Welcome to Visa's Fiscal Second Quarter 2021 Earnings Conference Call. Today's conference is being recorded.
I would now
like to turn the conference over to your host from Investor Relations, Ms. Jennifer Comeaux To Mr. Mike Milevich, Ms. Komo, you may now begin.
Thanks, Jordan. Good afternoon, everyone, and welcome to Visa's fiscal 2nd quarter 2020 1 Earnings. Joining us today are Al Kelly, Visa's Chairman and Chief Executive Officer and Sasanth Prabhu, Visa's Vice Chairman and Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at www.investor.visa.com. A replay will be archived on our site for 30 days.
A slide deck containing financial and statistical highlights has been posted on our IR website. For non GAAP financial information disclosed in this call, the related GAAP measures and reconciliation are available in today's earnings release. And with that, let me turn the call over to Al.
Jennifer, thank you and congrats on your 2nd anniversary of Visa. Good afternoon, everyone, and thanks for joining us today. I'm going to provide a few quick stats on the quarter and then share my thoughts on what's ahead as the world The recovery is going to take many different shapes and the timing will differ around the world based on vaccination rollouts and the easing of Restrictions. But we believe we're at the beginning of the end of the pandemic and the recovery is well underway at least in a number of markets. 1st, Q2 results.
Revenue declined 2% year over year, but would be slightly positive at 20 basis points if service revenues were recognized on current quarter payments volume. Non GAAP EPS It was $1.38 a decrease of 1%. When looking at volumes and transactions growth, keep in mind that we're now lapping the start of the pandemic As growth rates are now less indicative of performance and the business trajectory, we're going to also provide some metrics compared to 2019 on a constant dollar basis. So payments volume grew 11%, improving 7 points from Q1 and reached 116% of 2019, which is up 3 points from Q1. From Q1 and is 75% of 2019 levels, 3 points better than Q1.
Process transactions growth of 8% improved 4 points from Q1 And represented 116% of 2019, which is consistent with the Q1. This quarter, we continued to make progress across our 3 growth levers. 1st, consumer payments. In Asia Pacific, we renewed our partnership With Rakuten Card, a subsidiary of Rakuten Group, the largest e commerce marketplace in Japan. In Korea, these are one of the first hotel chain co brand in the country with Marriott and Shinhan Card, Korea's Largest issuer.
In China, we renewed our credit portfolios with CITIC Bank and Agricultural Bank of China, 2 of the top And largest banks in the country. Also on the co brand front in Brazil, Samsung in partnership with Banco Itau We'll issue their inaugural co brand in Latin America with Visa targeting Samsung's 57,000,000 Brazilian users. Our relationship to include 4,000,000 debit cards in addition to our existing credit relationship. In Switzerland, we've gained significant traction in growing Visa debit. Since this January of 2019, we have signed 13 new debit deals, representing an incremental $2,600,000 cause.
In new flows, Visa Direct transactions grew almost 60% in the Q2. We're pleased to have clients going live now on with Visa Direct Payouts, which offers a flexible set of APIs for Visa Partners globally Goldman Sachs Transaction Banking, Standard Chartered Bank Hong Kong and Kit Global are among the first Start utilizing Visa Direct payouts for B2C, cross border, P2P and B2 small b payouts. A few additional highlights on specific Visa Direct use cases include that in the marketplace in marketplace payouts, Airbnb, which now has 4,000,000 hosts Globally, we'll offer host payouts using Visa Direct in select markets. In cross border P2P, Remitly, a Top digital remittance fintech has renewed its Visa Direct relationship building upon the past 2 years of partnership. And Model Bank in Ukraine enabled cross border P2P to their 1,700,000 cardholders.
In the payroll category, the earned wage access use case continues to grow with 25 session. Earn wage access platforms now offering Visa Direct for fast and convenient access to employee earnings. G2C continues to grow as well. Global Blue, a leading tax free shopping solutions company covering 52 countries $35,000,000 tax free transactions in 2019 is utilizing Visa Direct to distribute tax refund payments across Europe. In fact, we supported the U.
S. Government disbursements of economic impact payments to nearly 13,000,000 Visa prepaid credentials Let me highlight a couple of examples. For Cybersource, Planet, a European acquirer and payment services provider that delivers payment Processing and currency conversion solutions to over 600,000 merchants. We'll be partnering with Cybersource to simplify payments across the hospitality, Food and beverage and retail sectors. KeyBank, a top U.
S. Acquirer will begin to offer CyberSource to its merchant clients. Fiscal year to date. Our other risk fraud and authentication capabilities grew as well. For example, we've now crossed the 2,000,000,000 token milestone, up from 1,400,000,000 tokens just in September.
One of our key authentication capabilities, Cardinal Commerce, grew revenue almost 40 almost 50% year over year this quarter by rapidly expanding beyond its U. S. Origins. In the next year, we plan to more than double our clients in Europe and Central Europe and at least in Africa. So while the pandemic has disrupted the world, it has not changed our strategy.
In fact, it has reinforced our belief that our three areas of focus will deliver Robust growth for years to come. As we look ahead with COVID recovery underway, a few key important realities, Mainly the way consumers feel about e commerce, cash and travel will particularly impact Visa. The pandemic has accelerated e commerce. Global CardNet Present credentials, excluding travel, grew over 20% in the quarter In the United States, Canada, Brazil, the United Kingdom, Italy, Germany, India and Singapore over the last 3 quarters. And in global cross border excluding Inter Europe, it's averaged 20% growth.
