, which is highly discretionary.
Purchase and we're in an unusual time, where employment is really held up.
No.
We will certainly watch.
If if payment volumes.
Are impacted in any kind of significant way back to the core of your question. Obviously, we will we will have some hit on our our revenue line.
But we will continue to manage on the expense side and I'll let.
Take that half of the question, yes and.
Continuing on revenue for a minute I mean, clearly we now have.
New flows and value added services, which are businesses, which are.
In new use cases that are very different than we've had in past times. When we had recession. So and they are also ramping in many cases.
And value added services clearly.
As a whole range of new services that are not necessarily all tied to economic ups and downs. So clearly there's a lot of differences from the possible Lal said recessions can come in all forms and shapes and sizes and there could be global or regional there could be deeper shallow they could be.
Recessions that have lesser impact on consumer spending and so on as it relates to expenses.
As I said in.
In my comments on planning assumptions I'd say three things one we're moderating expense growth as we go into the year.
So expense growth is clearly coming.
Coming down from the levels you've seen.
While the year going in planning assumption is nominal growth of about 9%, but I would I would just note that in the second half of the year the.
For the fiscal year the.
The growth is actually at the high end of mid single digits. So it is moderating through the year and we don't know when they will be a recession or if there'll be a recession, but if you look at what all the various prognosticators of saying it.
It appears that most people think of there is going to be a recession. It's sometime.
Next year, probably six months from now that would put us in the second half of our fiscal year. So.
We already have expense growth moderating.
The high end of mid single digits, clearly, we will look to re prioritize scaled back postpone et cetera and.
Depending on the nature of the recession and the impact it's having on our revenue we.
We would seek to manage our expenses to be even better than what our planning assumptions might be and bring the right growth rate down. So we will calibrate as we go along.
Next question.
Our next question is from Bob Napoli with William Blair.
Hey.
Thank you I appreciate it.
I was wondering maybe just.
If you could give some thoughts on what are you. Most excited about as we head into 'twenty, three and 'twenty four and what has surprised you and.
If anything.
Can you give a little bit of color on goods versus services have you seen.
The trend.
Trend on growth rates have you seen on those two items.
So in terms of.
What we're what we're excited about.
I think in all three businesses.
Where we're seeing some really terrific green shoots in the consumer payments.
Certainly excited about.
The realities of cash digitization getting more and more pronounced around the world. We're certainly excited about the continued progress we're seeing in.
Tap to pay the fact that our business in E Commerce has grown so much.
Really like what we're seeing in the continent in Europe .
In terms of.
The growth that we're seeing there which is.
Really strong if we look at India, Brazil.
Germany, Canada.
Japan.
All grew.
Growing at very very good levels, there's very different dynamics in each of those markets, but they are all.
Growing very well I, just recently took a trip to.
Nigeria, and the Democratic Republic of Congo Africa is a place that is not going to help us in 'twenty three 'twenty four necessarily Bob but.
The last we now have offices I think 13 countries there in the last five or six offices, we've opened there.
Opened around the world.
In Africa and new flows.
As we organize that business is.
As a single business.
Oliver Jacobs is bringing.
Great focus to it and making sure that we are driving new use cases around the globe.
Getting more and more enablers, who help us.
Drive those.
Use cases, and we're putting a particular focus there on beat it and cross border where previously a lot of the early transact early use cases.
New flows that have been in the <unk>.
Area of.
Things like.
Domestic like PDP and <unk> and then in.
Baz.
Certainly we're excited about the two recent acquisitions, we made a paint good currency cloud I think they're both going to bring some very interesting.
Good capabilities to us.
In both cases, we've spent a lot of time in planning sessions between.
The folks who are running those businesses and our folks and I think theres a great great opportunity ahead.
Besides you want to tackle the goods versus services question, Yeah, a few things on goods and services as you know we tend to look at.
How various segments are performing versus the pre pandemic level in 2019, it's a clean way to look at things and while there's been a lot of talk about how goods are underperforming.
Most of the goods categories index for 2019 actually have done quite well.
And they are holding quite stable what it means is that they grew a lot faster in the early parts of the recovery and then haven't grown as fast as people shifted from goods to services, but overall, if you compared to 2019.
<unk> business has done very well indexing very well to where it was in very much either on or above the pre COVID-19 trend line more recently.
