‘Digital gold’: Visa bets big on cryptocurrency
Visa CEO Al Kelly detailed the brand’s efforts to capitalize on trends such as central bank digital currencies and financial inclusion.
Visa works with central banks on CBDC policy and advocates for public-private partnerships to support CBDCs, a model that many digital currency experts believe will be the dominant model, especially given the complex work needed to digitize currency in different countries. Visa filed a patent application for technology that would support connections between financial institutions and central banks.
“Central bank digital currencies could end up being very valuable in countries where infrastructure is unavailable or limited,” Visa president and CEO Al Kelly said during the company’s earnings call, estimating that there is an addressable market of over 1.7 billion consumers. could be reached and suggesting that there is space to expand its work with government clients.
For the quarter ending March 31, Visa reported net income of $ 3 billion, or $ 1.38 per share, down slightly from $ 3.1 billion, or $ 1.39 per share, at the same time in 2020. That’s better than Zacks Investment Research’s expectation of $ 1.26 per share. Revenue for the quarter was $ 5.73 billion, up from $ 5.85 billion in 2020. Analysts forecast was $ 5.56 billion.
But a return of the pandemic is emerging, as the overall payment volume was 116% from the first quarter of 2019, Visa reported, using the 2019 figures as a comparison in this case to compare the new one. volume to pre-pandemic figures instead of the sharp drop in 2020. “The recovery will take different forms in different areas depending on vaccine deployment, but the beginning of the end of the pandemic and the recovery is well underway on most markets. ” Kelly said.
Unlike previous quarters, Visa provided projections, saying third quarter net income growth is expected to be in teens, with the recovery in travel being the key metric to watch. Visa maintains that there is a large amount of pent-up demand that will drive the resumption of travel.
Kelly discussed several ways Visa engages in the crypto market, which he has broken down into investment assets – or “digital gold” as he called it – and digital currencies, which he says are more favorable to payments.
Visa is positioned to quickly convert these investments into usable funds across the company’s network of 80 million merchants. “This is the heart of what we do, enabling consumers to make a purchase,” Kelly said, adding that Visa is adding partnerships with crypto exchanges such as Coinbase, Crypto.com and Bitpanda. Visa has also upgraded its infrastructure to enable stable coin settlement.
“We are looking into this area in a big way,” Kelly said.
Governments are also in the process of further digitizing their operations, Kelly said, an indirect nod to using digital rails to disburse stimulus payments and eventual CBDCs. “Governments are becoming bigger customers, and we’ll see more of this activity, in general, than we had before the pandemic,” Kelly said.
Visa also reported figures claiming Kelly’s belief that the digital commerce habits induced by the pandemic are permanent.
Visa said the volume of cards not present excluding travel grew 20% in the first quarter, while growth in the United States, Canada, Brazil, United Kingdom, Italy and Singapore was 30% higher. Card-present spending, which is up 4%, has not slowed the growth of CNP payments, Visa said, suggesting that the return of card-present payments as the economy recovers has not. no negative impact on the growth of e-commerce.
“The pandemic has not changed our strategy and has reinforced the belief that the habits of the pandemic will last,” Kelly said.
Cash withdrawals through Visa debit cards at ATMs fell 7% in the quarter, while overall debit card use rose 16%. This 20% gap is double the historical normal and constant gap globally, which Kelly attributed to the overall decline in cash usage in most markets.
These e-commerce figures exclude travel, although there has been some recovery. Travel from the United States to Latin America accounts for 90% of pre-pandemic travel in March, while travel from all markets to the United States is still down 70% from March 2019, with Visa again using 2019 figures for comparison for some parameters. due to the sharp drop in 2020. Travel within and outside Europe is down 50% from 2019. Visa said travel bubbles in Asia have led to an increase in travel costs. reservations, and news that U.S. residents vaccinated may soon be able to travel to Europe boosted bookings.
“Travel will take time to recover. Personal travel will come back, which is good for Visa since the vast majority of our travel business is consumer,” Kelly said, adding that Visa also had a strong co-business. travel brand.
The trend of e-commerce is also noticeable in cross-border flows, which shifted during the pandemic, from one-third of cross-border payments passing through e-commerce channels before the pandemic, to two-thirds of indexed cross-border payments. to online shopping currently. Visa attributed this to the growth of e-commerce as well as pent-up demand which will lead to an additional boost when returning from travel.
“Millions of new ecommerce buyers are coming in that weren’t there before,” Kelly said. “It’s not going the other way. People who are concerned about cash and the convenience of online shopping will continue to do so.”