Visa : Transcript ( PDF 233 KB )

Corrected Transcript

02-Jun-2022

Visa, Inc. (V)

Bernstein Strategic Decisions Conference

	Total Pages: 16
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Visa, Inc. (V)	Corrected Transcript
Bernstein Strategic Decisions Conference	02-Jun-2022

CORPORATE PARTICIPANTS

Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

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OTHER PARTICIPANTS

Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

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MANAGEMENT DISCUSSION SECTION

Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

Good afternoon, everyone. Thanks for joining us today for the 38th Annual Strategic Decisions Conference. I'm Harshita Rawat, the Senior Analyst covering payments at Bernstein, and I am delighted to be joined today by Vasant Prabhu, the Vice Chairman and CFO of Visa. Vasant, thank you so much for joining us today.

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

Nice to be here Harshita, good to see you in person and all of you.

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Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

So, a very quick housekeeping item before we begin. Investors are able to submit questions through the Pigeonhole link available on the conference website. And with that, let's begin.

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Visa, Inc. (V)	Corrected Transcript
Bernstein Strategic Decisions Conference	02-Jun-2022

QUESTION AND ANSWER SECTION

Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

Q

So, Vasant, let's start with the 8-K you put out yesterday. Can you share your thoughts on the current spending trends you're seeing both in domestic and cross-border spend?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Well, we issued the 8-K in your honor. So, we'll have something to talk about today. No, just kidding. We've been doing these mid-quarter updates because the world is fairly uncertain. And if you look at the numbers, I think what you would see - so we reported numbers yesterday all the way through the 28th of May. So, essentially April and May, the new news there is since our last call, which was towards the end of April.

And if you look at the numbers, essentially there was no change in trend between April and May. In fact, the trend has been quite stable for quite a while. In total US volumes, payments volumes indexed at about 148 to 2019, which - we look at 2019 because looking at last year there's so much noise.

So, a takeaway from that is things have been very stable. I know there is a lot of talk of slowdowns and so on, and we certainly are not going to be economic prognosticators. But if you look at the data, at least through the 28th of May, the consumer was essentially spending at the same level as they were in April and actually prior to April because the trend has been in that range for quite a while.

If you also look at the compound annual growth rate of 148 (sic) [compound annual growth rate of the index at 148], it's a very healthy rate of growth over the last three years which means that the growth has been faster post- pandemic than it has been pre-pandemic. So those are key takeaway.

And then you take the debit part of the business. It's indexing in the 150s, which is again, an even higher rate of growth. And that's driven by the fact that the cash digitization engine is in incredibly good shape.

Through the pandemic, as you know, more people have gotten comfortable with using digital forms of payment. More merchants have realized that they have to accept digital forms of payment and infrastructures for paying digitally have gotten better. In particular, more and more people are embracing e-commerce, even in categories they didn't do before.

So that explains a lot of why debit has been growing so strongly and even faster than it was pre-COVID and has stayed resilient even as credit has recovered. And if you look at the numbers for credit, the index is about 140 and that on a compound annual growth rate, again is faster than it was pre-COVID which would mean that credit which was slow to recover, has not only gotten back to the pre-COVID trend line, but is now getting past it.

So, again quite a bit of strength there and what we see here is not that dissimilar to what we're seeing around the world. And if you look below the surface across spending categories, it's fairly intuitive in that, for a while people stayed at home because they couldn't do anything else and bought a lot of product.

Now people are spending on services, so that thing is - the pendulum is swinging back to - it swung towards product, it's swinging back towards services. We don't see much difference between essential goods people are

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Visa, Inc. (V)	Corrected Transcript
Bernstein Strategic Decisions Conference	02-Jun-2022

buying. There's still a lot of discretionary buying going on. The fastest growth areas are things people can do now that they couldn't do for a while, like travel, like restaurants, like entertainment.

And then the cross-border business had a very healthy May. It, sort of, was okay in April, between March and April, it was around 90 - 92 indexed in 2019, and it jumped by over 10 points in May. So the cross-border business has also been strong. So, all-in-all, if you just strictly looked at the numbers you would say consumers doing the way they were before, business is strong and resilient and stable. And the categories that were slow to recover are recovering quite fast.

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Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

Q

So, Vasant, I want to follow-up on cross-border. So, as we've talked about before, had the pandemic not happened, your cross-border travel numbers would have been almost 30% versus 2019, I would argue even higher because inflation is running much higher. So, what do we need to see for cross-border travel to kind of like return to that pre-pandemic run rate now?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Yeah. I mean, if you looked at cross-border in total, right. I think, you would have said cross-border in total should be at about 130 now. And if you look at the numbers we reported from May, if you look at cross-border in total, including intra-Europe, it's over 130 already. If you take out Europe, which is the right thing to do, take out intra- Europe, it's slightly below 130 I think it was 128. If you then take out Russia because that's an apples-to-apples comparison, it's also already at 130.

