Visa : Transcript ( PDF 281 KB )

Corrected Transcript

03-Jun-2021

Visa, Inc. (V)

William Blair Growth Stock Conference

	Total Pages: 14
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Visa, Inc. (V)	Corrected Transcript
William Blair Growth Stock Conference	03-Jun-2021

CORPORATE PARTICIPANTS

Jack Forestell

Executive Vice President and Chief Product Officer, Visa, Inc.

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OTHER PARTICIPANTS

Robert Napoli

Analyst, William Blair & Co. LLC

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MANAGEMENT DISCUSSION SECTION

Robert Napoli

Analyst, William Blair & Co. LLC

Good afternoon, everybody. My name is Bob Napoli. I'm the analyst at William Blair. That covers Visa and the fintech space. For a complete list of disclosures and potential conflicts of interest, please go to williamblair.com. Very excited to have with us today Jack Forestell, the Head Of Products, EVP and Chief Product Officer for Visa, a big role. Jack's been at Visa for about seven years and he was at Capital One where he was Head of Digital and for 12 years, I think you were at Capital One. So it's up - maybe just give a brief background on yourself and what you're focused on at Visa.

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Jack Forestell

Executive Vice President and Chief Product Officer, Visa, Inc.

Yeah. Sure, Bob. Thanks for having me. Great to be here today. Thanks, everyone, for joining. You know, Bobby, you nailed it. I am the Chief Product Officer at Visa, that kind of encompasses a few different things at Visa. Part of it is about developing and managing and delivering the product roadmap for the company. Part of it is about managing a set of business units and our value added services business, we can talk a little bit more about that later. And then the last piece is managing the partnership portfolio with our strategic and digital partners and fintech partners around the world, that's kind of the..

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Visa, Inc. (V)	Corrected Transcript
William Blair Growth Stock Conference	03-Jun-2021

QUESTION AND ANSWER SECTION

Robert Napoli

Analyst, William Blair & Co. LLC

Q

At last year's Investor Day, you've spent a lot of time talking about value-added services. And I think at that point, value-added services was about 15% of revenue. And I was hoping you could maybe give a little more color on why that's important? And what you're driving? What are the key products you're most excited about in value- added services?

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Jack Forestell

Executive Vice President and Chief Product Officer, Visa, Inc.

A

Yeah. I'd love to Bob and I can give you a lot of color. So you cut me off when the color starts getting too long. Value-added services are a growing part of the business and really key to this strategy. If you think about it, value-added services is we offer them to our clients, they help grow the client business, and then have the knock on effect on the core relationship and the core volumes we're doing with clients. They generally deepen our client relationships. And then of course, they deliver a new source of revenue growth for us.

And our value-added services are less penetrated than our core business, and also a little bit more keyed toward digital and e-commerce services. So growing a little faster than the core with a ton of upsides to give you a sense, like in 2020, about 60% of our clients used five value-added services and 30% of them use 10 or more. So we were being successful, but we still have a long way to go, let it be that 30% number get a lot higher. I can give you a quick overview of the whole portfolio, if you want sort of what's in that bucket of value-added services.

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Robert Napoli

Analyst, William Blair & Co. LLC

Sure. Yeah, yeah.

Q

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Jack Forestell

Executive Vice President and Chief Product Officer, Visa, Inc.

A

I'm going to probably do it like, things that we do pre-transaction, during the transaction and after the transaction. A pre-transaction, a lot of that has to do with risk management and security. So that's products like Visa Advanced Authorization and Risk Manager, which is our transaction risk product for the issuing side of the table that about 8000 issuers and 125 countries using it. Decision Manager is another one that's the equivalent only for the seller side, focused on the digital seller that's been growing really fast as we've seen the pandemic put wind in the sales of digital about 30% a year.

And we got a suite of authentication services to authenticate user getting into the identity space, CardinalCommerce is part of that, or Visa Secure Services part of that. And we have a consumer authentication service for issuers that's part of that, again. A ton of growth coming out of that suite of products as we've seen digital transactions really take off. Cardinal, for example, grew 50% in the second quarter, that's the pre - I'll speed it up a little.

But during - think installments, transaction alerts, transaction controls, loyalty solutions after the transaction, if there's a problem, we've got disputes processing, along with our set of verified services for rapid dispute resolution, digital receipts. So that's just sort of a super quick overview of some of the services.

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Visa, Inc. (V)	Corrected Transcript
William Blair Growth Stock Conference	03-Jun-2021

Now, we kind of think it's incredibly important to have a differentiated set of services. But it's equally important to have a capacity to deliver them as solutions to clients. And there we've got two really important value-added services delivery platforms. One is DPS, which is one of the largest issuer processing platforms in the world. It's been heavily focused in the US, so lots of upside there to grow internationally. We just launched our first client in Germany, DKB, our largest issuing guide partner there.

And if you can go - now that they're up and running on DPS, they've now got access to 20 other value-added services by that DPS platform. In the seller side, you all know about CyberSource, which has grown from a payment gateway to a full service payment management platform. We connect directly to 450,000 merchants but more recently, it really started to invest in partnerships with acquirers and enabling our acquire partners like SNCC in Japan, or Barclays in the UK, KeyBanc here in the US.

