Visa Inc at Goldman Sachs Communacopia & Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Will Nance - Goldman Sachs - Analyst : Awesome. So maybe to kick things off, we've got to start a little bit more big picture in terms of what you're kind of seeing out there. The focus on July spending trends at earnings was on -- more of the kind of timing-related factors. I think as we got through the summer, the focus shifted more towards employment trends and some of the cross currents in the macro. How are you kind of feeling about the overall environment? Have some of those timing related things in July kind of faded?

Question: Will Nance - Goldman Sachs - Analyst : That's great. Great to hear the consistency, great to hear about the rebound. I wanted to maybe dig in on some more recent trends in the US. So the Fed is on the verge of cutting rates. The narrative has been that they need to respond more swiftly now to what appears to be some mild softening in employment trends, potential stresses on the low-income consumer. When you look at things like the weakness in ticket sizes, lower consumer confidence, what do those things say about how the consumer is dealing with the economic backdrop?

Question: Will Nance - Goldman Sachs - Analyst : Yes. Makes sense. And then just finally, I wanted to discuss maybe some of the trends we've seen out of APAC. I think it's been fairly well telegraphed some of the softening trends, particularly in Mainland China. You tweaked your volume expectations early in the year as a function of what you're seeing there. Any updates on just APAC trends more broadly?

Question: Will Nance - Goldman Sachs - Analyst : Okay. So maybe let's zoom out a bit from some of the recent trends. There's been a cyclical versus secular debate going on in the payments industry around US spending growth and specifically, US carded growth. Notably, at a time when there's been a lot of normalization and spending patterns in the wake of COVID in the wake of elevated inflation, what do you think is the growth algorithm for US card spend going forward? And where do you see the greatest opportunity for carded penetration to increase?

Question: Will Nance - Goldman Sachs - Analyst : So given what you're expecting in terms of spending growth and cash penetration for the next several years, you just talked about the trends in the US. But if you broaden it out to the entire world, do you still see runway for Visa to be a double-digit top line grower for years into the future? Daniel Perlin Yeah. I mean, we like -- we've talked consistently about kind of the components of our growth story. And we like those components. It's consumer payments, it's value-added services, and it's new flows. I talked a little bit about consumer payments in the context of the US already, which I said was a quarter of the $20 trillion. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 11, 2024 / 5:10PM, V.N - Visa Inc at Goldman Sachs Communacopia & Technology Conference So maybe the simple way to think about that globally is you sort of multiply that by four and take all the things that I said about things that we do in the US, but then also add on to the fact that there's many markets in Africa, in Asia, in the Middle East, and Latin America, where cash is still predominantly the bigger portion of the of the total PCE. And so there's a -- they're much earlier in the cash digitization life cycle. And so globally, we feel really good about the consumer payments opportunity around the world in the US and outside the other markets. So then there's new -- there's our value-added services and new flows opportunities. And both those businesses have continued to grow really healthy. We got good momentum. I think we have good strategic focus and good execution along all of it. For value-added services, Q3 $2.3 billion, growing 20%-plus, again, for the -- every quarter this year, we've grown north of 20%. And so there's durable consistent growth in a business that's -- $2.2 billion was 25% of our business in Q3. So we feel really good about that. We grow that business in a way that helps our clients be successful, helps our clients protect their business. And when they do that, and when we do that well, it creates a tailwind for the whole ecosystem, which then, in turn, it's good for Visa as well. And then new flows. New flows for us is maybe the biggest addressable market opportunity. It's early days, but it's really one of the biggest. We've sized that at $200 trillion. And a $200 trillion of addressable opportunity, that's 10x the consumer payment opportunity that I just talked about. My partner and friend, Chris Newkirk, who runs -- who's the leader of our new flows business at Visa, he likes to point out that $200 trillion, that's 44 times the total US federal tax income in a year. And so think about all the tax revenues collected in the US in a year and times that by like 44%. And that's the size of the opportunity that new flows represents. If I just take one sliver of that. So the most mature piece of that opportunity is our carded B2B business in DCS, that's $20 trillion as mark. So it's 10% of the total opportunity. And that $20 trillion opportunity in 2003, our payment volume was $1.6 trillion of that. So it's less than 10% of a sliver of that is less than 10% of the whole opportunity. And so when we look forward, obviously, like I said, it's early days, and there's lots of work to do, but the greenfield opportunity here in new flows is really exciting. And so again, looking at consumer payments, this is the business we've been in for many years, and we know how to operate there and continue to grow value-added services, execution, the size, the breadth, the momentum and the opportunity of new flows. When you put all that together, you could see sort of the reason why I'm bullish about our growth.

Question: Will Nance - Goldman Sachs - Analyst : Got it. Appreciate that. I know it's a nuance, but it's important to appreciate you going through that. Okay. Let's switch gears to something much more exciting, value-added services. Big picture, can we talk higher level about strategy around the importance of value-added services to the long-term story. So you've made for so long, Visa has made so much money with this very simple high-margin way of taking a very small percentage of a very large and growing number how do you think the mix shift of the business towards value-added services and away from the base card network means for the business, how does that change the economics and the way that the participants in the ecosystem derive value from the network?

Question: Will Nance - Goldman Sachs - Analyst : Yes. So these have become a much larger piece of the story over time, over $8 billion run rate business annually, growing over 20%, as you mentioned earlier. Since we're asking more kind of CFO-type questions. Could you kind of help us break down and think about that $8 billion. What are some of the main components in the business today? And how do we kind of see that from flowing through the P&L as we see it externally?

Question: Will Nance - Goldman Sachs - Analyst : Got it. Okay. Maybe we can pivot to new flows. Still early innings here. I know building scaled networks takes time. What are the largest opportunities that you are focused on? And what are some of the biggest challenges that you face in kind of adding nontraditional payment flows to the networks?

Question: Will Nance - Goldman Sachs - Analyst : Got it. So we're about four years post the start of the pandemic. I think investors are still weighing the cadence of sort of post COVID cross-border normalization in particular. I think normalization of travel has been in focus. With the business running at sort of mid-teens, you just gave us an update of where you're running so far in the third quarter. How are you thinking about the trajectory of cross-border volume growth going forward and the mix between e-commerce and travel?

Question: Will Nance - Goldman Sachs - Analyst : Got it. We're about to hit time here. I wanted to just maybe turn over to incentives. These have been hanging in the 27% to 28% range as a percentage of gross revenue for a while now. We're a little elevated in the first part of the fiscal year. You're calling for that to kind of slow in terms of the

Question: Will Nance - Goldman Sachs - Analyst : Great. Well, at that, we're out of time. Thank you so much for joining us today. Really appreciate the discussion.