Visa : Transcript ( PDF 196 KB )

Corrected Transcript

09-Sep-2021

Visa, Inc. (V)

Deutsche Bank Technology Conference

	Total Pages: 10
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Visa, Inc. (V)	Corrected Transcript
Deutsche Bank Technology Conference	09-Sep-2021

CORPORATE PARTICIPANTS

Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

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OTHER PARTICIPANTS

Bryan C. Keane

Analyst, Deutsche Bank Securities, Inc.

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MANAGEMENT DISCUSSION SECTION

Bryan C. Keane

Analyst, Deutsche Bank Securities, Inc.

Hi. Sorry about the late start here. But I'm Bryan Keane, I'm the senior payments analyst here at Deutsche Bank. And we're excited to have a financial discussion with Visa's Vasant Prabhu who's the Vice Chairman and CFO. There's also a Q&A format portal down below if you want to ask a question. So, Vasant and I live in the same neighborhood here. So, we should have just gotten together and done the fireside chat in person, but...

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

You're right, Bryan. And I have a fire here, we could have sat by and I'm very sorry I'm not on video. We had some issues here, but I'm glad we could get the phone line going.

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Visa, Inc. (V)	Corrected Transcript
Deutsche Bank Technology Conference	09-Sep-2021

QUESTION AND ANSWER SECTION

Bryan C. Keane

Analyst, Deutsche Bank Securities, Inc.

Q

Yeah. Yeah. Thanks. Thanks for doing this. So, Vasant, I know you guys just released the August data, the volume data. So, maybe you can just talk a little bit about the global recovery versus the rise of the Delta variant and kind of what you guys have seen in the volumes?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Sure. Sure. Yeah. Just to give you a quick sense of what we are seeing. I mean you must have all seen − many of you've seen what we released last week. We tried to do that now to give you some sense of how things are going. Overall trends remained pretty stable globally if you look at it versus what we've seen in the last couple of months. In the US, our total payment volume was indexing at around 130 of 2019. We compared to 2019 because it's the cleanest way to look at the numbers at this stage. At some point, things will stabilize and we can look on a year- over-year basis and get a sense of the trend. It's down a little bit from July, but it's not a surprise. We expected some amount of pullback based on the fact that stimulus effects are going to wear off. If you look across debit and credit, debit was down somewhat more than credit and that's not surprising since debit was bigger beneficiary of the stimulus.

And then, if you look at the spending across categories, it also suggests that it's mostly stimulus wear off that was the driver of the small downtick because we're seeing - some downticks across most categories, ticket sizes is a little lower. Those are all characteristics or the impact of the stimulus, whereas food and fuel and drug were up.

Travel was down. It's too early to call it a trend. It was still higher than it was in June levels and much higher than April and May. So, that's a general sense of the trends.

Card present was very stable around 115 million of 2019 and that's some indicator of where the people are actually up and about. And card-not-present was down a bit, and that's again, it's linked to the fact that some of that stimulus spending was mostly e-commerce. Across the world, we saw - of course a lot depends on what's happening with COVID in different countries and what they're doing as a result of that.

In general, Asia remained soft. They remain probably the most stringent in terms of putting in these curbs on people's ability to move around. New Zealand shut down for example during this period. On the other hand, Europe is improving. India has recovered fast as the COVID issue there has - has pulled - has become a little better. The important cross-border business, we're now indexing at about 4 points higher than we were in July around [ph] 85, 89 (00:03:50), if I believe - if I remember right of 2019. Travel continuous to recover, so both card present and card-not-present,travel-related spend cross-border was up another 5 points in August versus July. And now, we're indexing at about 60% to 2019. Of course, it's still down from 2019 meaningfully. But it was at 40% on 2019 in April, so it's been steadily improving since then.

If you look across sort of where the cross-border travel is getting better, in general, travel out of the US, Latin America, Europe has all been improving and is approaching levels that we saw in 2019. Where we're seeing continued significant restrictions on travel with borders not really opening up or significant difficulties and impositions on people travelling like quarantines and so on is Asia. And the problem with Asia is, if people leave Asia, they leave their home country, it's hard for them to get back. So, Asia, as you know still probably - still is the

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Visa, Inc. (V)	Corrected Transcript
Deutsche Bank Technology Conference	09-Sep-2021

most depressed part of the world when it comes to cross-border travel and it's all linked to the pretty significant restrictions that are in place.

In terms of inbound travel, Latin America is well about 2019 levels. We told you about that before and a lot of that is US travel into Latin America. Where we've seen the biggest improvement in inbound travel is into Europe, and that is coming from all over the world into Europe. Europe is largely opened for travel. US travel into Europe; Middle Eastern travel into Europe; Europe - travel from just about everywhere, travel into Europe improved by almost 20 points rather than 2019 in August. And as I said, I mean, Asia is still significantly depressed relative to the rest of the world. So, that's a general sense of cross-border travel.

Card-not-presentcross-border which has been a very bright spot for quite a while since the COVID crisis hit us, was still indexing about 140. That was actually better in July despite the fact that some of the crypto boost we got in April and May has worn off as the crypto boom has worn off. So it's holding up very nicely.

