The operator introduces the Visa fiscal second quarter 2024 earnings conference call and informs participants that the call is being recorded. The host, Ms. Jennifer Como, introduces the CEO and CFO and reminds listeners that the call is being webcast and contains forward-looking statements. The CEO discusses the company's strong second quarter results and key business drivers.

Visa's overall payments volume grew 8% year-over-year, with US payment volume growing 6% and international payments volume growing 11%. The company's business performance reflects its strategy in consumer payments, new flows, and value-added services, with significant opportunity remaining in each area. The total global purchase personal consumption expenditure (PPCE) is estimated to be $40 trillion, with Visa's addressable opportunity being more than $20 trillion. This includes cash and check transactions, ACH and other electronic transactions, and domestic-based cards that can be converted to Visa credentials. Visa is focused on delivering innovative and secure payment solutions, including new credentials, tap-to-pay, and e-commerce.

In the past few months, Visa has experienced a 6% growth in credentials, with a focus on Europe. They have successfully converted over 20 million credentials to Visa debit in Europe and expect to issue over 5 million Olympic and Paralympic branded credentials before the Paris Olympics. Visa has also renewed a partnership with Caixa Geral de Depositos in Portugal and has seen success in co-brand issuance, including a new partnership with Qatar Airways and British Airways in Kuwait.

Visa has recently signed exclusive agreements with leading airlines in the United Arab Emirates and Morocco and is expanding its partnerships with digital issuers like stc pay in Saudi Arabia and Maya in the Philippines. In the US, Visa has launched a new credit card with brokerage platform Robinhood and in Europe, it has partnered with Trade Republic to offer a new Visa card to their 4 million customers. Visa's tap-to-pay and e-commerce are driving the growth of digital payments, with tap-to-pay transactions growing by 5 percentage points globally and reaching nearly 50% penetration in the US, especially in cities with transit systems.

In summary, Visa has seen significant growth in e-commerce payments volume, particularly in countries like the US, Canada, Brazil, Australia, and India. This is important for Visa's growth as cash is not usually an option in e-commerce transactions. The company's focus on safety, security, reliability, and user experience has positioned them well in the competitive e-commerce environment. Tokenization has also been a key factor in reducing fraud and improving authorization rates. Visa is also focused on expanding into new areas of acceptance and spending. In addition, the company has been successful in digitizing new flows, with new flows revenue growing by 14% year-over-year. This has been driven by the growth of Visa Direct transactions and commercial volumes. Visa is continuously seeking new opportunities for growth, such as through partnerships with companies like Thunes.

Thunes is implementing Visa Direct's push-to-card capability for payouts to eligible Visa cards and accounts, expanding earned wage access in Canada, and bringing Visa Direct cross-border capability to Taiwan. JPMorgan Payments will integrate Visa Direct into their acquiring operations, and Visa has deepened their relationship with Chase in the small business market. They have also renewed and expanded their agreement with Bill and reached a global partnership with Taulia. Visa is also exploring opportunities in government payments, such as their recent agreement with Pesaflow in Kenya. In the value-added services segment, revenue increased by 23% in the second quarter.

Visa has seen significant growth and opportunity in value-added services, particularly in Latin America and Europe. They have expanded their open banking solutions through partnerships with companies like Adyen and Revolut, and are now entering the US market. They have also signed partnerships with fintech and merchant companies like Dwolla and Max Rewards. Visa is continuously improving their risk offerings, including expanding their fraud detection capabilities to non-Visa card payments and real-time payments using AI-based models.

Visa has been piloting two new solutions, Visa Deep Authorization and making their offerings available through third-party platforms. They have joined the AWS Partner Network and signed agreements with ServiceNow, Stripe, and other companies to distribute their solutions. They have also commenced an exchange offer for Visa's Class B1 common stock and reached a landmark settlement with US merchants. The second quarter saw stable results and strengthened relationships with clients. Moving forward, new flows and value-added services will be a key focus for the company.