We believe this ship is likely to persist as the convenience of e commerce is indisputable and its growth continues to be robust even as card present In March, in the United States, as some states loosen transactions, card present As a percentage of 2019 spend improved 11 points versus February, while at the same time card not present Excluding travel, Phil expanded 8 points. If you look at that in Japan, Where restrictions were also lifted, card present improved 6 points and card not present excluding travel still improved 4 points in that same Between March February. The pandemic has accelerated the digitization of cash and we see the impact in debit and tap to pay. When we look at cash usage in the last 12 months, just on the Visa brand, such as with ATM withdrawals, we see that global debit cash volumes have decreased by 7% while debit payments growth payments volume has grown 16% both on a constant dollar basis. This 20 point gap is more than double the historic gap in growth rates and relatively consistent globally, demonstrating cash digitization in both mature and emerging regions.
Overall, Visa tap to pay transactions have grown over 30% year over year in March. In Europe, less than a year since contactless limits increased across the region, Visa has seen 1,000,000,000 Additional touch free transactions. In the United States, 1 in 10 face to face Visa transactions are now done with a tap, More than a 2 times increase since the beginning of the pandemic. In New York City, the penetration is nearly 30%, Demonstrating the potential of focused issuance and merchant enablement along with transit. In the past 3 years alone, we've enabled nearly 250 transit systems globally and we can see based on our research That enabling tap to pay on transit can bring more than a 15% lift in transactions from merchants in the surrounding neighborhoods.
The decline in travel is temporary and we're starting to see some early signs of recovery. Cross border travel related spending Including Inter Europe improved from Q1 driven by 2 factors. First, those who are abroad are spending more, likely because of fewer restrictions. This quarter, essentially all the cross border travel spend improvement was driven by higher spend per card rather than more active cause. 2nd, we continue to see strength from countries with open border.
For example, U. S. To Mexico volume was almost 20% above 2019 levels for the quarter. We also saw several Top corridors between the U. S.
And Latin America improved by more than 10 points through the quarter versus 2019. Travel will certainly take more time to recover than other sectors, but we believe personal travel in particular We'll come back and that's good for Visa for 2 primary reasons. 1, because the vast majority of the travel we capture on our credentials is consumer And 2, we are the global leader in travel co brands. With the backdrop of travel, cash, digitization and e commerce, Let's briefly explore the future potential of our 3 growth levers. In Consumer Payments, in the last 2 years, We've grown our credentials to 3,600,000,000 and physical merchant locations to over 70,000,000, up 7% And 34%, respectively.
And remember that our merchant locations only count our partners like PayPal and Square each as 1. That said, there's ample opportunity as we focus on specific regions and partners. Looking at regions, even with our leading position in both emerging and developed markets, our market driven approach to growing credentials is succeeding and Europe is an excellent example. 25,000,000 additional credentials across 50 clients in the next few years. Let me start a couple of recent partnerships That would show this rapid growth.
Since FinTech Revolut signed a global agreement in September 2019, Selecting Visa as their lead issuing partner, they've increased the number of cards and payments volume by more than 200% through December 2020. Crypto.com has launched Visa cards in 39 markets Across their 10,000,000 user base since 2018. And just this quarter, they signed a global growth agreement with us Covering 12 markets with plans to expand to even more. There are so many more partners issuing credentials and building acceptance. For example, wallet providers represent the potential for another 2,000,000,000 credentials and 70,000,000,000 acceptance locations Over time and the pace of growth here is fast.
Go Money in Russia recently signed on to issue Visa credentials And has achieved more than a 1000000 credentials in just 5 months. In fiscal Q2 last year, we announced that STC Pay, Saudi Arabia's largest wireless operator with 25,000,000 subscribers plan to embed credentials in their STC Pay wallet. To date, more than a 1000000 Visa credentials have been issued. Our ongoing partnership with Paytm has enabled us to add more than 250,000 contactless enabled acceptance locations at new to card merchants. While the number of Visa credentials issued by Paytm has more than doubled since September of 2020, reaching a total of 3,000,000.
Around the world, TaptoPhone has also been a significant acceptance effort. Today, more than 35 markets offer it with 13 more being added this year. Wallets and Capstone are just a couple of next gen partners and capabilities that we believe will help us bring the 1,700,000,000 Unbanked into the financial mainstream, growing the pie for digital payments. The growth will come from a regional approach And openness to partnering with traditional and new players and by developing new ways to engage the ecosystem, all rooted in our strong brand Given by the pandemic, our strategies against $120,000,000,000 opportunity represent near, medium and longer term growth for Visa. In the near term, we're focused on supporting businesses small and large.
To date, we've helped 12,000,000 micro and small businesses to digitize And grow against our $50,000,000 global goal. And we continue to focus on card solutions. Visa has about 20% more Cross border B2B and we are continuing to head banks to reach scale. In the longer term, we're working with key partners to solve the challenges of Accounts payable and accounts receivable. For the other $65,000,000,000,000 of new flows, Visa Direct Has 5 clear competitive advantages that we believe will continue to drive growth.
