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Visa: Debit Volume Up As Consumers Spend With Funds On Hand

Visa reported fiscal fourth-quarter results Wednesday (Oct. 28) that showed a rebound in pent-up demand, with volumes up quarter over quarter. But the firm also reported headwinds on cross-border results that reached into double-digit percentages and will persist, according to management commentary.

Similar to fellow networking giant Mastercard, Visa reported some indications of growth. Payments volume was up 4 percent in the latest period as measured year over year, while processed transactions were up 3 percent.

Looking into quarter-over-quarter trends, Visa saw worldwide credit and debit volumes at nearly $3 trillion, where that same tally was $2.5 trillion in the company’s fiscal Q3. Management also said on the earnings call that restaurant spending is nearing levels last seen in 2019.

However, Visa also echoed Mastercard in logging double-digit percentage plummets in cross-border activity, with total cross-border volumes down 29 percent to 54.1 billion transactions. The company also said that international transaction revenues fell 38 percent to $1.3 billion. Management said that a recovery here remains uncertain.

Drilling down into payments volume results, as noted in supplemental materials tied to earnings, debit spend was up 20 percent to $1.2 trillion, but credit was down 9 percent, to $1.1 trillion. Domestically, U.S. credit volumes came in at $493 billion, while debit totaled $603 billion.

Operational performance data also show that the Latin America and Asia Pacific regions saw the steepest drop-offs in total volumes as measured across credit and debit at 16.4 percent and 10.6 percent, respectively.

Management noted on the conference call with analysts acceptance points at merchants were up by 16 percent in the latest fiscal year to 70 million merchants. And tap to pay is continuing to gain ground, with 365 million transactions over the period.

CEO Al Kelly noted on the call that movement away from cash transactions is accelerating, as card not present activity is “seeing very good volume.” He also said 43 percent of face-to-face transactions are being done through contactless means — a tally that rises to 65 percent excluding the United States. Overall, CNP transactions were up 33 percent in the period, indicating that consumers are forming new habits.

Debit activity, according to Chief Financial Officer Vasant Prabhu, is twice the rate that had been seen pre-COVID-19. Consumers, said Kelly, want to spend the money they have and not borrow (i.e. use credit) to make purchases.

“There is real opportunity to drive up authorization rates,” especially cross border, the CEO said. The company also said in commentary accompanying the earnings that Click to Pay is accelerating card not present activity.

The Details On Cross Border 

In reference to cross-border activity, management noted that the closing of many countries’ borders and the continued impact of the coronavirus have hampered results in that segment.

Kelly took note of the fact that France and Germany went into lockdowns this week, and stated that the government-led actions are “not positive news” for European payment volumes. Payment volumes there had rebounded by high single-digit percentage levels. Still, cross border was down 37 percent coming into the period that ended Oct. 21.

With other qualitative commentary on results, efforts in the B2B space should see acceleration as the company invests in and promotes virtual care use and B2B Connect.

Kelly noted that the firm does not have a large corporate travel component, and CFO Prabhu remarked that “the small-business side is recovering nicely” while larger enterprises are still sluggish.

Looking ahead, though there was no concrete guidance, management stated that revenues are projected to decline in the first half of fiscal year 2021 and then recover in the second half.

All in, Visa posted earnings that came in on an adjusted basis at $1.12 per share, two pennies better than had been expected. However, revenues were down 16.9 percent to $5.1 billion. That was slightly better than the Street had expected, beating analyst estimates by roughly $70 million.

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