The paragraph discusses the strong performance of Visa in the second quarter of the fiscal year. The company saw stable growth in payments volume, process transactions, and cross-border volume. The global payments volume grew by 8%, with a slight slowdown in Asia due to macroeconomic factors. The US payments volume also grew by 6% in both credit and debit, with card present spend growing by 4% and card not present volume growing by 8%. The company's net revenue and EPS also exceeded expectations due to lower incentives and better value-added services revenue.

In the second quarter, Reg II had a similar impact as in the first quarter, with stable US payments volume growth when normalized for leap year. There was no significant behavior change across consumer segments. International payments volume growth was up 11% in constant dollars, with strong growth in most major regions. Domestic volumes in Mainland China had a minimal impact on revenue. Cross-border volumes were up 16%, with strong growth in card not present volume and travel volume. Travel volume is recovering at a slower pace in Asia-Pacific compared to other regions.

The main factors driving revenue growth for the company in the second quarter were macroeconomic weakness in key markets, weakness in some Asia-Pacific currencies, and lower airline capacity. Despite these challenges, the company's e-commerce growth offset the weakness in travel, demonstrating the strength and diversity of its business model. Service revenue and data processing revenue grew in line with their underlying drivers, while international transaction revenue was impacted by currency volatility. Other revenue saw significant growth due to strong consulting and marketing services. Consumer payments, new flows revenue, and Visa Direct transactions all showed growth in the second quarter.

In the second quarter, commercial volumes increased by 8% in constant dollars, with value-added services revenue growing by 23%. GAAP operating expenses rose by 29%, while non-GAAP operating expenses increased by 11%. The company experienced a slight headwind from FX and Pismo. Non-operating income, excluding net losses from equity investments, was $189 million. GAAP EPS was $2.29 and non-GAAP EPS was $2.51, up 20% from the previous year. In April, US payments volume was up 4%, with process transactions growing by 9%. Constant dollar cross-border volume, excluding transactions within Europe, grew by 15%. For the full year, the company expects adjusted basis results to be in line with non-GAAP results in constant dollars and excluding acquisition impacts.

The company is reaffirming its prior year guidance for adjusted net revenue and operating expense growth, with a small adjustment to total payments volume growth due to trends in Asia. The company expects adjusted net revenue growth in the low-double-digits and adjusted operating expenses to grow in the low-teens in the third quarter. Non-operating income is expected to be between $50 million and $60 million, and the tax rate is expected to be between 19% and 19.5%. Pismo is expected to have minimal benefit to net revenue growth and a slight negative impact on non-GAAP operating expenses and EPS growth. FX is also expected to have a slight negative impact on net revenue growth and a slight positive impact on non-GAAP operating expenses and EPS growth.

The company had a strong quarter in Q2 with stable underlying drivers and good financial results. They are optimistic about the momentum in their business and are being cautious with their spending. They then moved on to Q&A, where a caller asked about the impact of Easter and tax refund timings on their growth rates. The company clarified that April volumes were lower due to the timing of Easter, but adjusting for that, the growth rate is not significantly different from the previous quarter. They also mentioned that e-commerce strength in cross-border transactions is helping to offset the weakness in travel.

The speaker discusses the components of overall cross-border transactions, including traditional travel and e-commerce, as well as other smaller but faster growing portions such as remittances and marketplace payouts. They are pleased with the growth in all types of cross-border transactions, but do not have specific data on the breakdown of these different types. They also mention that US debit trends have been weakening since February, but they expect stable volume growth in the US overall.

During a conference call, Jennifer Como introduces the next caller, Bryan Bergin from TD Cowen, who asks about Visa's growth in the second quarter. Chris Suh, a Visa executive, responds by stating that commercial volume growth globally was stable at 8% and there was strong growth in Visa direct transactions at 31%. He also mentions that new flows revenue grew 14% in line with their expectations. Another caller, Will Nance from Goldman Sachs, asks about the company's prior guidance on first-half versus second-half dynamics and drivers of acceleration. Suh explains that there will be a step-down in growth rate for incentives in the second half, but overall there has been positive commentary on ticket sizes and easing inflation in comps, which may be helped by lower gas prices.