The first one is reach. In Visa Direct, the endpoints are Our credentials and bank accounts and we can reach 5,000,000,000 endpoints globally. This is unrivaled by anyone else. 2nd, operating scale. Visa Direct is built upon the operating scale of VisaNet and leverages its real time authorization, clearing and settlement capabilities.
This means we can deliver industry leading solutions with low marginal cost. 3rd is commitment to a network of network strategy. Visa Direct is truly multi rail, which provides clients flexibility and efficiency. Just in the last year, it has utilized 16 card That is more connections, coverage and capability than we've seen from any other network offering. 4th, Investments in our capabilities.
We have invested in leading technology stack for both payouts and account funding capabilities. For example, our accounts funding capabilities include unique codes to help clients manage risk, compliance and authorizations for money movement transactions With APIs to streamline implementation for apps, neobanks and fintechs. To our knowledge, no one else has this capability. 5th is commercialization. We've now enabled over 20 use cases with more than 4 50 new program launches.
And we will continue to expand by 1, growing existing use cases like marketplaces and cross border P2P 2, bringing existing use cases like P2P, payroll and earned wage access to other new markets and 3, developing new use cases such as tipping. Visa Direct also brings a network effect in terms of benefits to Visa. For every dollar received on a debit card through Visa Direct, About half of it is then used for debit card purchases. Furthermore, cardholders who receive payments through Visa Direct then spend up to 50% more than those who do not. So Visa Direct is actually not only helping new flows, but it is helping consumer payments.
Lastly, let's turn to value added services, which are being utilized by our clients more and more. In fiscal 2020, more than 60% of our clients used at least 5 value added services from Visa and more than 30% of our clients session. Our toolbox is large with hands on consulting, sophisticated and flexible technology platforms, valuable data and insight and card benefits, all which will improve with the recovery. We also have 3 platform businesses At scale very profitably, fiber source, issuer processing and risk identity and authentication. With the recovery and the continued strength in e commerce and debit, these capabilities are well aligned with trends towards digitization.
Let me just speak about CyberSource as an example. Our strategy to partner with acquirers creates a leveraged opportunity for future growth, both transaction growth And cross selling value added services. We mentioned last year that Japanese acquirer SMCC was going to start offering CyberSource capabilities to its merchant customers. Starting with 1 nationwide convenience store chain and rapidly expanding to over 30,000 merchants, SMCC is now delivering next generation acquiring solutions to Japanese merchants and cyber sources Processing over 500,000 e commerce and in person transactions per day. With all this opportunity across the three levers, We are investing heavily to drive future growth in several areas, including simple compelling user experiences.
Examples include tap to pay, tap to phone and click to Capabilities to scale new flows and value added services. Examples include new Visa Direct use cases and advancing fraud and identity solutions. Such as crypto APIs for banks and digital currency settlements. So to quote, Visa has weathered the COVID storm and is emerging from the pandemic even There's significant opportunity ahead and Visa's existing present scale and capabilities position us well With that, now let me turn it over to Bhassat for more colors on our financials and what we see ahead. Bhassat, over to you.
Thank you, Al. Good afternoon, everyone. Our fiscal second quarter results were stronger than we expected, GAAP EPS was flat to last year and non GAAP EPS declined 1%, helped by a lower tax rate. Exchange ratio increased net revenue by 0.5 point, but lower EPS by 0.5 point due to currency related benefits in the Q2 last year. As Al mentioned, as we lap the most significant COVID-nineteen impacts starting in March 2020, Year over year growth rates are not the best indicator of the underlying trend.
To help you better assess both the magnitude And the trajectory of the recovery so far, we also provided growth rates for key performance metrics relative to fiscal year 'nineteen. In constant dollars, Global Payments volume year over year growth was over 11%, fueled by continued strength in debit as well as improving credit spending. Compared to the corresponding quarter in 2019, global payments volume was 16% higher, A 3 point acceleration from the Q1. Excluding China, total payments volume growth was 13% 20% higher than 2019 as Chinese domestic volumes continue to be impacted by dual branded card conversions, which have minimal revenue impact. U.
S. Payments volume growth was 18% and up 24% from 2019, Managing from economic impact payments in early January mid March, as well as the relaxing of COVID related restrictions in many states, Partially offset by bad weather lowering spending in mid February. Even after adjusting for economic impact payments, U. S. Payments volumes have bounced back to the pre COVID trend line.
Debit growth accelerated 13 points to 34%, up 44% from 2019 boosted by the 2 economic impact payments in this quarter. Credit growth was 2%, up 6% from 2019. The credit improvement was helped by increases in retail, Travel, restaurant and entertainment spending, mostly starting in early March, restrictions were relaxed in many states. It is important to note that credit has improved without debit slowing, pointing to accelerated cash displacement. Card not present volume excluding travel continued to grow over 30% in the quarter and was 55% above 2019 levels, primarily driven by retail spend.
The most notable sign of a domestic recovery was card presence spend growing 4%, which Which is up 3% over 2019, an 8 point acceleration from the Q1, led by retail and restaurant spending. Improving cart presence spending did not slow e commerce indicating that e commerce strength is likely to continue Even if card present spend recovers. International constant dollar payments volume growth 6%, up 9% from 2019. A few regional highlights. CEMEA remains our fastest growing region, Growing 26%, up 50% from 2019 levels.
