Visa : Transcript ( PDF 263 KB )

Corrected Transcript

02-Jun-2021

Visa, Inc. (V)

Bernstein Strategic Decisions Conference

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Visa, Inc. (V)	Corrected Transcript
Bernstein Strategic Decisions Conference	02-Jun-2021

CORPORATE PARTICIPANTS

Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

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OTHER PARTICIPANTS

Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

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MANAGEMENT DISCUSSION SECTION

Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

Good afternoon, everyone. Thanks for joining us today for our 37th Annual Strategic Decisions Conference. I'm Harshita Rawat, the senior analyst covering US payments at Bernstein. I'm delighted to be joined today by Vasant Prabhu, the CFO of Visa.

A quick housekeeping item for people viewing this webcast. Investors are able to submit questions through the Pigeonhole link on the left hand side of your viewing screen.

And with that, let's begin. Vasant, thank you very much for joining us today.

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

Great to be here, Harshita. Thanks for having me.

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Visa, Inc. (V)	Corrected Transcript
Bernstein Strategic Decisions Conference	02-Jun-2021

QUESTION AND ANSWER SECTION

Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

Q

Fantastic. And Vasant, you put out an 8-K last night with a lot of good data around some of the improving spending trends you're seeing both in domestic as well as cross-border spend. To kick things off for the audience, can you talk about some of the overarching spending trends around consumer travel behavior that you're seeing today?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Sure. So the 8-K is out and it's in keeping with what we've been doing for the last several quarters since the pandemic started. We've been putting out an 8-K in the middle of the quarter to give people a sense of how trends are moving along since things are changing fast.

You might remember, when we did our second quarter call, we provided a lot of color on what was going on with the business. And so it's perhaps useful to just compare how may be it relative to the second quarter in April.

If you look at the 8-K we put out, normally, what we provide is US trends and then we also talk about cross-border and processed transactions. And I can give you some color on what's happening outside the US.

In the US, what you saw in May was that PV growth stayed very strong. It was at 132% of 2019. Now just to remind you, we're comparing to 2019 because growth rates, as you compare to last year now, are not as meaningful because they're comparing to some big declines last year. Obviously, the growth rate relative to 2020 was a lot higher. 2019 is a good baseline year.

And what's good about the 132% is that, it's up a point from April. And the reason that is important is that we had seen the impact of the stimulus in March and April and there was a belief that perhaps we would start to see some slowdown, but we didn't see that. So, American consumers continue to spend at a very healthy clip in May. In fact, debit was almost exactly at the same level relative to 2019 as April. It grew at about 151%, which means our debit business relative to 2019 is up over 50% [ph] pre-pandemic. (00:02:56)

The other piece of, I think, good news in the May results, is the continued recovery of credit. Credit improved its trajectory in May relative to April by almost 4 points. So credit now is indexing at about 114% to 2019. So in a way, it's almost back to the pre-COVID trajectory, not quite there, but very close.

And what we're seeing in credit is improvements in travel, restaurant and entertainment, which means that people are starting to get out and about, at least in domestic spending. In the case of debit, the strength is people are buying goods and services. The strength was in retail, in department stores, in apparel and home improvement. So, clearly, the American consumer is spending, and that spend trend has not been affected with any wear out from the stimulus payments.

The other couple of pieces to point out is on the travel front, so May spend was about 10 points above 2019 levels. Excluding travel, in all the other categories, spend was about 10 points above 2019 levels, and travel was approaching 2019 levels, although slightly below. So it's getting close. In fact, travel has improved steadily from

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Visa, Inc. (V)	Corrected Transcript
Bernstein Strategic Decisions Conference	02-Jun-2021

January, almost a 30 point improvement. And in fact, [ph] as we got through (00:04:23) the end of May, domestic travel at least was approaching 2019 levels. So we are starting to see that travel is beginning to normalize.

And as a reminder, a lot of our travel is consumer travel, not business travel. And then, as far as the US goes, one last point, card-present spending improved by 4 points relative to April. Again, it tells you people are up and about and shopping in stores, and card-not-present, excluding travel, is very, very strong still. It's still at about 159% of 2019 levels.

So what you're seeing is that even as people are up and about and going into stores, and card-present is recovering, card-not-present is still almost 60% above 2019 levels. So you're starting to see that card-not-present is not slowing down even as card-present recovers to, let's say, almost pre-pandemic levels.

If you go around the world, Asia is a mixed bag. Asia remains an area where COVID controls are still pretty prevalent. And you've seen the latest news. People are worried about variants in Asia. Certainly, India, the situation worsened a lot in May, but it's showing some signs of stabilizing. Singapore and Japan put in some new restrictions. We saw their volumes decrease versus April. On the other hand, Europe saw a big improvement. You know that Europe had put in some restrictions in the first calendar quarter because of COVID spikes. As they reopened, we have seen some nice improvement in Europe. Many key markets have improved almost 10 points versus April.

