Q2 2024 Earnings Summary
- Visa Direct transactions grew 31% in the quarter, with new flows revenue increasing 14%, demonstrating strong growth in Visa's new payment flows.
- Cross-border e-commerce business is strong, growing above expectations, with total cross-border volumes growing 16% in Q2 and expected to grow in the mid-teens in the second half, contributing to Visa's robust cross-border performance.
- Value-added services revenue has grown over 20% in each of the first two quarters, showing evident momentum and significantly contributing to Visa's growth.
- Slower recovery in Asia Pacific cross-border travel is leading Visa to moderate its outlook for travel in that region. Visa's management noted that while overall cross-border volumes remain strong, the pace of recovery in Asia Pacific travel is slower than expected due to macroeconomic weakness in key markets like Australia and Mainland China, weakness in some Asia Pacific currencies impacting consumer purchasing power, and airline capacity constraints.
- Currency volatility at multi-year lows is negatively impacting Visa's currency-related revenues. Visa experienced lower-than-anticipated currency volatility treasury revenues in international markets due to currency volatility reaching lows not seen in about four years, and this low volatility is expected to continue into the next quarter.
- Potential weakening in U.S. debit trends with lower-income consumers reducing spending. An analyst observed that April continued the trend of weakening U.S. debit, possibly due to lower-income consumers significantly reducing spend in certain areas, which could impact Visa's U.S. payments volume growth.
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U.S. Debit Trends
Q: Is U.S. debit growth weakening in Q3 guidance?
A: Visa sees stable U.S. debit volumes, normalizing for certain factors. Despite observed weakening in April, they believe data indicates stable volume growth in both credit and debit in the U.S. -
Cross-Border Outlook
Q: How is cross-border volume growth and outlook?
A: Cross-border volumes grew 16% in Q2, with travel up 17% and e-commerce performing better than expected. Asia Pacific recovery is slower than anticipated, leading to a moderated outlook for travel but increased expectations for e-commerce. Overall, they expect cross-border volumes to grow in the mid-teens in the second half. -
Value-Added Services Growth
Q: What drove the uptick in value-added services growth?
A: Visa's value-added services grew over 20% in the first two quarters, driven by deepening client penetration, new product development, and geographic expansion. The momentum is evident, and opportunities are enormous with clients using an average of 22 services. -
Incentives Guidance
Q: Will incentives growth rate step down in H2 as planned?
A: Despite lower incentives in H1 due to deal timing, Visa expects incentive growth to be lower in H2, as previously guided. The Q4 incentive growth rate is expected to be the lowest of the year. -
Merchant Settlement Impact
Q: Impact of merchant settlement on interchange and dynamics?
A: The settlement brings clarity and stability. It reduces interchange for U.S. credit cards for both Visa and Mastercard, with no increases for five years, and gives merchants more flexibility. Overall, it allows the market to move forward. -
Visa Deep Authorization
Q: What is Visa Deep Authorization aiming to achieve?
A: It's an e-commerce transaction risk scoring platform tailored for the U.S. market. Built on deep learning, it addresses sophisticated fraud, aiming to reduce fraud rates and increase authorization rates, enhancing buyer and seller experiences. -
Open Banking in the U.S.
Q: How is Visa approaching open banking in the U.S.?
A: Leveraging Tink's success in Europe, Visa sees opportunity in the less developed U.S. market, aiming to introduce proven open banking capabilities and expand in a market at early stages of development. -
New Flows Growth
Q: What contributed to new flows growth recovery?
A: New flows revenue grew 14% in Q2, with Visa Direct transactions up 31%. The recovery reflects passing of prior one-time lapping issues, with expectations of continued strong growth in H2. -
Gaining Share from Domestic Networks
Q: How is Visa taking share from domestic networks?
A: By demonstrating the value of Visa cards over domestic schemes—offering better e-commerce capabilities, cross-border travel opportunities, and superior risk and fraud prevention—leading clients to issue more Visa cards. -
Prosa Acquisition in Mexico
Q: What's the progress and opportunity with Prosa in Mexico?
A: Visa sees significant opportunity in Mexico. With majority ownership in Prosa, they plan to bring world-class capabilities and value-added services, leveraging Prosa's processing experience and client base to digitize payments. -
Service Yields Stability
Q: Why did service yields decline, and outlook forward?
A: Service revenue grew 7%, slightly below payment volume growth due to several small factors. Yields remained consistent with Q1 and over recent quarters, and net revenue yield is stable across the company. -
FX Volatility Impact on Cross-Border
Q: How does FX volatility affect cross-border revenues?
A: Currency volatility is at multiyear lows, impacting treasury revenues. Visa assumes low volatility continues into Q3, with slight improvement in Q4. Underlying business health is strong, but volatility remains a variable. -
Average Ticket Size Trends
Q: What's the trend and outlook for average ticket size?
A: Global average ticket size was slightly down, consistent with Q1. In the U.S., ticket size improved but remained slightly negative. Expect U.S. ticket size to turn positive in H2, with global ATS slightly negative due to Asia Pacific impact. -
Middle East Growth Potential
Q: Is the Middle East a significant growth market?
A: Visa sees strong execution and client engagement in the Middle East, capturing opportunities by meeting client needs and driving their strategies, as evidenced by wins like Emirates. -
Addressing Cash and ACH Opportunity
Q: How is Visa capturing the $20 trillion cash and ACH market?
A: Visa is having success across cash, ACH, and domestic network conversions. The opportunity is enormous, with efforts varying by region, and some teams ahead in different parts of the world.