And then lastly, I'd call out our advisory services and data solutions. We've got an incredible dataset to help our clients gain insight on what's happening within their business and where the leverage is, where, frankly, they could deploy some of our solutions to help them. In 2020, we had 5,000 clients using our Visa Analytics Platform. And we've got a whole army of consulting advisors, well over 500 people around the world in the consulting business who work with our clients. So that's just a potted version of value-added services portfolio.

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Robert Napoli

Analyst, William Blair & Co. LLC

Q

Thank you. I'll next dig into Visa Direct, which I think is one of the very high growth portion and very important portion of value-added services. Can you talk a little bit about what makes Visa Direct unique, the growth potential, what inning are we in as far as growth of Visa Direct, [ph] 360% (6:17) in March to 3.5 billion transactions I think there was or?

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Jack Forestell

Executive Vice President and Chief Product Officer, Visa, Inc.

A

Yeah, yeah. I'd love to Visa - Visa Direct is near and dear to my heart, sort of been there from the beginning. We've seen incredibly strong growth through the pandemic. But it's still really early days in terms of the growth potential, for growth the Visa Direct is pretty big. So, it's probably you got to think about the growth potential in three ways. There's existing use cases and geographies, bringing the existing use cases to new geographies, and then new use cases all together.

So, we started out with domestic P2P, that P2P in country that's where we really got started. And we've gained a ton of scale in a few markets. So, the US and Russia are the anchor tenants in terms of the installed base of growth in the domestic P2P business. But we're really starting now with the again, the pandemic digital wins behind us to see growth around the world. Latin America is a great example where we've seen a lot of activity lately. I'll give you some examples there. In Peru, there's a consortium of banks that have put together a P2P platform called PLIN. They decided to connect to Visa Direct and YellowPepper, a recent acquisition of ours.

And they've grown to 5.5 million transactions just in the second quarter, having only launched in late 2019. Also in Peru, BCP, a bank partner of ours developed their own solution called Yape. They launched in 2018. And they've gotten to 5 million users, which in US terms may not sound that big, but 5 million users in Peru is 50% of the country bank population. And they've more than tripled their daily Visa Direct transactions over the last six months. We've seen WhatsApp now launched in Brazil, powering their P2P solution with Visa Direct. And we also got a deployment going on in Colombia. So it's really starting to take off in new markets around the world.

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Visa, Inc. (V)	Corrected Transcript
William Blair Growth Stock Conference	03-Jun-2021

In terms of newer use cases, we're super excited about cross-border remittance, which is just starting to take off. We're already working with players like MoneyGram, Western Union, Remitly, Wise and we got new agreements in place with a whole host of banks like VTB in Russia, TD Bank in Canada, and a ton of other fintechs. And then lastly on new use cases, we've got emerging use cases and deals in merchant settlement, earned wage access and marketplace payout. So just a ton of potential.

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Robert Napoli

Analyst, William Blair & Co. LLC

Q

Can you give any color on the monetization of Visa Direct on revenue per transaction, or just how does Visa monetize Visa Direct?

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Jack Forestell

Executive Vice President and Chief Product Officer, Visa, Inc.

A

Yeah, I mean we - it's a pretty straightforward revenue for - fee per transaction model. I mean, the yields are obviously different depending on the space, their competitive alternatives. I can't think of a space where I don't believe we have a superior product. So we tend to be priced at a premium. But it really depends, that P2P transaction is going to have a different yield than a cross-border remittance transaction for example.

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Robert Napoli

Analyst, William Blair & Co. LLC

Q

Does Visa Direct essentially drive the multi-rail strategy for Visa, when you have MasterCard with Vocalink and driving multi-rail in different ways, but is Visa Direct the core driver for multi-rail?

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Jack Forestell

Executive Vice President and Chief Product Officer, Visa, Inc.

A

Yeah. I mean, Visa Direct is a big part of it. I wouldn't - multi-rail a network for us is bigger than just Visa Direct, but Visa Direct is right at the heart of it. If you think of it with the reach we have today with Visa Direct and then you combine the acquisition of Earthport, which last year used 16 different card networks, 65 ACH schemes, 7 RTP networks, and 5 payment gateways. That's a lot of connectivity.

You add all that together and we can hit 5 billion endpoints, so we can send money not just to Visa cards, but pretty much anywhere on earth with that connectivity. So what we've developed is a platform called Visa Direct Payouts, which creates ease of use through a single point of connectivity. You could push payments through Visa Direct Payouts, through a Visa card, through one of those other card-based networks to an ACH account or through an RTP network.

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Robert Napoli

Analyst, William Blair & Co. LLC

Q

Thank you. So what technological innovations are going to be the most important to Visa and the payments industry? And I think management has suggested over 2 billion credentials, more credentials could touch the network, but things like open APIs, tokens, fast payments, software-led payments, what are the most important technological innovations?

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Jack Forestell

Executive Vice President and Chief Product Officer, Visa, Inc.

Well, that's a good list, Bob. You're asking me to choose a favorite child.

A

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