Payments companies took a beating as the pandemic raged, but Visa Inc.’s top brass indicated Tuesday afternoon the big network has put the worst behind it. “We believe we are at the beginning of the end of the pandemic,” said chief executive and chairman Al Kelly as he pointed to recovering economies, rising vaccination rates, and some stronger-than-expected results for Visa. “We have bounced back to the pre-Covid trendline,” pronounced Vasant Prabhu, Visa’s chief financial officer.
In a wide-ranging presentation for equity analysts tuning in for the company’s latest quarterly results, Kelly and Prabhu pointed to big progress for the Visa Direct near-real-time payments platform, the surge in e-commerce spending, the rise of debit, and the network’s stance on cryptocurrency and on the sizzling buy now, pay later trend.
Total transactions on Visa Direct, which enables nearly real-time transfers between Visa cards—and now, from Visa cards to bank accounts—increased almost 60% in the March quarter, Kelly reported, without citing absolute figures. Some 25 earned-wage access platforms are now among clients using the service, he said, while it also facilitated government distributions for pandemic relief to some 13 million accounts. Further expansion is likely with the introduction in March of Visa Direct Payouts, which works in 170 countries and expands Visa Direct’s reach for the first time to recipients’ bank accounts.
The pandemic also drove millions of consumers to e-commerce shopping, a trend that Kelly says will stick as the world enters a post-Covid stage. “We see millions of e-commerce shoppers who weren’t there before. They’re much more comfortable shopping online, [so] we believe this shift will persist even as card-present [activity] begins to return.”
Kelly: “We see millions of e-commerce shoppers who weren’t there before.”
With these trends has come a surge in debit card transactions. Just in the March quarter, the second period of Visa’s fiscal year, total payments volume on debit in the U.S. market rose fully 34% year-over-year, to $657 billion. By contrast, U.S. credit card volume rose just 1.6% to $500 billion. “We saw incredible separation during the pandemic between credit and debit,” noted Kelly, though he noted that credit volume is now “starting to come back.”
Helping drive debit, he added, was the surge in online activity, where debit “has become the cash of the e-commerce world.”
Still, Visa’s debit practices and its competition with other debit networks remains a sensitive topic in the wake of news last month that the U.S. Department of Justice is looking into Visa’s debit-routing practices. Kelly would not address the issue, saying, “I’m going to tread lightly there. We feel very good about our Visa debit business. We’ve got very good capabilities.”
But where Kelly wanted to tread more heavily concerned the market for cryptocurrency services, an area where last month it completed its first direct-settlement of a stablecoin, USD Coin. He sees much more activity to come. “This is a space we’re leaning into in a very big way,” he told the analysts.
Besides settlement, the network is also working on capabilities to allow purchases in crypto using Visa cards; to enable crypto cash-outs to fiat currency; and to allow fintechs to offer a crypto option to their customers. Also, Visa is in talks with central banks about enabling acceptance of central bank digital currencies, Kelly added. “To have value, crypto has to be secure and have some form of utility,” he said.
Visa is also high on the prospects for the buy now, pay later trend, in which consumers can get their products right away but pay for them over a few installments without interest. “One transaction can end up being three or four payment transactions, which is very, very good for us,” Kelly said. “We’re doing a lot in this space, we’re committed to it.”
For the quarter, total U.S. payments volume on Visa debit and credit reached $1.16 trillion, up 18% over the same quarter last year, a period when Covid’s effects only began to be felt in the latter weeks.