Q3 2024 Earnings Summary
- Strong growth in Value-Added Services (VAS): VAS revenue grew to over $2.2 billion this quarter, with over 20% growth for many consecutive quarters, significantly contributing to Visa's consolidated revenue growth.
- Visa Direct shows tremendous potential: Visa Direct transactions increased from 2 billion in 2019 to 2.6 billion this quarter, representing a 41% year-over-year growth, indicating early stages of growth potential.
- Rapid adoption of Tap to Pay: Tap to Pay has reached 80% penetration globally (excluding the U.S.), and has surpassed 50% in the U.S., with cities like New York City exceeding 75% penetration, highlighting significant growth opportunity in contactless payments.
- Slowing U.S. payments volume growth: In July, U.S. payments volume growth decreased to 4% year-over-year from 5% in Q3, with credit growth at 3% and debit growth at 4%. This slight deceleration may indicate potential challenges in the U.S. market.
- Cross-border volume growth expected to slow: Visa anticipates that total cross-border volume growth will be slightly below Q3 levels in Q4, partly due to macroeconomic challenges in Asia affecting travel-related volumes. This could impact overall revenue growth, especially since cross-border transactions are a significant driver for Visa.
- Moderation in spending among lower spend consumer segments: Visa observed a slight moderation in spending by lower spend consumer cohorts in July, which may be correlated to the divergence in credit and debit growth. This could signal consumer stress and potentially affect future transaction volumes.
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Litigation Impact
Q: What's the impact of the recent litigation decision?
A: We strongly disagree with the judge's decision on the MDL litigation. We believe the settlement was fair and provided meaningful relief to all merchants. We're pursuing a revised settlement, but it's too early to speculate on its details. A settlement can occur at any point before, during, or after the trial. -
Revenue Guidance
Q: What's the outlook for revenue growth in Q4 and beyond?
A: For Q4, we expect adjusted net revenue growth to be in the low double digits, slightly above the 10% growth in Q3. Payment volume and transactions are anticipated to be consistent with Q3, with cross-border slightly below due to Asia travel recovery. As for FY '25, we'll share our expectations at the end of Q4. -
Value-Added Services Growth
Q: How is value-added services contributing to growth?
A: Value-added services revenue grew 23% this quarter to over $2 billion, now approaching 25% of total revenue. We've delivered consistent growth quarter after quarter and see strong momentum across issuing solutions, acceptance, and advisory. We feel great about the opportunities ahead and believe we'll continue to deliver consistent growth. -
Incentives and Margins
Q: What's driving the lower incentives and impact on margins?
A: Incentives are expected to be lowest in Q4 due to fewer renewals and better client performance. Year-to-date incentives have played out differently, and overall, they're lower than anticipated. We had higher incentives last year due to a higher volume of renewals, which we're now lapping. -
New Flows and Visa Direct
Q: Can growth in new flows like Visa Direct be sustained?
A: We saw 18% growth in new flows this quarter, with Visa Direct transactions growing 41%. We feel great about the execution and momentum. While growth rates can vary quarter to quarter, we're in the early stages and see immense opportunity ahead. We've built strong infrastructure, and we're optimistic about continued growth. -
Credit vs. Debit Trends
Q: Are slowing credit volumes a sign of consumer stress?
A: In the first 21 days of July, U.S. payment volume growth ticked down to 4% from 5% in Q3. Factors like a major hurricane, timing of e-commerce events, and a tech outage impacted results. We saw some moderation in lower spend cohorts, which may correlate to the credit versus debit trends. Overall, we consider the results relatively stable. -
Contactless Payment Adoption
Q: How is contactless payment adoption progressing?
A: Globally, outside the U.S., 80% of face-to-face Visa transactions are tap-to-pay. In the U.S., 1 out of every 2 transactions are taps, and in New York City, it's over 75%. Adoption is strong across all segments, products, and demographics. -
AI and Generative AI Investments
Q: How is Visa leveraging AI and generative AI?
A: We're all-in on generative AI, applying it to drive productivity and enhance the entire payment ecosystem. We're using AI to develop risk tools and capabilities, like fraud prediction services. We see positive impacts on productivity and our ability to help clients reduce fraud and grow sales.