The easing of COVID related restrictions, particularly in the Middle East and Russia, as well as client wins drove the robust growth. Latin America grew 23%, up 40% from 2019 With consistently strong performance across the region mostly fuel accelerating e commerce option and usage as well as client wins. Europe grew 2%, up 8% from 2019, but decelerated from the last quarter. With significant COVID restrictions in place, particularly the UK, France, Italy and Germany. In Asia Pacific, excluding China, 2nd quarter spending grew 4%, up 8% from 2019.
Performance across the region varied based on the level of COVID restrictions with markets like New Zealand and Singapore growing strongly, while markets like Hong Kong and Japan, which had restrictions for most of the quarter, were weaker. Global process transaction growth was 8%, up 16% from 2019, Lagging volume growth due to higher
revenue growth and revenue growth
continues to perform well. The transaction is growing all over the world and globally this quarter consistent with the Q1. The cross border volume recovery continued Despite most borders remaining completely closed, constant dollar cross border volume in transactions within Europe declined 21% in the 2nd quarter and was at 75% of 2019 volumes. Looking at the trajectory versus 2019, This was a 3 point improvement from the Q1. We're seeing a typical seasonal uptick in March and into April, which is a positive sign as we look ahead to the summer.
Cards not present excluding travel volume continued to be very strong, growing 28% year over year, Cross border travel related spend declined 55% year over year and was at 39% of 2019 levels. Carc residence spend as a percentage of 2019 expanded 3 points versus the Q1. Some color on the state of cross border travel as we approach the important summer travel season. Travel to and from the U. S.
And Latin America is the best performing corridor, almost at 90% of 2019 levels by March. Health by U. S. Travel, travel into Latin America in general has recovered to over 80% of 2019. Travel between Russia and neighboring countries as well as travel in and out of the Gulf states has helped EMEA cross border travel to recover 2 thirds of its pre COVID volume.
Cross border travel in and out of Asian countries remains very depressed, down almost 75% versus 2019 And flatlining for the past 6 months. Traveling to the U. S, an important corridor for us, was also down 70% versus 2019 in March, but has been recovering slowly. With significant U. S.-Canada border restrictions, Travel is still down about 80% relative to 2019 in this corridor.
As Europe has increased COVID restrictions, Shavu's in and out of Europe remained hard hit, down over 60% versus 2019 in March. Moving now to a quick review of 2nd quarter financial results. Net revenue declined 2%. Had we recognized service revenues on current quarter payments volume, net revenue growth would have been slightly positive. Service revenues grew 8%, helped by small pricing modifications.
Data processing grew 11% with strong value added services growth Continuing to be partially offset by the mix shift away from higher yielding cross border transactions. International transaction revenue were down 19%, in line with nominal cross border volumes excluding intra Europe. Other revenues were flat, Negatively impacted by low usage of travel related card benefits and client marketing projects pushed to later in the year, While advisory services continue to grow strongly. In total, value added services revenue continued to perform well growing 14% with strong growth in CyberSource Security and Identity Solutions. This quarter we reclassified some prior period Travel related card benefits as value added services and as such our previously reported first quarter revenue growth Would have been similar to the 2nd quarter on a comparable basis.
Prime incentives were 25.8 percent of gross revenues, Lower than expected due to better than cross border volume, lifting gross revenue and lower Europe and Asia Pacific volumes benefiting client incentives. Non GAAP operating expenses grew 3% in line with expectations. We recorded gains from our equity investments Of $156,000,000 excluding investment gains, non GAAP non operating expense was $109,000,000 for the fiscal second quarter, Below our expectations, primarily due to 2 benefits, one of which is offset in personnel expenses and the other is related to the completion of certain tax audits. These completed audits also benefited our GAAP and non GAAP tax rate with a non GAAP tax rate lower than expected at 16.8%. GAAP and non GAAP EPS was $1.38 We bought 8,300,000 shares of Class A common stock at an average price of $208.51 for $1,700,000,000 this quarter.
Including our quarterly dividend per share, We returned approximately $2,400,000,000 of capital to shareholders in the quarter. Turning from the past to the future, I'll start with key business driver trends through April 21. As you look at these weekly trends, keep in mind 3 key factors. 1, year over year growth is lapping the 2020 lows in many cases 2, The timing of Easter is impactful. 3, in the U.
S, there are peaks in debit spending when economic impact payments are deposited in people's bank accounts. Through April 21, U. S. Payments volume growth was 64% with U. S.
Debit growing 67% and credit up 61%. Compared to 2019, U. S. Payments volume, debit and credit were up 29%, 51% and 9%, respectively, all consistent with the March trend. Looking outside the U.
S, Trends versus 2019 are relatively stable. Notable exceptions include the UK improving as restrictions relaxed, while India is slowing as restrictions increase. Process transaction growth was 58%, up 16% from 2019, which is consistent with the Q2. Cross border volume excluding transactions within Europe on a constant dollar basis grew 63% And was at 78% of 2019, which is 3 points above the 2nd quarter and 1 point above March. As we look ahead, there are several positive cross border travel indicators to highlight.
Travel bubbles are being created. Australia, New Zealand is already in place with an immediate and substantial uptick in bookings. Hong Kong, Singapore is starting in late May with more likely. So far, all indications are that some popular tourist destinations in Southern Europe will be open for the summer and bookings are trending well. Just this week, it was announced that Europe's model will be open to vaccinated visitors from the U.
