Visa at Barclays Conference Notes

Vasant Prabhu – EVP & CFO

Step up in drivers of business

“Sure, as you said and as you heard when we had our first quarter earnings call, we certainly have seen a tick-up in what I would call the drivers of the business, which is what we like because that is in the end what counts. We saw, as we told you on the call a step-up in payment volumes, almost everywhere except a couple of places like Brazil, a nice step-up in Europe, certainly in the US, we were helped by gas and also we were helped by the portfolio wins we’ve had like Costco and USAA.”

Currency is one headwind we remain concerned about

“The one headwind that we remain concerned about is currencies, a stronger dollar certainly hurts us both from an translation standpoint, as well as in its impact on our inbound US business.”

Chinese growth isn’t changing. It’s ok, not great

“Chinese growth isn’t changing, that still I would say, okay, not great, but at least it’s stabilized, the rate of growth is not declining. Oil economies have stabilized. So, cross-border commerce out of there is returning. And then beyond Europe, so we are picking up stuff in Europe that we might lose here and that helped us in the first quarter because there was a massive amount of inbound commerce into the UK and frankly into many parts of Europe because of the weak euro and then the strong dollar moderated. I mean it isn’t getting weaker, but it’s not getting stronger at the same rate.”

Visa FY 1Q17 Earnings Call Notes

Alfred F. Kelly, Jr


“I just completed my first quarter at Visa, and past my two-month mark as the Chief Executive Officer. I think, as many of you know, I’ve been a board member since early 2014, so I’ve been involved in the business and was a party in approving the company’s strategy and priorities.”

A good chance to make the necessary investments in India with govt support

“I think for us very importantly, and strategically this is a build opportunity that the government really has put out there in front of us. And so in my mind, at this point I’m much more focused on capitalizing on this opportunity and investing heavily behind driving both awareness for consumers and incentive for merchants to get signed up. There’s only a very fractional amount of the merchant community in India that is enabled today to be able to accept electronic or digitized payments, and we want to try to get that number up as much as we possibly can. So I think when you consider the economics of the investments we’ll make in India, plus a fairly conservative pricing, it’s certainly not going to be a market in this fiscal year that’s going to drive a lot of profit for us. But I think, it’s a great year for us to make sure that we do everything we can in one of the two largest population countries in the world to get as good a position as we can to help us over the next decade.”

Thoughts on Trump

“I think, it’s too early to tell. I mean, we’re barely two weeks into this presidency. And while the President has been active with executive orders, I think that as things start to settle down and we get into more specific policies and his cabinet is confirmed and in place and the legislature gets going, I think it remains to be seen what happens. I will tell you this, that we have a world-class group of government relations people who are already fully engaged as much as we can in the relevant conversations in Washington. But I think there’s things that relate to trade, relate to taxes, all of which could play into our business. But I honestly just think it’s too early to start to speculate. And we’re certainly not building anything into our plans positively or negatively for that matter related to any policies that might come out. But I can assure you that we’re watching it very closely.”

Visa at UBS Conference Notes

Vasant Prabhu

Most of our growth has come from conversion of cash to electronic payment and that has been boosted by the smartphone

“And the global economy hasn’t been booming for the last five years, in fact if you look at personal consumption expenditures globally in real terms — in nominal terms they’ve only grown about 2% or 3%. So, if we were dependant strictly on personal consumption expenditures, we’d be heart stretched to grow our revenue much more than 2% or 3%. The other seven points of growth has come from the most important thing in our business which is the conversion of cash to electronic forms of payment, the digitization of cash. So it’s what we call personal consumption expenditure penetration by cards.

And what is making the biggest difference there is technology. So, today if you live in the Bay Area, you don’t never have to use cash, because thanks to Square and dongles and you can pay for parking with cards, you can pay for taxies, you can pay for everything with cards. And that is a revolution. So, every smart device is both a potential digitized card or a point of sale. So, what’s phenomenal for our business is — mobile is the future, because if you go around the world, of course they’re bypassing landlines; remember the old Visa business was built on hardwires, landline that went from bank-to-bank and so on, and from merchant-to-bank and processor and so on. Today every smartphone or every mobile is either a point of sale or a potential device to use to pay. That is a revolution and extraordinarily attractive to us.”

We are not in China

“Yes from the very beginning when it was announced a year ago that China was opening up, if you listen to everything we said we urge everyone to be cautious on a whole range of front. So I think by and large I think our caution has been filled right. It’s taken the lot longer to get to the point where we can even submit an application and once you submit an application they have to get us a license and then once you get a license we have to get a proximity infrastructure up and running in China. And remember that we don’t operate in China today. We have a nice business in China that is a cross broader business, but we have no real domestic business in China. Visa cards are really not prevalent in most of China, because there was a government monopoly there and we’re not allowed to participate in the domestic market. So we have to build acceptance, and that can take time it costs money.”