In this paragraph, Chris Suh discusses the factors affecting incentive growth in the second half of the year and the trend of ATS (average ticket size) in the US and internationally. He explains that the Q2 ATS growth was down slightly, but there was improvement in several regions and they expect ATS to turn positive in the second half of the year. However, when factoring in the impact of Asia, global ATS will still be slightly negative. This was taken into account in the revised payment volume outlook for the full year.

During a conference call, a caller from Wedbush Securities asks about the significant growth in value-added services. The CEO, Ryan McInerney, attributes this growth to the company's focus on deepening relationships with existing clients, developing new products, and expanding into new markets. He specifically mentions success in the risk and fraud and open banking spaces, as well as geographic expansion through the cybersource platform. The next caller, Cris Kennedy from William Blair, is then introduced.

Chris Suh, speaking on behalf of Visa, discusses the open banking opportunity in the US compared to Europe. He notes that Europe is the most developed open banking market and that Visa's acquisition of Tink has proven successful in the region. In the US, the market is less developed, but Visa plans to leverage their experience and success in Europe to compete in the US market. The caller, Dan Perlin, asks about Visa's Deep Authorization and its market potential.

The speaker is discussing the launch of Visa Deep Authorization, an e-commerce transaction risk scoring platform designed to combat fraud in the US market. They explain that it is built on deep learning technology and aims to improve the buyer and seller experience by reducing fraud rates and increasing authorization rates. They also mention a recent deal with Emirates in the Middle East and hint at a strong pipeline of potential deals in the region.

The speaker is discussing a recent merchant settlement in the US, which has brought clarity and stability to the market after years of litigation. The settlement will result in reduced interchange fees for credit cards and give merchants more flexibility in managing payments. This will not directly impact the company, but it is seen as a positive development for the market.

Ryan McInerney discusses the importance of value-added services in the company's growth and mentions that their top clients use twice as many services compared to the rest. He also talks about how they are constantly looking for opportunities to create value for clients by offering different services and that pricing models vary depending on the product and market.

The speaker discusses their company's portfolio of value-added services, including issuing, acceptance, risk and identity, advisory, and open banking. They mention that they have different pricing approaches for each market to meet their clients' needs. In response to a question about consumer payment opportunities, they mention driving share from domestic card networks by working with clients to understand the benefits of using a Visa debit card, such as better e-commerce capabilities, cross-border travel opportunities, and risk and fraud prevention.

The company views the Mexican market as a significant opportunity and has recently acquired a majority stake in Prosa, a processing company in Mexico. The company plans to bring its world-class capabilities, such as tokenization and risk scoring, to the market. Prosa has been operating for 50 years and has a large client base, making it a valuable asset for the company.

The combination of Prosa's experience and deep presence in the Mexican market, along with the company's technology and track record, gives confidence to both the company and its clients in digitizing cash, check, and electronic payments in Mexico. The company expects currency volatility to remain low in the third quarter, but its underlying business is strong.

Chris Suh, speaking on behalf of the company, discussed their expectations for the second half of the year. They reaffirmed their previous guidance for adjusted net revenue growth, operating expenses, and earnings per share. They anticipate new flows to grow faster than consumer payments, with a focus on faster growth in the second half of the year. Value-added services have also shown strong growth in the first two quarters. However, there has been a slight adjustment in their expectations for cross-border travel volume growth, based on trends in the first half of the year. Despite this adjustment, the company is pleased with their overall cross-border performance, with 16% growth in the second quarter and strong performance in both travel and e-commerce.

The company's travel volume expectations have mostly been met, with strong performance in most regions except for Asia. The company has moderated its outlook for travel and increased expectations for e-commerce. Overall, the company expects total cross-border volumes to grow in the mid-teens in the second half. There was a decline in service yields, but this was offset by lower client incentives. The company expects service revenue and data processing revenue to continue growing in line with underlying drivers.

The data processing revenue for the company grew slightly above processed transactions, aided by pricing. The second quarter yields remained consistent with the first quarter and the average over the last few quarters. The net revenue yield for the company as a whole also remained stable. The company is seeing success in all three areas of the addressable opportunity, including cash and check, ACH, and domestic network conversion.

This summary was generated with AI and may contain some inaccuracies.