So, effectively the cross-border business in total has recovered to the trend line it was on pre-COVID because cross-bordere-commerce is so much stronger, right. One of the big things that happened through the pandemic was the growth of cross-bordere-commerce. I think one of the things we've all learned is that as people embrace e-commerce more, they also become less sensitive to where the merchant is.

If you're online and you're looking for something and you come across a merchant who may not even be domestic and you don't even know, you're comfortable buying it because we Visa protect you. Similarly, the merchant is okay selling it to you because we pay them. So, we've enabled a lot of cross-bordere-commerce, which is indexing in the 160s right now, which is far faster than the pre-COVID trend line.

So, cross-border in total is back to 130. The travel part is not yet. It was in May around 108 or so. There is no reason why it won't get back because Asia is still recovering. Asia was indexing at around 40 in the second quarter, it's now indexing closer to 60. So, just as we talked in April; Australia, New Zealand were opening up, many Asian countries were opening up. So, clearly we've seen the benefit of that. There is more to come.

No question, we still have to see China open up at some point. Japan and Korea are still not fully open. Taiwan, same thing. We said that the US had been recovering nicely. Inbound travel to the US was recovering nicely in the second quarter, but on average through the quarter it is at about 70, that's now in the mid-80s or so. So, that recovery trend has continued as the weather here gets better as more Europeans and Asians come to the US, as Canadians come to the US because that border has just opened.

And then all indications are that travel into Europe is going to be very strong because it has really become strong right now. So, we think there'll be a good travel season in Europe this summer. So, it's all happening as we expected. May was [ph] still a (00:07:43) lot stronger than we expected.

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Visa, Inc. (V)	Corrected Transcript
Bernstein Strategic Decisions Conference	02-Jun-2022

Now, having said that, I mean we'd like to see 10 point improvements every month. It's not going to happen. There'll be fits and starts. So, you can't do a straight line here, just like between March and April things sort of stabilized a bit and then and then May was strong. So, we'll see how it goes.

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Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

Q

So, Vasant let's talk about the topic, which is on everyone's mind, inflation, which is a tailwind for you because majority of your revenue is assessed as basis points and purchase volumes. But how should we think about the risk from rising inflation on consumers, crowding out consumers discretionary spend, areas such as travel?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Look, I think, inflation in general is not something anybody would like. And in the long run, economies are better off without inflation. And governments and central banks should do whatever they can to get inflation under control. As it stands today, it's not obvious that inflation is having meaningful changes in consumer behavior.

I should say that everybody focuses on the headline number for inflation, whatever that number is, 8%, 8.5%, whatever. That may not be the inflation in the basket of things people buy using our credentials. So, for example, you need to take out housing, people don't often pay for housing using our credentials. You need to take out used cars and there are several other things you need to take out.

And you'll get to things that are mostly bought on our kinds of credentials and the inflation in those kinds of things is lower the last time I looked. Now there's gas in there and gas is certainly a big contributor to inflation, and we're seeing that, no question. And if you take gas out, the amount of inflation in the things people are buying with our credentials is not anywhere near the headline number people see.

So, I think that's important for people to understand because that also has an impact on how behaviors might change. At this stage, it's not obvious that there are discernible changes in behavior. For example, our transaction count stayed quite strong. So, it's not like people are using their cards less and buying things less frequently because of inflation.

Our ticket sizes have become - are still quite high. They haven't shrunk. Some of it, maybe because inflation has helped them. Some of it may be that consumption reductions are not meaningful yet. Some people say, well, because of inflation, people may cut back on discretionary spending. Well, on a year-over-year basis, the categories growing the fastest are what you might call discretionary categories like travel, like restaurants, like entertainment, because they're in a recovery mode, right.

So maybe that's masking - maybe they would have grown even faster, I don't know. It's hard to know. But if you look at that growth rate, you'd say there's no evidence of a pullback. So, it's hard to know what it might have been. So, I would say the short answer to your question is, at this point, it's not obvious whether people are pulling back on amount they consume or spending less on discretionary items and so on.

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Harshita Rawat

Analyst, Sanford C. Bernstein & Co. LLC

Q

And Vasant in light of the growing concerns around the current macro environment, just more broadly, can you remind us how to think about Visa's financials, volume transactions revenue sensitivity in a potential downturn?

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