Not sure what the economics will be like in China anyways

“And then China already have a relative well developed card based economy as well as alternative payments like Alipay, Tenpay and so on. So it’s a very competitive market it’s not clear what the economics are because when it will setup, it will setup more as a public good and so we have to figure out what the future economics of the business are going to be. So in the short run it’s waiting till we can get started, then it’s a lot of investment and expense, so it’s quite a while before China is something that will meaningfully contribute and we have to be careful in how we do this because it’s not totally clear what the right business model is for China. Because it is a different kind of market and it’ll have to evolve as we go along.”

China has done a very good job of digitizing cash

“China is very unique. I think the Chinese have done a spectacular job of digitizing cash compared to other emerging economies. Between what some of the internet players have done like Alipay and others and what China UnionPay has done, they have actually made a lot of progress in both building card — having cards out there, building the acceptance base and then driving volume. So in many ways China has moved far ahead of a lot of other emerging economies and has evolved in a very different way from them. So I think you go into China, normally we go into countries and we are the pioneers, right, we are the ones who are out there doing the missionary work in building acceptance and building digitization of cash and all that. We go into China where somebody is else has already done that. ”

What makes Visa Visa

“Yes, look Blockchain is a technology that we are watching closely from everything that we hear from our technology people, it’s not something that is easily used in our kind of business which is low ticket transactions with very high volumes. It seems to be more applicable to lower volumes sort of larger transactions and so initially I think the commercial cases are all in back office type clearing systems, where there is certainly an opportunity because a lot of what happens in the back office is not as efficient as it could be. So certainly Blockchain and we are watching it given investment in one of the companies is being used in these kinds of systems and there are experiments going on in other areas, and we’ll watch this closely. But remember that it is very important to remember that yes we are at heart a processing and technology enterprise, but there are three components to what makes Visa, Visa. One is the technology and yes it’s possible there are other technologies that could do what we do, but the real power of Visa is the other two things, which is our network and remember that we are essentially in network of 42 million points of acceptance being connected to 3 billion card holders. So you can have a technology that does what we do, but the real value is in the loans you have in the network. We have to somehow create the network too. So you got to watch both. Is there a technology that can do what we do, but how do you build that network and the chicken and egg issues that go with it. And then on top of all that is our brand because if you are going to carry something in your wallet that is as good as cash and as a result of it you are not carrying cash, it better work all the time.”

Some things have changed in the past two weeks

“we just had our earnings calls less than a month ago, and we went through in some detail what we saw going on around the world. I would say on the margins things are still the same, but clearly in the last two weeks we have seen the few big shifts. I wouldn’t say big shifts but we have seen some shifts and the bulk of the shifts have been in currencies as it relates to our business. In a week the world’s economy can’t change but currencies did move and that does have an impact on our business.”

Visa FY 4Q16 Earnings Call Notes

Visa (V) Q4 2016 Results

Charles W. Scharf – Visa, Inc.

The global economy is not improving

“On the negative side, the global economy is not improving. Geopolitical tensions are high. The U.S. election is a wild card, and we continue to watch the impact of Brexit. But Costco and USAA meaningfully improved volumes, with USAA being an important contributor to revenues in the U.S., while Costco far less so. Cross-border volumes are both lapping decreases and have improved, and we will have a full-year benefit from Europe, which as I said, is performing as expected.”

40% of merchants are accepting chip cards

” give you the update on the numbers in terms of almost 65% of the credit cards and 45% of the debit cards, 1.6 million merchants, which is about 40%, are accepting them. I think this is a – it is – it’s a lot of work, for sure. It’s progressing along a timeframe, which is faster than we’ve seen in any other part of the world when they have moved from mag stripe to chip. We’ve said this I think last quarter or the quarter before, this is – today it’s the largest chip card market in the world, even though we still have a long way to go. And we – and you can just – you see the meaningful impacts on the reduction in fraud when chip-on-chip exists.”

Vasant Prabhu

China timing is uncertain

“In terms of costs related to China market entry, the timing remains uncertain. We had assumed we would be much further along at this point when we talked to you last year. It is our intent to move very fast to set up our processing infrastructure once we have greater clarity from the PBOC around timelines for their decision for granting licenses. At this point, it is difficult to know for sure what costs related to China market entry will be incurred in fiscal year 2017. We have made some assumptions in our outlook and will update you as we learn more.”