S. This summer. As the U. S. Vaccination program moves along fast, it is possible that travel to and from the U.
S. Will gather momentum into the summer. Airlines are adding capacity in anticipation. The trajectory of the cross border travel recovery remains the key metric to watch. We will be monitoring all leading indicators, easing of water related forward bookings as well as surveys of consumer intentions And we'll update you as we learn more.
As with previous quarters, accurate forecasting is difficult in this fast changing environment. Assuming stable to improving trends relative to FY 2019 continue, Q3 net revenue growth is expected to be in the high teens. The cross border travel recovery trajectory will be the key factor to watch. Client incentives as a percent of gross revenue I expect it to increase 1 to 1.5 points above the 2nd quarter level as client volumes grow over last year's low and service fees are recognized with a quarter lag. We plan to increase operating expenses in the mid teens in the 3rd quarter As we step up investments on marketing and key initiatives to capture the significant growth opportunities Al described.
We expect non operating expense to be around $130,000,000 consistent with the Q2, excluding the non recurring impacts I mentioned earlier. Our tax rate expectations are 19% to 19.5%, again consistent with last quarter's expectations Accelerated growth post COVID world. A few points to highlight. Our net revenue and profits are at Fiscal year 'nineteen levels, even as a rebound in travel, especially cross border travel, still remains ahead of us after the world is vaccinated and borders reopen. There is significant pent up demand for travel, in particular personal travel.
Large swaths of new consumers worldwide have been introduced to the ease, Convenience and security that digital payments can offer. This is evidenced by the significant global growth in debit as consumers abandon cash And an accelerated pace. These are habits we believe will not only stick, but also continue to grow Healthline initiatives such as Step 2 Pay. Consumers, merchants and governments globally have recognized the value of e commerce through the pandemic. Governments are upgrading their digital infrastructure, Merchants are significantly enhancing the e commerce capabilities and more consumers are turning to e commerce more categories and also cross border.
We expect these trends will only accelerate. Within our new flows business, Visa Direct has continued to grow at extraordinary rates. The pandemic has expanded adoption of use cases in B2P, B2C and G2C. Many use cases and markets are just starting to scale. B2B remains a huge opportunity and we are committed to our 3 pronged approach to drive growth, card based, cross border and large enterprise accounts receivable and payables with many capabilities scaling or launching in the near future.
Our value added services have sustained high growth despite lower usage of travel related services. Debit and e commerce acceleration Have driven growth in our debit processing, security and identity and cyber source businesses and a recovery in travel related services lies ahead. As a result, we see acceleration across all three vectors of growth in consumer payments, new flows and value added services. As Al indicated, we're investing in the strategies and capabilities required to capture these growth opportunities. With that, I'll hand it back to Mike for the Q and A session.
Thank you, Vincent. Jordan, we're now ready to take questions.
Our first question is from Timothy Chiodo from Credit Suisse. Your line is open.
Thanks a lot I wanted to touch on the evolving mix of the cross border business. So within cross border, you called out a couple Use cases for Visa Direct. Earlier you touched on remittances, you touched on marketplace payouts, but separately we'd add to that list some of the new flows within cross border So maybe you could just comment a little bit on the prospects for those new areas of cross border to come into the mix and maybe be a more meaningful portion over the next, Call it 3 or 5 years.
Well, I think as we grow out our capabilities and we see its recovery in the pandemic, I think the Visa payouts capability we just put in place, which basically brings together what was Earthport and Visa Direct and gives a Single point of connection is going to facilitate many more use cases and make it very, very easy for people to Send money cross border and that's kind of the high volume, lower value types of transactions. I think we are Continuing to make progress in connecting more banks around the world to B2B Connect. And as we We need to grow out of that network over the next few years. I see us as having great capability to drive cross border, B2B, high value, lower value types of transactions. So I think the combination Of our capabilities, what has happened in terms of continued adoption of digitization And the capabilities that we have built and the use cases that we are Working with today and anticipate adding to the mix over time, I think this is going to become an increasingly important and growing part of our business.
A couple of things to add. When we before we got into the pandemic, 2 thirds of our cross border business Travel related, 1 third was e commerce related. Today, in the second quarter, 2 thirds of our business was cross border e commerce, 1 third was travel. There are 2 things. 1, how much our cross border e commerce business has grown and the second, how much recovery is left In our cross border travel business, because as I said, most of our cross border travel is personal travel and there's a substantial amount For personal travel that is going to come back once borders reopen.
So the traditional cross e commerce is an area of significant growth we've seen that as people move online, they become somewhat less sensitive to where the product is shipped from And there's just a lot more cross mod e commerce. The other use case that holds a lot of potential is to the extent that crypto related Transactions become significant and we're enabling as you know a vast number of them. One use case that is particularly useful in either stablecoin or Bitcoin type scenarios It's cross border and that is another new use case that could have a lot of potential in the long term.
Thanks a lot, Bassan. Yes, that's exactly what I was trying to The mix has certainly flipped more e comm and there are some new flows that are coming in to keep the travel portion lower than it was pre COVID. So thank you so much for taking the question. Next
question please, Shannon.