Even as services.
Restaurants travel entertainment have continued to grow we are starting to see goods do better.
So they went through a period, where they had very high growth, especially.
Especially through the stimulus spirit and so on recovered much faster than services than services ought to come back we're starting to see some recovery on the good side to know but overall.
Good is doing quite well on a three year index too.
Next question.
Our next question is from Harsha.
You May go ahead.
Thank you for taking my question can you talk about <unk>.
Transponders avenues in 'twenty two 'twenty three.
I know, there's still the company to be had if you just look at like trend line in <unk> versus <unk>.
<unk> on all.
Patrick.
Inflation of around.
On the flip side. This is very high beta to macro.
U S. Dollar has strengthened a lot, which can impact and influence into the U S and FX volatility was a big benefit in revenue this year against tough comps next year.
Moving pieces skinny, how you're thinking about thank you.
Yes, clearly lots of moving pieces as you pointed out so I'll just go through them one by one.
Yes, we did benefit from very high currency volatility in the second half of this year.
And that does help us as you know.
It's in our international fees line International revenue line.
Any what volatility is going to be is anybody's guess.
For planning purposes, we assume that it starts to moderate through the year.
Its still high and we're assuming that.
It'll be maybe higher than normal in the first quarter and then moderates as we go through the year or two what we've seen in the past to levels that are normal.
Over a long period of time, so that's the impact of volatility.
As it relates to <unk>.
The dollar and its impact on cross border travel.
We've told you that it is.
<unk> seen about a two point monthly improvement in that index in the last few months.
And again I mean, it's very hard to predict these things.
You know, we got it wrong last year, the recovery was a hell of a lot faster than we expected.
Got it wrong again, but we've been very clear about our assumption, which is that the recovery we've seen for the past. Several months. We think is probably the new rate of recovery, there will be acceleration and deceleration than maybe if China opens up and lift restrictions there could be some some acceleration.
So that's sort of what we're assuming for travel what impact of recession might have on it remains to be seen as al said this pent up demand and how much will that offset it we'll wait and see.
The main the main messages there is still recovery in cross border happening, but we're also lapping much stronger cross border levels from last year as you know cross border travel really starting to recover last September and so we are now beginning to lap some really stronger periods last quarter. So the data growth inevitably has slowed.
And it will continue to slow through the year, but it's still above the long term trend line because we still are in recovery mode. So hopefully that helps a bit.
Next question.
Our next question is from Ashwin <unk> with Citi. You May go ahead.
Thank you.
From a headline perspective against acute in nothing but stability and it has been the situation for a few months as you mentioned.
That seems to highlight on a more granular basis.
In particular.
Particular areas of strength or weakness so thats part one but then it also seems that you're implying that business as a whole is more resilient because we have new flows and value added services. In addition to consumer pay an EBIT that but could you maybe.
Talk about.
Okay.
New flows and value add and what you might see in a downturn.
First of all.
I'd say, we've seen stable for whether a few months, but probably pretty close to the the last 12 months certainly the last nine nine months look.
As I said well this stability. The reality is we do know that there is.
Some changes in consumer behavior going on but theres still spending the same amount of money and they are still paying in the same way, which are critical to us.
No.
We know there is some substitution going on.
Where people are.
Buying.
Generics versus buying brands, we know that people are spending a certain amount on that.
Increased amount of on food and.
Drug products, and thats, causing them to have less money available for discretionary.
Spending but.
And we're still seeing.
As I highlighted I think last quarter.
Customers still jumping back in the market and Thats.
A very very good thing because the amount of spend they do and we're still seeing employment levels that are at a very healthy.
A level so.
We know this stuff.
Going on but the reality is that.
While consumers might be altering a bit.
What they buy in different categories.
The realities are that.
As I said, there, they're still spending the same amount of money and using the same ways to pay as they did before in terms of value added services.
And new new flows.
Obviously.
Value added services is somewhat dependent on transaction. So we provide the additional value on transactions. If those were transactions that were to go down that obviously impact the value added services business.
The net flows business.
We took a bit of a hit because of the.
The amount of business that we had in Russia, but as I reported it was up 42% in the fourth quarter.
Excluding Russia, which was up seven points from the third quarter. So the momentum is very very good there and I think that.