So, that's a general sense of the trends, and of course transactions are up a point and index at about 125. So, as you look at it, I'd say, to summarize, infections themselves are not a good indicator of what we're going to see in spend. As we've told you before, it's driven more by what governments do in response to infections climbing. If there are no restrictions, we find that mobility stays pretty robust and have stayed that way even in US states with high cases and so on or countries with high cases like in Latin America. It's really when governments impose restrictions like they have done in, for example, New Zealand in the last quarter that you begin to see some impacts. And as far as Delta goes, we sort of remain in the same camp we were before which is it's not obvious it's having a big impact on spending. Maybe it's having some impact on domestic travel spending. We'll have to wait and see. But overall, it doesn't seem to be having a big impact at this point.

So, that's a general sort of overview, Bryan.

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Bryan C. Keane

Analyst, Deutsche Bank Securities, Inc.

Q

No, that's very helpful. And I keep going back to the Analyst Day when you guys talked about some of the top-line growth rates and trying to think about post-pandemic just because of some of the adoption curves have been bended. Is it actually potentially a faster growth rate top-line for Visa coming out of the pandemic?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Well, there have been as we've discussed structural changes that the pandemic has caused. I think most of you who watch us closely are quite familiar with them. But I'll just go through them. And I would say these structural changes have kick started or given sort of a bigger boost to trends - some of the trends that are already underway. And we've seen a step change in our growth rate in some areas. And then as we come out of the pandemic, we think they stay in place. So, let's go through them one by one. The first of course is the traditional engine of our growth, something we've been at doing for 60 years or our entire history, which is the digitization of cash. You all know, there's still plenty of cash around to digitize. It's not only true in emerging markets where our penetration levels have still been relatively low. But it's also true [ph] that in (00:08:56) absolute dollar terms, there's a lot of cash in developed markets too. And it has become very clear through the pandemic to most people that they don't want to use cash. It became issue of not just convenience, but also hygiene.

And so, even in emerging markets, including governments, including consumers, there has been this big desire to move away from cash and the infrastructures that enable people to do that be their wallets or be their - better connectivity. All those things have been improving substantially through the pandemic. So, cash digitization has

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Visa, Inc. (V)	Corrected Transcript
Deutsche Bank Technology Conference	09-Sep-2021

accelerated quite a bit. In developed markets, things like tap to pay, we've been telling you how important that is to cash digitization. The US [ph] was a laggard (00:09:45), I think the US banks have all decided that they have to get on the tap to pay bandwagon because their consumers demand it. This is contactless payments with cards.

So, cash digitization is most evident in our debit growth. And as we've said before, our debit in the US, for example, is indexing at 150, which is well above its trend line and it's higher across the board in most parts of the world. So, we've seen a sort of a big step change in cash digitization. We also think the infrastructures are falling in place, which means that we think this will continue post the COVID era. Until we get past COVID, it'll be hard to actually say what the acceleration is from faster cash digitization.

The other big trend that's been underway for a while, but also got a - sort of a real boost was the shift to e- commerce. E-commerce has been around 20 years. But you know that there's still plenty of opportunity. There's still a huge amount of commerce that does not happen online. And we saw, as you can imagine, a significant bump-up in e-commerce across the world and especially cross-bordere-commerce. I mentioned earlier that cross-bordere-commerce was indexing at 140 to 2019. Again, that's well above the trend line. And in general, e- commerce everywhere is trending well above the trend line. And the reason we think this sustains is because as the pandemic has gone on, a few things have happened that are very sustainable. One is habits are being formed. People are buying things online that traditionally they may not have bought online, for example, food and drug type purchases; for example, larger ticket purchases; for example, the adoption of e-commerce in emerging markets and the improvement of those infrastructures.

And then the other important thing that's going on is that merchants have all realized that they have to be good at e-commerce. So merchants are getting better, more and more of them are getting online. Being online is important for survival. These are all structural changes that will persist. And so, we are confident that the sort of the shift to e-commerce just like the overall digitization of the global economy is one that will not only not continue, but also accelerate.

As we go past that, we've seen a big boost in our new flows business. Not only is that a desire to digitize in merchant payments, but there is a desire to digitize cash across all kinds of use cases and whether that's B2B or B2C. And businesses have realized that they have to digitize their platforms and that includes payments, so B2B too. So, every segment and every use case which we can now serve because of our Visa Direct platform and our B2B platforms are seeing a big move towards digitization. And so, our new flows business and you've heard about the growth of Visa Direct reflects all that.

And then finally, our value-added services do benefit from more e-commerce because they are very geared towards e-commerce type transactions whether that's CyberSource, and what you can do for merchants and on omni-commerce, whether it's our fraud solutions, whether it's what we do with identity, authentication, processing solutions and so on. So, I think in summary, there's a step change. But we also believe as you all know there is a massive move towards digitizing businesses across the board and that includes payments and therefore it benefits us and we think it sustains.

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Bryan C. Keane

Analyst, Deutsche Bank Securities, Inc.

Q

Got it. A couple of hot topics I want to get to over the last several weeks. But, one in particular on Amazon, they announced that they - we're going to surcharge credit cards in Singapore, then now in Australia. I know surcharging isn't a new tactic, but can you talk a little bit about how these disputes typically get resolved?

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