Strong European performance at Visa gets lost in translation

Visa reported another strong performance in the July-September quarter. This is Visa’s Q4 and completes the 2022 financial year. Despite looming headwinds of inflation, the Ukraine war and the threat of global recession, consumers keep spending on Visa cards. Alfred Kelly, CEO, said “the reality is that while consumers might be altering a bit what they buy in different categories.… they’re still spending the same amount of money and using the same ways to pay as they did before.”

Looking forward, management remains confident reporting that “business trends have remained strong and stable” into the new financial year. “We remain as certain as we’ve ever been about our extraordinary long-term growth opportunity. There is still plenty of cash to digitize in core consumer payments.”

Distancing itself from plastic cards, Visa now describes the paying public as “credentials” and there are 9% more of these than one year ago. Many credentials are now tokenised by Apple Pay and other services. In fact, there are now more tokens than credentials. And there are 10% more merchant locations worldwide at which these credentials are accepted. 

The recovery of international travel is a positive for Visa as its charges higher fees for cross-border transactions. Vasant Prahbu, CFO, said “summer travel in and out of Europe was also very strong, with a travel index to 2019 in the 130s, up 13 points from the third quarter. European travel appears to have benefited most from the strong dollar.”

While a strong greenback is great news for American tourists, it’s less helpful for US listed corporations that report in dollars. A very positive European performance by Visa got lost in translation. 

Despite quarterly transaction growth of 16%, European payment volume actually fell 6% year-on-year in the quarter to $533m. ATV declined from $50 to $42. Taking constant currencies paints a much happier picture. Payment volume was up 12%. It’s an even more positive story when the UK (where Visa has lost issuing clients) is removed. Mainland European volume was up 30% at constant currencies. 

Management is particularly pleased with progress in the German debit market. Visa has profited from Mastercard’s withdrawal of Maestro to add more than 12m debit credentials including ING, DKB and Comdirect. Santander Germany will begin issuing Visa credentials in 2023. 

Shrugging off currency fluctuations, Al Kelly is taking the long view, saying “We 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.”   

Turning to product updates, while Mastercard is investing in inter-bank payment rails, Visa is pushing Visa Direct as safe and secure alternative to account-to-account payments. These often lack basic consumer protection. In contrast, Visa Direct offers “zero liability, chargebacks and solid dispute management.” There are a claimed 7bn “endpoints” worldwide to which a Visa Direct payment can be pushed. FY 22 transactions were 5.9bn up 42% year on year. New programmes include Vipps, the Norwegian mobile payment app, which is to offer users access to Visa Direct for all domestic payments. Another new signing is Thunes, which boasts a network of mobile wallets in over 44 countries, giving Visa Direct  access to 1.5bn digital wallets.

Other news included:

  • The UK is no longer the world’s number one market for contactless transactions. The US has finally begun to adopt tap-to-pay and is now the global leader in number of transactions.
  • Mass transit (tap to ride) was up 70% in 2022 surpassing 1bn transactions worldwide for the first time.
  • Although the crypto market continues to be volatile, Visa (like Mastercard) is signing deals to help people spend their crypto. FTX, a crypto-exchange, will issue Visa credentials. Click here to join the wait list.

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