Next question comes from Darrin Peller from Wolfe Research. Your line is
Hey, thanks guys. Nice job. When we look at the slide, the index to 2019 was really helpful, showing 16% up From 2019 levels, I mean there's a lot of considerations we're getting asked about including stimulus and higher savings rates, but clearly also structural Just changes in the industry, which some of which we just touched on e comm, but just more going on to debit cards faster across the whole industry. How do you parse out what you see as structurally sustainable? E comm is a part you mentioned, but even beyond that, just more on maybe small ticket versus What was maybe stimulus driven or near term?
Thanks guys.
I'll start, Darren. First of all, I think We definitely see millions of new people coming into the e com shoppers who weren't there And I don't think they're going to turn backward at all. So I think that certainly remains. Obviously, as we get out of the pandemic, the stimulus types of money will dry up and that will You'll go away. I think the people being concerned about cash and much more comfortable shopping online, The combination of that will continue.
I think that will also see structurally much more tapped pay as people find that to be a more helpful Tivity sticking as well. I think that in general, we had Before the pandemic, there was very little separation in growth rates between debit and credit. In any given month or quarter, they would kind of grow Within a percentage point of each other, we saw our incredible separation during the pandemic as much as 40 points of differential in terms of growth. We're now seeing in this quarter credit come back a bit and start to drift into A positive territory, but I think that at least for the foreseeable future and maybe for longer I think you're going to see debit continue to grow above credit, although as travel comes back, that should certainly I'll bounce back credit buyers, particularly since most of the travel co brand cards and many of the actual travelers tend to use credit cards.
I mean, a couple of other things to add there is, as you know, debit has become the engine for cash digitization. And What we see in this pandemic, especially as it has gone on for quite a while, is there's often a hurdle in getting people to change habits. So people are used to using cash, getting them to use digital forms of payment, that takes some time. This pandemic has caused A range of changes in behavior because there was no choice, whether it's in emerging markets, where there was a greater propensity to use cash or certain cultures. You've heard of Germany and Japan having been very cash based economies for a very long time or habits in terms of people using cash for certain categories Like food and drug, that's changing or people using more cash at the physical point of sale, As Al said, with the cash dirty risk, staff to pay, making payments easy at the physical point of sale, We're seeing a substantial shift towards cash digitization given the physical point of sale.
And the point you said about Smaller and smaller transactions that used to be cash moving digital, again, tap to pay is a big engine for that. And the trajectory of tap To pay remains very significant and we are probably within a year of coming to the point where the U. S. Will be in takeoff ways
Our next question comes from David Togut from Evercore ISI. Your line is open.
Thank you very much. Just bridging to Darren's question On structural changes, when you look at the heightened shift to e commerce, which you've indicated will likely accelerate even post COVID, can you talk about Your funding mix of e commerce transactions, debit, fee credit, specifically how you expect that to evolve with economic Reopening, would you expect to lean a little bit more heavily on their credit cards as the economy rebounds or Does debit likely remain the primary funding of e commerce transactions?
Well, David, I think one of The incredible stories of the pandemic was that debit had become The cash of the e commerce world and people are doing much more everyday shopping post the pandemic than they did pre the pandemic. The amount of food orders that are placed and take out orders that are placed, buying normal household staples That might have been many of them were in person, the vast majority, and maybe even some of them were in cash. But we're just seeing the type of transaction that typically goes along with Debit is everyday spend. And so what we're seeing as a real structural change is everyday spend has moved from in person to e commerce in a big way. I do think though that credit will make a rebound, particularly as Some of the larger discretionary spending comes back in as the affluent get back into Thank you.
Travel reservations as the online travel agency business starts to grow. I think that There'll be a closing of the gap between credit debit growth and credit growth. But again, as I said to Darren, I'm not sure that we get back to Those 2 different card platforms growing at the same level going forward. I think We certainly closed the gap, but I think at least as far out as I'm looking right now, debit will continue to outpace the growth of credit.
Thank you very much.
Thank you.
Our next question comes from Tien Tsin Huang from JPMorgan. Your line is open.
Hey, thanks so much. I know you gave a lot of volume growth. It's a good detail here. But I wanted to ask maybe differently about credential growth, Building on the last couple of answers here, it seems like everyone is trying to bank their users by giving them cards and there's a lot of new use cases around virtual cards. So I'm wondering, either for Zant or Al, if you're thinking about credential growth and you compare that to 2019, are you thinking about No potential for issuance or your pipeline for new cars that might be coming out globally.
How does that measure today if you want to qualify that? Is it much larger than what you would have expected, let's say, Pre pandemic?
Well, I think the Tien Tsin, first of all, good to hear from you. I think that The pandemic has interrupted a little bit a real bolstering of credentials that was driven by A combination of marketplace platforms, wallets, neobanks, etcetera. I cited a number of examples in my remarks about the fact that we think that there's upwards of 2,000,000,000 More credentials out there from a lot of those types of players. And we've seen I do it by building partnerships with numbers of Fintechs over the course of the last year or 2, Tremendous amount of opportunity to grow Visa credentials either by having these players Become issuers and acquirers for us, which is a very big and important trend, particularly in Developing countries, but also just getting currencies and credentials into some of the existing wallets. But we believe there's an enormous opportunity to grow the number of credentials and it's something that We're certainly focused on, particularly as we talk to the FinTechs, the Wallace and the Neo banks around the world.
Our next question comes from Dan Dolev from Mizuho.
