Ryan McInerney
Chief Executive Officer at Visa
Good afternoon, everyone. Thank you for joining us. We delivered strong second quarter results with $8.8 billion in net revenue up 10%; GAAP EPS up 12%, and non-GAAP EPS up 20%. For our key business drivers, we saw relative stability. Overall payments volume grew 8% year over year in constant dollars. U.S. payment volume grew 6% year over year and international payments volume grew 11%. Cross-border volume, excluding intra-Europe, rose 16% year over year and processed transactions grew 11%. Visa's business performance demonstrates our strategy at work in consumer payments, new flows, and value-added services.
Furthermore, across all of these growth levers, tremendous opportunity remains. I'll spend a few moments on each growth lever. Let's start with consumer payments. The opportunity in consumer payments is enormous. Based on the latest public data from calendar year 2022 and our analysis, we estimate that the total global purchase personal consumption expenditure, or PPCE, excluding Russia and China, was approximately $40 trillion. Within that $40 trillion, our addressable opportunity is more than $20 trillion. This includes three components: one, cash and check, which is about half of the addressable opportunity tap-to-pay is a great example of how we are converting small ticket cash transactions to Visa credentials. Two, ACH and other electronic transactions. We have many examples in this space, including the work we are doing to extend Visa as a bill pay method in acceptance categories like rent, education, and loan repayments. And three, cards that run primarily on domestic networks. We have been focused on converting these domestic based cards to Visa credentials in countries around the world, and I'll share a good example from Europe in a moment.
There is a very long runway ahead, and I remain excited about Visa's future growth opportunity in consumer payments. We continue to capture that growth by delivering innovative and secure payment solutions for buyers and sellers, including new credentials and issuance, tap-to-pay, and ecommerce. I'll briefly talk about each. First, we're making great progress in expanding the number of Visa credentials. We have added over 100 million credentials from September to December for a year-over-year growth rate of 6%. One area of focus is in Europe, with the U.K. growing credentials at its fastest rate since 2016, driven in part by strong growth from fintech clients. In addition, from 2018 to 2023, we converted more than 20 million credentials in Europe that primarily ran on domestic networks to Visa debit credentials, with millions more in the process of being migrated. This is a great example of the opportunity I mentioned a moment ago.
We're particularly excited as we prepare for the Paris Olympics, which are less than 100 days away. We have close to 300 clients across 85 countries globally working with Visa to activate our Olympic sponsorship for marketing campaigns and cardholder engagements such as credential issuance and on-site cardholder events. And in Europe alone, we expect our clients to have issued over 5 million Olympic and Paralympic branded Visa credentials before the start of the games. Also, this quarter in Europe, we renewed our relationship with Caixa Geral de Depositos in Portugal across consumer credit, debit, and prepaid, and commercial credit and debit, as well as a suite of value-added services including risk solutions and analytics.
Another area of strength is our co-brand issuance. Visa is the primary network partner for 8 of the top 10 co-brand partnerships in the U.S. today, and we are pleased that Visa has finalized a multi-year extension of our successful credit co-branded partnership with Alaska Airlines, a portfolio that benefits from a loyal customer base and high cross-border usage. We have also had significant co-brand momentum in CEMEA. First, we launched a new co-brand card in partnership with Qatar Airways, British Airways, and National Bank of Kuwait. Second, we expanded our strong global Marriott relationship to launch Qatar's first hospitality co-branded card with Qatar Islamic Bank. Across the United Arab Emirates, we now have exclusive agreements with all the leading airlines, marked by a recent agreement with Emirates Skywards, and we also signed an inaugural airline co-brand agreement in Morocco with Royal Air Maroc.
Now, newer digital issuers are equally important to our future growth in consumer payments. And in Saudi Arabia, fintech stc pay, which has over 12 million customers, is transitioning from a digital wallet to a full digital bank and expanding its Visa prepaid business into Visa debit and credit. Digital bank Maya in the Philippines has chosen Visa to offer its millions of mobile wallet users and bank depositors access to consumer credit cards with new issuance of affluent products. In the U.S., we signed a newly expanded credit deal with brokerage platform Robinhood, including the launch of a new Robinhood Gold Card, which offers 3% cashback for all purchases.
In Europe, broker and savings platform Trade Republic has launched a new Visa card that combines spending and savings for their 4 million customers across 17 markets. Over 1 million people joined the waitlist for the card in just a few weeks. As I've mentioned in the past, we feel great about our products, our value-added services, our new flows capabilities, our brand and our people, all coming together to deepen and expand our partnerships with our clients around the world. As we think about Visa's growth, tap-to-pay and ecommerce are key drivers in the digitization of payments. This quarter, tap-to-pay grew 5 percentage points from last year to 79% of face-to-face transactions globally, excluding the U.S. Of note, Japan nearly doubled its penetration since last year to almost 30%. In the U.S., in the second quarter, we're nearing 50% penetration, with New York City at over 75%, the first U.S. city to reach this milestone, up from 50% two years ago, demonstrating the impact that transit and our focused issuance and acceptance have on accelerating growth.
