Visa : Transcript ( PDF 274 KB )

Corrected Transcript

10-May-2021

Visa, Inc. (V)

MoffettNathanson Payments, Processors, and IT Services Summit

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Visa, Inc. (V)	Corrected Transcript
MoffettNathanson Payments, Processors, and IT Services Summit	10-May-2021

CORPORATE PARTICIPANTS

Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

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OTHER PARTICIPANTS

Lisa Ellis

Analyst, MoffettNathanson LLC

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MANAGEMENT DISCUSSION SECTION

Lisa Ellis

Analyst, MoffettNathanson LLC

All right. Thank you. Welcome back, guys. We are back and absolutely delighted for our 09:00 AM Session to have Al Kelly, the Chairman and Chief Executive Officer of Visa joining us, one of our main events of the two-day summit. So, Al, thank you so much for being here.

And I'd just say, maybe before we dive into the Q&A for our fireside chat, are there any opening comments that you would like to make?

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

Well, first of all, Lisa, it's a pleasure to be with you and a belated Happy Mother's Day to you. Hope you had a good weekend. Look, I would say a couple of things, number one is, we are certainly at the beginning of a recovery. All of our metrics, except for cross-border, are better than they were in 2019, which I think is the most relevant comparison point at this point. Revenue and EPS is greater than 2019 and that's despite travel being down, especially cross-border travel being down.

The recovery is going to be bumpy. It's going to be inconsistent in different parts of the world. A lot of it's going to be based on the rollout of vaccines and the lifting of restrictions. I think key to all of this is, do consumers get comfortable and do they get mobile, and I think to the degree they are comfortable and mobile, that's going to make a big difference. We're certainly excited about the upside that we see coming from the recovery and we're pretty bullish about the opportunities that we feel like we've got with our three growth metrics of consumer payments, new flows, and value-added services.

Certainly, the world has, through the pandemic, been digitizing in a big way. Cash is being displaced, governments are stepping in and increasing tap-to-pay limits, people are tapping and paying much more than they did before. Merchants are trying to make sure that their websites are really good for ecommerce. Some of them clearly had to be improved or probably some still need to be improved.

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Visa, Inc. (V)	Corrected Transcript
MoffettNathanson Payments, Processors, and IT Services Summit	10-May-2021

In terms of new flows, Visa Direct continues to do extremely well and we believe there's still a lot of upside in B2B, but - in the three areas we've identified: card-based,cross-border, as well as AR/AP enterprise level types of things. And then, in value-added services, we think there's continues to be a lot of upside. And because of debit and ecommerce, both CyberSource as well as our issuer processing has all been a beneficiary of that.

So, we'll see what happens, but we're bullish on the opportunities ahead as the recovery starts to take shape around the world.

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QUESTION AND ANSWER SECTION

Lisa Ellis	Q
Analyst,
MoffettNathanson LLC

Yeah. All right. Well, given that this is a strategic conference, I like to spend a little bit of time thinking about the movie, the longer-term horizon. So, you've been CEO now of Visa for 4.5 years. It was October of 2016, I remember well. Looking back, can you talk a bit about the three or four major ways in which Visa has evolved over your tenure as CEO?

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

A

Well, I think I would identify that three or four things that I think are probably most significantly. So, the first is that we've moved from facilitating payments to moving money globally. That's a big shift for us and I think it opens up many things. Our network has moved to have push-enabled capability. We're now just not focused on cards, but access to accounts. And so far, from that vantage point, Visa Direct has been the star of the show, most recently, just still growing 60% in terms of transactions. We've moved beyond - secondly, I'd say, we've moved beyond VisaNet, embracing our network of network strategies. We're looking to move money wherever it needs to be moved in the world to either cards or to accounts. We have created or are creating and building out a high value new capability for high value transactions in B2B Connect. And overall, that's going to give us a platform for more selling of value-added services.

The third change I would talk about is what I would call Partnerships 2.0. Four-and-a-half years ago, most of our partners were traditional financial institutions and face-to-face merchants. But now we've seen neobanks, wallets payment facilitators, fintechs of all types, just ecommerce merchants themselves with wallets. So, lots of new types of players that have entered the ecosystem and we've had to change because of that. We've had to become more flexible and easier to do business with. We have a much easier onboarding process that we call Visa Fintech Fast Track. We've made our contract less burdensome, much more simple, and now we have about 315 fintech partners around the world. It was up 45% year-over-year. We've also had to open up our technology to the outside world and we now have about 600 APIs. We have about 1.5 billion calls to our APIs every single month. We've created local versions of these and that to be able to accommodate or have to accommodate data localization rules.

So, I'd say Partnerships 2.0 has been the third big change. And then, I'd say fourth is the maturing of Visa as a company. When I joined, we were eight-years-old as a public company, now we're in our 13th-year as a public company, and there's just a lot we had to put in place that as a company of less than a decade age didn't had in place. We've got a real corporate purpose now. We've got a much more rigorous process around talent and talent evaluation. We are investing more in the business, both in technology and services, solutions and innovation.

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Visa, Inc. (V)	Corrected Transcript
MoffettNathanson Payments, Processors, and IT Services Summit	10-May-2021

We've created a culture that's very obsessed with clients, very focused on innovation, and a place that hopefully people are excited and fun to work in. So, those would be the four areas that I think have been big changes in the last 4.5 years, Lisa.