Can you talk a little bit you spoke a
little bit about Bitcoin earlier and about the use case for crypto and Bitcoin On cross border transactions, can you talk a little bit about more about that and kind of the progress you're making on settlement in stablecoins and The steps you've taken on Ethereum, I think there's a lot of interest out there in what you guys are doing there and how it's progressing. Thank you.
Well, thanks, Dan. This is an interesting subject. So let me give a little bit of background to talk about where we see the opportunities. So, first of all, there's 2 market segments as we see it. 1 is are the Bitcoin, the kind of which are primarily Assets held by people, they're not used much in a form of payments.
We kind of think of them as the digital gold. And then there are digital currencies, including Central Bank Digital Currencies and Stablecoins that are directly backed by existing fiat currencies and they're definitely Emerging as a payment option, and they're running on public blockchain, which is really in essence an additional So network much like an RTP or ACH might be. So our focus is on Five different opportunities that we see in this space. And I would say that this is space that we are leaning into in a very, very big way and I think You're extremely well positioned. The first opportunity is really at the core of what we do, which is enabling consumers to make a purchase of these currencies Or Bitcoin, and we're working hard with wallets and exchanges to just make sure we're facilitating acceptance and people's ability to use their Visa cards to buy.
And Prasad referenced that in his remarks that we saw some increase, some of the volume came for people Making these purchases on Visa cards. Secondly, the second opportunity is enabling digital currency cash outs to Fiat. So converting a digital currency to a fiat on a Visa credential, which then makes that Those funds available for shopping at any one
of the
$70,000,000 Visa Merchants and gives immediate utility to The digital currency. And we're the clear leader here. We've got over 35 digital currency platforms and wallets That's that have chosen to work with us, Coinbase, crypto.com, BlockFi, Fold, Bitpanda, just some examples. And so that's certainly a second big opportunity. Thirdly, is enabling financial institutions and FinTech partners To be able to have a crypto option for their customers.
So what we've done in this space is we've created APIs that enable financial institution customers to purchase Custody or even trade digital currencies held by Anchorage, which is the 1st federally chartered digital asset bank in the U. S. And we've done our 1st rollout with First Boulevard, which is a digital neo bank focused on building generational wealth for the Black community. So that's the 3rd opportunity just helping FIs and FinTechs have this crypto option for their customers. 4th one is settlement, which you started to reference.
We've upgraded our infrastructure to allow a financial solution to settle with Visa in a digital currency with Stablecoin starting with USDC. As you think you know, today we transact in 160 currencies every day and we settle every evening in 25 currencies. So we're going to now be able to support digital currencies as an additional settlement currency on our network. And on our end, we're going to settling In USDC, it's pretty similar to settling in U. S.
Dollars, but the mechanics of receiving these The fund is a bit different and requires some integration work with several crypto custodian like players like Anchorage. And then the 3rd area of opportunity is just working with central banks. Central bank digital currency is being explored in many nations. And I think it could end up being Prove to be quite valuable in countries where the infrastructure to distribute cash is either unavailable or limited. And one of the factors that These 1,700,000,000 people I referred to in my remarks that are outside the financial mainstream for being in the financial mainstream.
So We're talking to central banks about the criticality though of public private partnership and in particular the criticality of acceptance because For these, Central Bank Digital Currencies to have value, they're going to have to both be You're in the minds of consumers and that's something we have a long track record with and can help. And then secondly, obviously, they have to have Some form of utility. So Dan, that's a bit about how we're thinking about crypto with a We'll focus on digital currencies and those five opportunities.
Thank you, Al. Yes, it definitely sounds like you guys are at the
Ellis from MoffettNathanson. Your line is open.
Hi, good afternoon guys. Al, I'll leave your comments there that debit has Becoming the cash of online transactions. As an opening to ask about the online debit competitive environment, can you just highlight Describe what in your view from Visa's perspective are the advantages of Visa's signature debit products over alternatives, like account to account
Al, I think you're on mute. Sorry, Vincent. I was going to tread a little bit lightly there in In light of the DOJ case, but we feel very good about our Visa Debit business, we think we've got very, very,
very good
capabilities and we believe that The innovations that we have, the ability to stand behind customers in disputes And other cases that makes our products something that both consumers, merchants and issuers look to choose. And we will continue to invest in debit for a product that we hope people use both online and
Our next question comes from Dan Perlin from RBC Capital Markets. Your line is open.
Thanks and good evening everyone. I in keeping with the kind of structural change being that we all seem to be on tonight, All of these new products, I'm just wondering how the long term Growth rates of the company are going to be sustainable, if not accelerating from these kind of levels. You're using these indexes Back to 2019, but I'm thinking back even a couple of years. It's a much larger organization. You seem to have outlined
Many potential avenues of growth.
So I'm wondering, are you at a point now where there's just this pivot in the Business itself where it can structurally grow faster than maybe it over the next 5 to 10 years than maybe you did over the prior five The 10 years just given all of the new constituents that you're ultimately servicing these days?
Dan, We don't typically get into forecasting out that far, but obviously, you hopefully got a good sense in my remarks that We feel like we have pretty, very strong growth levers and we think each of them has tremendous gas left in the tank. We and our consumer payments, which has been our staple for years, Still has huge upside. Back to Tien Tsin's question about credential growth. We have tremendous amount of growth in credentials. We think there's tremendous amount of growth In Acceptance footprint, we think there's a tremendous amount of growth when we look at various geographies and we look at the 1,700,000,000 people That are outside the financial mainstream.
