Visa's Impressive Growth and Key Partnerships in 2023

2023-12-30

Visa, a global leader in digital payments, recently held its fiscal fourth quarter and full year 2023 earnings conference call. The call featured key executives including Ryan McInerney, Visa's CEO, and Chris Suh, Visa's CFO. During the call, the company highlighted its impressive performance and announced several partnerships and agreements.

Visa reported strong growth in various areas during the fiscal year. Total net revenues for the full year grew by 11%, while GAAP EPS increased by 18%. The company also achieved significant milestones, surpassing 7.5 billion tokens and witnessing Visa credentials being used an average of 757 million times per day.

One notable area of growth for Visa was tap-to-ride transactions, with 1.6 billion transactions in 2023. Global tap-to-ride transactions grew by over 30%, and Visa added nearly 150 new transit systems, including those in Philadelphia and Bangkok. More than 40% of these launches included value-added services.

Visa's total revenue grew by 17% in constant dollars for the full year, with the total commercial volume reaching $1.57 trillion. Visa Direct, the company's real-time payment solution, experienced a 19% year-over-year growth with 7.5 billion transactions. Cross-border person-to-person transactions also saw a significant increase of 65%.

The company announced several partnerships and agreements during the call. Visa partnered with Razer Pay to enable Visa debit cards for purchasing mutual funds and securities. Shopify renewed its agreement with Visa for the Balance card, while Costco and China Merchants Bank chose Visa's acceptance solutions.

Visa's involvement in the real-time payment space expanded as it became a certified service provider for FedNow, allowing Visa financial institution clients to receive funds in real-time.

The company also made significant partnerships and agreements in different regions. Shinhan Card, Visa's largest issuer in Korea, will provide consumer and business credit, data capabilities, and enable Visa Direct for cross-border remittances. Banco RB in Brazil will enable Visa Direct for low-value, high-velocity cross-border payments, and Everyware in the U.S. will enable bill payments with Visa Direct. Visa also signed agreements with Universal Destinations & Experiences and Coupang for co-branded cards, and Etihad Guest renewed its co-brand partnership with Visa.

Visa's commitment to the Olympic Movement was highlighted during the call. The company has been a sponsor since 1986 and will be activating its brand at the Paris 2024 and Milano Cortina 2026 Olympic and Paralympic Games.

In terms of expansion, Visa has increased its presence in Europe, opening seven new locations over the past five years and establishing over 100 fintech relationships.

Visa's strategy for growth includes a focus on consumer payments, new flows, and value-added services. The company also announced a potential exchange offer program and a $25 billion multiyear share repurchase program.

In terms of financial performance, Visa reported a 9% year-over-year growth in global payments volume and an 11% growth in net revenues for the fourth quarter. Payments volume in the U.S. grew by 6%, while international markets saw an 11% growth in total payments volume in constant dollars.

While the travel industry showed improvement, it remained below 2019 levels. However, outbound travel volume from the U.S. remained strong, and U.S. inbound travel recovery accelerated in the last quarter.

Visa attributed its revenue growth to factors such as business mix, pricing, card benefits, data processing revenues, international transaction revenues, and other revenues. The company's growth engines for revenue growth are consumer payments, new flows revenue, and commercial volumes.

Expenses increased for Visa, with GAAP operating expenses rising by 13%. Non-GAAP operating expenses also increased due to investments in growth initiatives.

Looking ahead, Visa expects its net revenue growth for the full year to be in the low double digits on an adjusted basis. Expenses are projected to grow in the high single digit to low double digits on an adjusted basis, and the expected tax rate for the full fiscal year is between 18.5% and 19%.

Visa's processing opportunities are focused on Latin America, Europe, and certain markets in Asia Pacific. The company aims to work with local processors and clients to unlock processing capabilities and has made progress in several countries in Latin America.

The company's investments in CyberSource have led to new opportunities and growth. Visa has shown resilience in regulated interchange markets and has not experienced any significant impact from regulatory changes.

Visa plans to expand its network and collaborate with enablers to sell new use cases. The company has announced partnerships with Citi, IBM, and SAP and is focused on expanding into verticals such as government, travel, fleet, fuel, agro, marketplaces, and healthcare. Visa has also introduced the virtual card acceptance platform to simplify the acceptance of virtual cards.

Visa manages its business by tracking yield across its net revenue yield, which has remained stable. The company believes that tokenization is a significant technology that drives higher authorizations and lower fraud rates. Visa operates in 198 markets with tokenization and has crossed 7.5 billion tokens.

Visa's deal pipeline is characterized as great, with opportunities to grow credentials. The company has announced partnerships with various companies, including Citi, U.S. Bank, FNBO, Fidelity, Shinhan, China Merchants Bank, Shopify, IBM, DBS, Etihad, and Saudi.

Visa welcomes the proposed rules for open banking in the U.S., believing it will provide clarity and opportunities for growth. The Tink business has performed well in Europe.

Visa's growth engine is focused on value-added services (VAS) and new flows. While the growth rate in Asia Pacific has slowed down due to certain factors, the company has seen growth in Asia Pacific constant-currency volume. Europe ex U.K., Latin America, and CEMEA are growing at around 20% or more.

Visa's long-term tax rate is expected to be between 19.5% and 20%. The company sees promising new use cases for Visa Direct, including cross-border remittances, bill payments, earned wage access, insurance disbursements, and person-to-person transactions.

Visa's investments in CyberSource include omni-commerce, tokenization, risk management, and fraud prevention capabilities. The company has not experienced any meaningful impact from regulatory changes and continues to engage actively with clients and partners. The CEO expressed excitement about the cash and check digitization opportunity, seeing it as a tremendous growth opportunity.

Visa plans to collaborate with partners to drive more activation and usage among credentials. The company views the Consumer Financial Protection Bureau (CFPB) rule for open banking as beneficial for Americans and a great opportunity for Visa to leverage its data. Visa's stance on the proposed rules for open banking in the U.S. is positive, as it provides clarity and allows the company to build a thriving business.

Visa's processing opportunities remain focused on Latin America, Europe, and certain markets in Asia Pacific. The company aims to increase its processing market share to deliver more value-added services and earn higher yield. Visa's processing capabilities include risk capabilities, issuing capabilities, and loyalty programs.

Investors interested in Visa can reach out to the company's Investor Relations team through phone or email. The earnings call featured not only the CEO and CFO but also various analysts from different firms, providing valuable insights into Visa's performance and future prospects.