Visa CEO: Tokenized Credentials Grew 90% From Year Ago Levels

Visa’s fiscal second quarter shows that new payment flows and B2B loom large, but plenty of room remains to capture the share of consumer payments as debit and credit spending remains robust.

The company’s earnings supplementals show that payments volumes were up 10% year on year in constant dollar terms to just under $3 trillion. Credit transaction volumes gained 13% to nearly $1.5 trillion, and debit was up 7%, also to roughly $1.5 trillion.

Cross-border payments volume excluding intra-Europe volumes, were up 32%. That represents a slowdown from the 47% year-on-year growth that was logged in the March quarter of 2022.

Total cards grew by 7% year on year to 4.2 billion.

During the conference call with analysts, CEO Ryan McInerney said that cross-border volume now stands at 130% of 2019’s pre-pandemic levels.

McInerney detailed the progress and potential still extant in consumer payments and new payments flows.

Growth in Consumer Payments and in Credentials

“Consumer payments remains a massive opportunity for Visa. Even with all the digitization over the last several decades, there is still a tremendous amount of cash and check spent globally,” he said, adding that “there is a very long runway for growth in this business.”

Within consumer payments, he said the ambition is to grow credentials, to have more buyers and sellers on the network. Credentials grew 7% year over year through December and 11%, excluding the impact of Russia. The company now has 6 billion tokenized credentials in place, up 90% from a year ago, he said.

Tap to Pay continues to be widely embraced, said McInerney, who told analysts that 74% of all face-to-face transactions outside the U.S. are now Tap to Pay. That percentage in the U.S. stands at 34%, up 7x from three years ago and up 10% year on year. In the first half of fiscal 2023, Visa processed more than 745 million Visa tap-to-ride transactions globally up 35% over the first half of last year.

With additional detail into new payment flows, the CEO said that revenue in the second fiscal quarter was up 20% in constant dollars. Visa Direct transactions gained 32%, he said. He spotlighted Visa+, which allows users to send and receive payments across different P2P payment apps.

Asked about the mechanics and potential of Visa Plus, McInerney said that “the pay name construct could be extended to really any source of funds on any surface. But it’s early days still and we’ve just launched.”

In the second quarter, Visa Direct cross-border P2P transactions, excluding Russia, grew nearly 50%.

B2B transactions, he said, “are the largest component of new flows and traditional issuance is the core of what we do today in B2B,” representing the majority of $760 billion in commercial payments volume year to date.

In his own remarks, Chief Financial Officer Vasant Prabhu noted that the cross-border surge represents a rebound in travel to and from Asia.

The State of the Consumer

In the U.S., said Prabhu, credit transactions grew 10.5% year over year, slightly faster than the first quarter. U.S. debit grew 9.6%, up more than one point from Q1. U.S. card not present volume excluding travel was up 9%, as these growth rates have lapped surges emerging from the pandemic.

“Payments volume growth ticked down and has remained a similar growth level to the first three weeks of April,” said the CFO. Ticket sizes are declining as inflation moderates, he said. “You’ve heard various U.S. retailers comment publicly about price cuts,” he told analysts. The price cuts are being implemented to clear out inventory. U.S. payments volume growth remains strong in services, particularly travel and entertainment. Non-discretionary spending in categories like food and drugs is also holding up well, he said.

“The consumer is still in good shape,” said McInerney.

In looking out into the current quarter, management said that payments volumes are stable around the globe, and the international growth trend remains unchanged from the double-digit rates seen in the second quarter on the strength of cross-border travel.

Asked about AI and its potential, McInerney said on the call that “we have an enormous data set that we’ve architected to be utilized at scale by hundreds of AI and ML [machine learning],” adding the company has already long been using AI. “As you transition to generative AI,” he said, “this is where we see this as an opportunity to take our current AI services to the next level. We are — as a platform — experimenting with a lot of the new capabilities that are available.”