That has a lot to do with the fact that over the last 15 months, we've done a really good job of further diversifying that business in terms of use cases, enablers and geographies and all of that has helped US a lot next question.
Okay.
Our next question is Timothy Chiodo with credit Suisse. You May go ahead.
Great. Thanks, a lot for taking my question I wanted to talk about the visa direct decision. So by businesses platforms governments that are deciding to use visa direct relative to other alternatives like RTP systems around the world and I fully appreciate that visa direct leverages. Many of these RTP and other ACTH systems around.
In the world, but what is it that is causing them to choose visa direct and as a follow up.
You've often talked about the pricing for visa direct is very use case based maybe you could just give directional examples.
What a higher priced use case might be and what a lower price use case might be.
On the let.
Let me first tackle the why visa direct.
First of all visa direct.
Biggest advantages that it uses the visa net platform.
And therefore, it comes along with all the capabilities of the visa net platform.
Second we have incredible reach.
With these <unk> as I talked about almost 7 billion endpoints, including accounts cards.
And and and wallets and as you alluded to.
We have become a bit agnostic of exactly how that flow happens if the first or last mile is on an RTP networks.
<unk> net network or a payment gateway that's that's.
Fine by Us and we're continuing to invest in capabilities.
As it relates to.
Visa direct and then you get a lot of the protections that you get zero liability charge backs dispute manage good solid dispute management.
Fact that you get the security in the mud.
<unk> that we spend on protecting consumer data as well as.
Bad Ling.
Cyber security.
And all of those capabilities offer an awful lot of peace of mind to a consumer versus.
Transaction, where the money is immediately move from your bank account across the RTP network to pay somebody and all of a sudden there is an issue there's nobody to turn to there's no rules governing what what happens there is nobody to help mediate what's happening all those things are things that are <unk>.
At work does that makes visa direct a really really strong alternative.
Two in RTP.
Network and relative to your second question, maybe we'll give you two examples at one end is the high value use case and that will be cross border remittances.
Using visa direct gives you extraordinary.
<unk> ability you can do it got to account account to account card to card sitting at home you don't have to go to <unk>.
I want to give them cash.
The tremendous flexibility of the other end in terms of how someone receives the money. It's real time. It is all the other benefits I'll mention.
As you know cross border remittances have a very high cost right now we can do all of that for a lot less and still have a yield that is quite attractive relative to our traditional yield at the other end of the spectrum <unk>.
Very much a preferred way to do it is to have your debit credentials in there because it makes it a lot more secure.
And has all the value we can add.
It's a high volume, but lower yielding use case and very often it's the way we get going in most markets. So those are two examples and in between you have insurance disbursement earned wage access marketplace payouts and so on all of which are different.
Last question please hi.
Our next question comes from Tien Tsin Huang you May go ahead.
With J P. Morgan.
Thank you. Thank you so much I know you've gone beyond the hour. So thanks for the time just two quick ones. If you don't mind just on the other revenue line on those services you have mentioned.
There is some transactional element to it but you did 20% growth at scale in fiscal 'twenty. Two so any thoughts on how 'twenty three might come together, assuming relative stability and then just wanted to clarify the base case.
On operating leverage it looks like on a nominal basis, we should assume minimal operating leverage I just want to make sure we're hearing that correctly and how that might flex if things change. Thank you.
Here on operating leverage as we said.
We are trying to balance the short term and the long term.
As you heard we think that our extraordinary opportunities in new flows and value added services. These are long cycle businesses, you have to invest now for the future. So yes, we are choosing to invest in the business and.
That reflects the expenses that we plan that our expense growth plan relative to the revenue growth.
And the other part of the question was.
Are there other revenue right on other revenues, yes. There are some things that will also have some sequential slowdown because there are things like car related benefits and so on in the other revenue line that are linked to travel and as you lap a stronger recovery of traveled from last year there'll be some sequential slowdown there.
Also a few other value added services there so.
Just like the overall business, where there is a sequential slowdown because of the lapping effects and some currency impacts in Russia, and so on you'll see that in the other revenue line too.
Great and with that we'd like to thank you for joining US today. If you have additional questions. Please feel free to call or E Mail, our investor Relations team. Thanks, again and have a great day.
And this concludes today's conference. Thank you for participating you may disconnect at this time.