Visa at Deutsche Bank Conference Notes

Sam Shrauger – SVP, Digital Solutions

Consumers becoming comfortable with mobile device as payment

” we are now kind of getting to the point certainly in North America where consumers are becoming comfortable with the mobile device as a vehicle for payment. I think with any new technology and I know we tend to like to over ascribe the pace at which people are going to take a new technology and immediately begin paying with it. I think it takes a little bit longer than that for people to get comfortable with these things specifically for payment.”

Breakage rate of ecommerce to mobile is large

” I think that probably the biggest growth area right now is just what was traditional desktop e-commerce moving to mobile. So and actually we have a product out there called Visa Checkout, we built it for a reason which is unfortunately if you’re a retailer right now, there’s kind of a good news, bad news thing. We have a lot of your store traffic shifting to e-commerce and that’s great kind of from an operational standpoint and operational cost standpoint. But at the same time a lot of that what was traditionally kind of desktop, keyboard commerce is shifting to mobile. And the breakage rate in checkout conversion is enormous in mobile for most retailers just because the key entry process and all those things are a big encumbrance.”

Don’t really care what communication protocol wins in payment

“I think what we’re not trying to do necessarily is pick winners in technologies and communication protocols in particular. I mean whether it’s QR or BLE or NFC I mean they are all basically ways of communicating payment data to a reader of some kind but at the end of the day how that happens as long as it’s done securely it’s sort of agnostic to you.”

Probably wont be one mobile wallet to rule them all

“I don’t think that and I think there is always this tendency to say it’s going to revert to this world where there is one wallet that ruled them all. I don’t believe that but I do think you’d have to look at scale players that are out there whether it’s on the device side or on the wallet side that are sort of agnostic to a particular transaction type and those are probably the most likely to do so.”

Visa FY 3Q16 Earnings Call Notes

Visa (V) Charles W. Scharf on Q3 2016 Results

Payments volume growth was similar to last quarter

“Overall, payments volume, cross-border volume growth, and processed transaction growth was similar to last quarter. The following numbers do not include Europe. U.S. payments volume growth was 10%, basically unchanged from last quarter after adjusting for leap year. International payments volume growth was 11%, down from 14% last quarter, driven almost entirely by lower domestic transactions in China that yield very little revenue. Cross-border volume growth was 5%, unchanged. Processed transaction growth was 10%, an acceleration of one point due to lapping of Russian’s NSPK migration.”

Brexit doesn’t change strategic rationale for Visa Europe

‘Regarding Brexit, just let me make a couple of comments. First of all, with Brexit or without Brexit, it does not change our long-term view that the strategic rationale for putting these two companies together makes extraordinary sense. ”

Visa (V) CEO Charles Scharf Video Interview

Visa (V) CEO Charles Scharf on the biggest misunderstanding folks have about his business

“When I first got to Visa, the first thing everyone wanted to know in all the town hall meetings I went to was were we a financial services company or were we a technology company.  And the answer is we’re definitely not a financial services company, we have to act like a technology company, but we really are a payments business and they’re fundamentally very different.  We don’t do what financial services company do, most financial services companies are our direct clients.  All issuers are financial services companies.  The payments industry has gone from this extremely boring back office function to a world driven by commerce and digital platforms.”



Source: Stanford Business School Video Interview

Visa at JP Morgan Conference Notes

Charles Scharf – Chief Executive Officer

The environment continues to be more of the same of what we saw last quarter, not weakness but not strength either

“Listen I think – I guess what we are seeing and you can take this as good or bad, but it’s very much more of the same. The 8-K that we put out had updated volumes for the month of April which when you look at where we were last quarter and just for the leap year the numbers are basically right on where we’ve been running. So, on the one hand you look at it and say listen given what a lot of retailers are reporting especially here in the United States, is there a fear of a weakening environment. We don’t see that weakening environment, but in the same respect we also don’t see a strengthening of commerce and obviously that’s something that we’d like to see. But I would say in every developed market around the world volumes continue to perform at levels like we saw last quarter.”

Banks understand the importance of preserving their role as a payments provider

“the banks all across the world clearly in my mind understand the importance of doing everything they can to preserve that their role as the primary payments provider and we in the other significant established networks out there provide the best way for them to continue to do that.”

The chip eliminates fraud

“The heart of it it’s not really complicated. The heart of it when you look at the card-present fraud over 80% of the card-present fraud is eliminated just by having a chip card at a chip accepting terminal. It’s the chip. That’s what eliminates the majority of the fraud, because the chip cannot be duplicated as opposed to a magstripe, which is very easily duplicated. So you can capture the magstripe information either physically or by electronically getting into people’s files, very easy to duplicate magstripe cards they can then get used all places where magstripe cards are accepted. The chip produces a one-time cryptographic. It is a real computer chip and it hasn’t been duplicated yet. And so the best thing that we can do to eliminate fraud in the country is to get chip cards and chip readers out there.”