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Lisa Ellis	Q
Analyst,
MoffettNathanson LLC

Okay. All right. Well, no rest for the weary. So, how about looking forward to your...

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

Well...

A

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Lisa Ellis

Analyst, MoffettNathanson LLC

Q

Yeah. Sorry. As you think about your priorities over the next 4.5 years as CEO of Visa, how will Visa look differently from an investor perspective and what are you really focused on?

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

A

Well, again, I think at the risk of being boring, but - and not very sexy, we are really focused on these three growth levers of consumer payments, new flows and value-added services, and we think there is incredible amount of gas left in the tank for all of them. Look, we're going to deepen relationships with current partners. We're going to build new partnerships. We're going to plant flags in geographies where we've not invested a lot. At this stage, we're going to help lift over time the 1.7 billion people around the world that we look at as unbanked outside of the financial mainstream that exists for everybody else. We expect to identify more use cases for Visa Direct, and in general, expand our services.

We also, Lisa, very importantly have to fortify our foundation. We have an incredible brand that we have to continue to invest upon and build upon. Technology is hugely important to us as is security, very important to us, and we feel like we've got a big role to play there, not just at Visa, but in the ecosystem. And then, lastly, of course, is our people and our talent agenda is very, very important as we look ahead. We're going to continue to try to attract great talent over the next few years. We're going to continue to try to really put our corporate purpose in action. And lastly, very importantly to investors, we're going to be really good stewards of their capital.

If I were to pick a single word, if we look 4.5 years, 5 years out, that I would say that people would hopefully say about Visa is diversity. We will have diversified our revenue. We would have diversified our footprint. We would have diversified our client base more than it is, diversified our services more than they are today, diversify our workforce more than it is today. And I think, as a more diverse company, we'll be more valued, because we'll have more capabilities and we think - and therefore, we will be more valuable. So, I'm very bullish about what comes ahead, and I think that this recovery and some of the things that have happened during the pandemic that will remain sticky is a great platform for growth going forward.

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Lisa Ellis

Analyst, MoffettNathanson LLC

Q

Well, that's a good transition to talking a little bit about the pandemic, and specifically, I wanted to talk about cash displacements, been a driver of this industry for the last 50 years, I suppose. But clearly during the pandemic, we

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Visa, Inc. (V)	Corrected Transcript
MoffettNathanson Payments, Processors, and IT Services Summit	10-May-2021

saw this huge step up in the use of digital forms of payment, both online and at the point of sale. And while that is clearly a big help to your near-term volumes, you'd say, well, you are probably going to get that volume at some point anyway. So, I guess, maybe just talk a little bit about more broadly than just simply the volume aspect of it, what are some of the benefits to Visa of having accelerated cash displacement and then are there some challenges also that you're facing from this?

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Alfred F. Kelly, Jr. A

Chairman & Chief

Executive Officer, Visa,

Inc.

Well, first of all, I think cash is going to be here for quite a while. I mean, the purchase volume of Visa plus Mastercard plus American Express is still underneath the level of cash that's used in the world. So, cash displacement is going to be an opportunity for a long time and we're going to certainly do our part to make sure that we get our fair share or more of it. I think debit is going to play an increasingly critical role. We think we're really well positioned in debit in terms of our scale, our security, our innovation, our services, dispute management, our settlement capabilities. And if you look at our debit volume, it was up 35% in the second quarter around the world and it was up 44% in the US.

Now, the US number, Lisa, was a little bit impacted certainly by stimulus - two stimulus programs in the first quarter or into the beginning of the second quarter, so certainly that has helped. But these are incredibly healthy levels of growth and one of the things that did [indiscernible] (00:10:57) if you look at the last year, our debit growth has been 16% and our debit cash has been down 7%. So, that greater than 20% delta is double the historic level. So, cash digitization is happening and happening at quite a pace, and I think it's going to be sticky even as some of the mobility comes into place and some of the restrictions are left.

You ask what cash digitization does for us. It does a number of things. Number one, it drives PV. Secondly, it drives - in the face-to-face world, we know that people who tap-to-pay actually spend more and have more transactions than the people that don't. As debit grows and as prepaid grows, that's good for issuing processing business. Ecommerce in general actually has a higher take rate on value-added services than does the face-to- face world. So, that's a real positive for us. And lastly, I would say, to the degree that people are getting comfortable with digitization, it's going to help in our new flows as well and people will be more comfortable being adapters of things like Visa Direct over time in various uses cases in which they could interact with Visa Direct. So, I see it as extremely valuable. I think the one thing we'll have to all be continued to be working in ecommerce world is that the user experience still has to get better. There's still too much of a drop-off rate from shopping to actually paying. The approval rates still need to get higher, and obviously, we're all battling fraud on ecommerce. So, I'm confident the industry - everybody is aligned on these things being better. And so, I'm confident that it will happen, but it will take a little bit of time.

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Lisa Ellis

Analyst, MoffettNathanson LLC

Q

Okay. Okay. All right. I do want to touch on the DOJ CID. In your latest Q that you just disclosed, you did disclose that you have received a CID from the DOJ regarding Visa's US debit practices. So, can you just comment if there is anything that you can tell us about the scope or timing of the CID?

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

A

Yeah. At the end of March, we did get the CID. Obviously, I'm not going to say much, but let me make a few points to you and the people joined today. Number one, we believe we are completely compliant with all the laws

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