When we look at new flows, there's $185,000,000,000 of opportunity there. So We think we've got 2 big efforts going in both B2B and Visa Direct to take advantage And value added services is relatively new as well, but we've got to in terms of how we talk about it, We've had many value added services or capabilities or solutions for years, and they've always contributed well to A lot more revenue and higher revenue growth than we had in consumer payments through value added services. And so we think there's still Tremendous amount of upside. Baio, I commented about the fact that we're getting high usage from a lot of our But there's still a huge amount of room to grow with existing with clients that are already using value added services as well as clients that are not assuming as many of their value added services. So I look ahead and say the future is very, very bright And adding on top of that, a lot of what we've talked about in terms of digitization and the fact that We will come out of this pandemic and we'll start to see travel recover.
All of those are extremely good trends for us.
Our next question comes from Harshita Rawat From Bernstein, your line is open.
Hi, good afternoon. Thank you for taking my question. My question is on the growth in buy now, On a very long term time horizon, how do you see BNPL coexist during this quarter and service? And I know globally it's very small right now, but the growth rates are very impressive. Given your partnerships with P and P providers, your Stonemannuation, it's a growth year as it's growing opportunity from your perspective.
Thank
I don't know where installments is going to end up, but we are attacking that like we attack Crypto and other things and assuming that it's going to be successful and that we want to lean in heavily and be in the middle of it and be a driver What's going it's going to potentially happen. As you alluded to, we have both Our strategy, both working with 3rd party providers as well as offering our own Visa proprietary platform That would allow issuers to offer their own buy now pay later capability. And we see it as potentially having a Very, very good effect for us. I mean we could see we could work with a whole bunch of options. Virtual cards from Visa could be used for repayment.
A Visa card on file could be used for repayment. We could explore Visa Direct as a way for installments to be Paid off. And in many of those cases, if that's the case, what ends up happening is a single purchase Turned into a number of installments so that one transaction can end up being 3 to 4 or 5 payment transactions, which is certainly Very, very good for us. We also think that this is a space where we can sell value added services, data analytics to augment our providers, Underwriting, for example, or risk products to help some of the 3rd party providers. So There's other countries where it's nascent.
I again can't predict exactly where it's going to land, but we are to the degree that it takes off, We're going to be there to be part
of it. Great. Thanks, Al.
Our next Question comes from Jamie Friedman from Susquehanna. Your line is open.
Alan, in your prepared remarks, you talked about the Trajectory in the spend per card, I was hoping you could elaborate on that. How you see that Evolving, I would think with the recovery of travel, there would be more gas in the tank there as well. But anything you have on spend per card, Would appreciate it. Thank you.
Well, in my remarks, what I believe I referenced was that in Travel, we were seeing higher spend per card versus seeing more people active. And while we haven't been able to study that, what we think is happening is that in places that people can travel, There tends to be also just less restrictions and that's just opening up more options for people to Actually spend and for instance instead of doing takeout go to a restaurant and eat a more expensive meal, order a nice bottle of wine, Etcetera. So I think that right now what we're seeing is simply higher spend per card in terms Travel, we haven't commented on spend per card beyond that.
Got it. Thank you. One last question, Jordan.
Our last question comes from Jason Kupferberg from Bank of America. Your line is open.
Hey, guys. Thank you. I was just curious if you could share with us some of your underlying assumptions for the DIRN gross revenue lines. If we look at the high teens Revenue growth outlook for the June quarter. I know there's a lot of moving parts in the macro environment.
It just seems like high teens could maybe be conservative Based on what you've seen in April so far, even though I know the comps won't be as easy in May June. So we just love to hear more about how Talking about the different pieces of gross revenue because you outlined the rebate piece pretty clearly.
Yes. On revenues, yes, high teens is our best estimate. Service revenues, as you know, we're recognizing with a quarter lag. So the service revenues you see in the Q3, remember, will not reflect the revenues Related to the volumes in the Q3. So the Q3 will have a big ramp in volumes as you're seeing because we're lapping.
But the revenues and service fees will reflect The revenues from the volumes in the Q2, it's important to remind people of that. In terms of the cross border business, I think you see what the trends are. In terms of transactions, I think the trends are fairly stable at this point quarter over quarter. A point to make on incentives, it's important for you to note that last year, Q3 was when our incentives We're really hit because volumes declined. Even though we recognize service fees in the lag, our incentives are recognized in the quarter Based on quarter volumes, so this quarter we'll see a big ramp in volumes relative to last year, which is going to cause incentives to go up a lot And we compared to a quarter last year where they've been down.
The second thing is, we have these incentives tied to certain thresholds being achieved. Last year, because of all the drops, thresholds were not achieved. This year, we're assuming they will be. So you get an additional amount of incentive Because clients are going to hit certain thresholds. So you have to factor in the fact that year over year incentives growth is going to be quite high in the Q3 And factor in the fact that we won't have the benefit of the volumes in our service fees because of the lag.
So you should make sure you have all that as you think about our 3rd quarter revenue growth.
Right. Okay.
Thank you for all the color. And with that, I'd like to thank everyone for joining us today. If you have additional questions, you can always reach out to myself