Blockchain is something we spend a lot of time thinking about. Right now we think it will just force us to make sure that our costs are as low as possible

“Listen, blockchain is it something I think that from our standpoint we certainly spend a lot of time thinking about and we have our own investments in companies where we’re developing prototypes that are based on blockchain technology for things. I think if you just ask me what the impact will be I think the short-term on payments not tremendously significant because the blockchain technology I think is most applicable where you can get very quick wins at bringing transactions in a way which there’s clear ownership, where it’s public, where it’s reasonably priced and it’s very, very fast and we have that in the payments environment today. Over a period of time does it become a tool to help drive, force people to drive the underlying infrastructure cost down absolutely. And so I think from our standpoint, we need to know that there is technology out there, which with all of its flaws, while it’s certainly not free, because there a lot of embedded costs when you’ve got to do the things that you have to do to run a payments network. It will force us to make sure that we’re doing everything we can to drive our infrastructure cost down.”

Visa (V) Q1 2016 Earnings Call

Visa (V) CEO Charles Scharf said the company is fighting against a number of headwinds
“And our growth continues to be subdued by the strength of the dollar on both translation and cross-border business volumes, continued low oil prices, and weakness in China, oil-based economies, and Brazil.  We’ve not seen improvement in the global economic environment.”
Visa (V) CFO Vasant Prabhu said the strong dollar hurt results
“Cross-border business was once again very weak but in line with the first quarter’s growth rate. The deceleration of outbound commerce from China continues. Cross-border commerce out of commodity-based economies remained anemic. This has added to the negative effects of the strong dollar, especially on our large inbound U.S. business. However, currency volatilities were higher than the first quarter, offsetting some cross-border weakness.”
Cross border purchases originating from China dropped precipitously
“Cross-border commerce outbound from China has dropped from growth rates above 40% a year ago to single-digit levels in the second quarter. Commodity-based economies across Latin America, the Middle East, and Africa have also experienced sharp declines. This has hit our large U.S. cross-border acquiring business hard.”
Provided an updated on the credit card’s transition to embedded chips
“I’ll move on and talk about EMV for a second. Six months out from the official kickoff to chip in the U.S., we continue on the journey of moving from mag stripe to chip. More than 265 million Visa chip cards were issued as of March of 2016, making the U.S. the largest chip card market in the world and larger than the UK and Brazil combined. 47% of credit cards and 30% of debit cards have a chip on them today. More than 1 million merchants now have chip-enabled terminals, or roughly 20% of all merchants. Based on client surveys, we expect 50% of merchant locations will be enabled with EMV by the end of calendar year 2016.”


Visa FY 2Q16 Earnings Call Notes

Visa (V) Charles W. Scharf on Q2 2016 Results

Solving the problem of additional time to read chip cards

“One of the main pain points in moving to chip is the additional time it takes to complete a transaction due to the time the card spends in the terminal. Earlier this week, Visa announced the launch of Quick Chip for EMV. The upgrade streamlines the processing of a chip card transaction to enable customers to dip and remove their EMV chip card from the terminal without waiting for the transaction to be finalized, allowing the consumer to put away their card in typically two seconds or less.”

Things haven’t deteriorated, but they haven’t improved

“our assumptions are that in order to make those guidance numbers, there needs to be an improvement. And things haven’t deteriorated, but things haven’t improved, so that’s playing out exactly – not the way we would want, but given what’s happened, the way we would expect. And so obviously, if things got better, then that would change as well. But we just don’t see that. And so it’s not something at this point, given that we’re already in the third quarter, we think is prudent to think about.”

Vasant M. Prabhu – Chief Financial Officer & Executive Vice President

Cross border commerce out of commodity based economies is anemic

“Cross-border business was once again very weak but in line with the first quarter’s growth rate. The deceleration of outbound commerce from China continues. Cross-border commerce out of commodity-based economies remained anemic. ”

Have now lapped sharp gas declines but volumes haven’t picked up

“We have now lapped the sharp gas declines from last year. Last October, we had hoped that this would provide a tailwind for U.S. domestic volumes in the second half of fiscal 2016. This has not happened, as gas prices remain below the lows of last year. Given the recent failure of OPEC to agree on production caps, lower gas prices could persist. As such, we are assuming that U.S. payment volume growth will not improve from current trends in the second half.”

The transactional trends are fine but pricing is deflationary

“the underlying transactional trends are very good. And on the margin, even setting aside gas, a stronger dollar is mildly deflationary, as you know, which plays through into payment volumes.”