Processed transactions, again, mirroring the trends in payments volumes. Globally, processed transactions are indexing at 121% to 2019 right now, up 4 points from April. Europe has improved a lot in May. LAC and CEMEA, which are already very strong, have continued to stay strong. And Asia-Pacific is sort of the same as it was in April.

Moving to the crucial cross-border business, which everybody is watching, you can see in what we release that we're about 85% to 2019 levels. So that's a 6-point improvement from April, which is quite substantial. Travel spending improved 5 points, so now travel is indexing at about 45% to 2019. So it's still severely depressed. It's less than - more than half below that it was in 2019, but it is recovering. And the recovery is interesting because it depends on where the corridors are open. So, for example, travel from North America almost anywhere in the world is very strong, almost back to 2019 levels. In fact, it passed 2019 levels in May. Travel into Latin America is another bright spot. Again, it's above 2019 levels right now.

Just to give you an idea of how certain corridors benefit, US to Mexico is now 70% of our 2019 levels. So it tells you that people want to travel, and where the corridors are open, they're seeing some hefty, hefty increases. Asia Pacific is the area where travel cross-border is still not strong. Europe is improving a lot. In fact, all the indications are that popular tourist destinations in Southern Europe will be open for the summer and bookings are trending well. The fact that Europe will be open to vaccinated visitors from the US is a good trend.

For example, in Greece, once Greece reopened in mid-April, in the six weeks after that, cross-border spending has doubled and is accelerating every week. And we give you these data points because these are just the corridors opening up. Iceland opened its border in mid-April and volume is up almost 4x in the last week of May, and improving almost every week.

There are bubbles opening up like Australia and New Zealand, for example. Cross-bordercard-present spending from each country had more than doubled from pre-bubble levels and has remained that through May, it's almost back to 2019 levels.

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Visa, Inc. (V)	Corrected Transcript
Bernstein Strategic Decisions Conference	02-Jun-2021

So there's a lot of bright spots around the world. And of course, the final bright spot is cross-bordere-commerce.Cross-bordere-commerce is indexing at 162% to 2019 in the 8-K we just released. Now a lot of it is cryptocurrency purchases. Many of them tend to be cross-border. That's clearly helping, and that could go away over time.

So net-net, you are starting to see a good recovery in many parts of the business and certainly a sequential improvement from April. So hopefully, that was a fairly long answer to the question you had, but wanted to give you the best sense of where things are right now.

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Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

Q

That's very helpful, Vasant. Thank you. And I can personally attest to the pent-up demand in cross-border travel. Now, Vasant, [ph] I want to (00:09:33) talk about, back in February of 2020, you hosted Visa's Investor Day in- person in San Francisco, and you discussed this addressable market expansion into new flows and value-added services and how that can accelerate Visa's long-term earnings growth algorithm over time.

Fast forward to today, given what you're seeing in the market with respect to Visa Direct, B2B Connect, and your evolving partnerships, how do you feel about the long-term opportunity of new flows versus a year and a half ago?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Yeah, for sure, we feel a lot better about what the opportunity there is, and a lot of it has been validated in the last year. So if we just stick to new flows now, we sort of talked about the new flow business in two major buckets. We talked about the kinds of new flows we're enabling with our Visa Direct capability. And I want to emphasize that Visa Direct is not a product. It's a capability. It's a platform. It enables a whole range of use cases in P2P, in B2C, and G2C, and of course, B2b or b2b. So I'll talk about Visa Direct first and then we can talk about B2B, too.

We said that at least $65 trillion in opportunity existed in use cases that can be supported by our Visa Direct platform. And just to tell you a little bit about it, just to make sure people understand, the Visa Direct is a platform that is built on our existing platform that has more functionality than the traditional enablement of credit and debit payments to merchants. What we bring to the Visa Direct platform is our reach, which is unmatched, 5 billion endpoints points globally, our scale, our Network of Networks strategy that is really at the core of Visa Direct.

So for example, in 2020, Visa Direct utilized 16 card-based networks, 65 ACH schemes, 7 RTP networks and 5 payment gateways to move money around the world. And then, in addition to that, we've invested in a whole range of services that add to security, dispute resolution, et cetera. So what Visa Direct has been able to do, of course, is by the end of last year, it got to 3.5 billion transactions, and was growing 60% a year with no signs of slowing down through the pandemic. And there are some huge use cases that we're very excited about. Of course, early days, the big use case was B2B. And as you know, Visa Direct is at the heart of most of the big [ph] P2P (00:12:21) platforms everywhere in the world. We are very, very excited about what's going on with cross- border remittances. We have partnered with almost all the major players. And what we can provide them is a solution that is far more flexible than the ways they were doing it, more secure, more reliable, more real-time, and also cheaper, which is why they're extremely excited about it, and every one of them have signed up with us. They're very excited about Visa Direct payouts, which is enabled through Earthport that adds to the capability where we can send money not only to debit accounts - to debit credentials but also to bank accounts.

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