On the ecommerce front, we continued to see Visa's U.S. ecommerce payments volume grow several points faster year over year than face-to-face spend. And the same is true in many key countries around the world, including Canada, Brazil, Australia, and India. And this matters to Visa's growth because in the ecommerce space, cash is not usually an option. And although ecommerce payments are a highly-competitive environment, we believe our capabilities and our focus on safety, security, reliability, and user experience position us very well. Adding to the potential for growth is tokenization, which brings several benefits to the ecosystem, especially in ecommerce, including reducing fraud, improving authorization rates, and therefore, making it easier for a customer to purchase a good or service. As of the second quarter, we have over 9.5 billion tokens globally and have surpassed a milestone of 1 billion tokens in Asia Pacific, joining the ranks of the U.S. and Europe. We continue to be focused across all of these efforts in addition to seeking new areas of acceptance and spending.
Now moving to new flows. We mentioned last quarter that we see $200 trillion of opportunity, excluding Russia and China, and we are delivering Visa's commercial and money movement solutions to help digitize these flows. This quarter, new flows revenue growth improved to 14% year over year on a constant dollar basis, with Visa Direct overall transactions growing 31% for the quarter to 2.3 billion and commercial volumes up 8% year over year in constant dollars. Throughout the quarter, we remained focused on our Visa Direct strategy across several areas of growth, including through new use cases, expansion to new geographies and enablers.
One recent example is our expanded agreement with Thunes, which increased the number of countries in which Visa Direct can enable push to wallet from 78 to 108. In addition, Thunes is implementing Visa Direct's push to card capability to enable payouts made to eligible Visa cards and accounts. We have also expanded Earned Wage Access in Canada through an agreement with Payfare and have brought our first Visa Direct cross-border capability into Taiwan with Taishin Bank. On the enabler front, we are pleased that our longtime partner JPMorgan Payments will be seamlessly integrating Visa Direct into their acquiring operations to offer their business clients faster push payments capabilities.
In addition, we continued to deepen our relationship with Chase in the small business market, with investment and enhancements in products and services. And in accounts receivable and payable, we renewed and expanded our multi-year agreement with BILL on their accounts payable, spend and expense management platforms. We have also reached a global partnership with Taulia, an SAP company and a leading provider of working capital management solutions. The collaboration will incorporate Visa's digital payments technology into Taulia's virtual cards, a solution that integrates with SAP ERP solutions and business applications to make embedded finance accessible for businesses through a seamless and streamlined payments experience for buyers and suppliers.
One vertical in new flows that has immense potential is government payments, representing over $15 trillion in annual payments volume opportunity, where we are in a strong position to combine many of our new flows offerings. A recent example is in Kenya, where we signed an agreement with Pesaflow, a technology partner for the government of Kenya, to expand card payments on eCitizen, the government's electronic platform with over 12 million users. We achieved this by bringing together Visa Virtual credentials and Visa Direct into the platform.
Now let me move on to value-added services where revenue was up 23% in the second quarter in constant dollars. The growth and opportunity in value-added services continue to be significant and broad based. In acceptance solutions, we signed an agreement with Millicom International Cellular in Latin America for CyberSource Gateway, Decision Manager, and Token Management solutions. As it relates to open banking, just about two years ago, we acquired Tink, as we saw the opportunity in open banking to enable the movement of data and money and to provide consumers with control over their financial data. Over those two years, we have been expanding our presence in Europe, winning deals with such companies as Adyen and Revolut. We're now expanding open banking solutions through Tink into the United States, having signed several data access agreements, including with Capital One, Fiserv, and Jack Henry, so that their customers may share data with Tink. We've also signed partnerships on the fintech and merchant side, including Dwolla and MaxRewards.
Across our risk offerings, we continue to bolster them through our technology, innovation and AI expertise and are expanding their utility beyond the Visa network. Recently, we announced three such capabilities in our Visa Protect offering. The first is the expansion of our signature solutions, Visa Advanced Authorization and Visa Risk Manager, for non-Visa card payments, making them network agnostic. This allows issuers to simplify their fraud operations into a single fraud detection solution. The second is the release of Visa Protect for account-to-account payments, our first fraud prevention solution built specifically for real-time payments, including P2P digital wallets, account-to-account transactions, and central banks' instant payment systems. Powered by AI-based fraud detection models, this new service provides a real-time risk score that can be used to identify fraud on account-to-account payments. We've been piloting both of these in a number of countries, and our strong results thus far have informed our decision to roll these out globally. The third solution is Visa Deep Authorization. It is a new transaction risk scoring solution tailored specifically to the U.S. market to better manage ecommerce payments, powered by a world-class deep learning, recurrent neural network model, and petabytes of contextual data.
We also continue to make our offerings available through third-party platforms. We mentioned ServiceNow last quarter, and we are excited to have recently joined the AWS Partner Network to help seamlessly provide our clients running systems in the cloud access to Visa's solutions, initially starting with Currencycloud now known as Visa Cross-Border Solutions and Pismo. We also signed an agreement with Stripe for them to distribute Verifi solutions through a self-service dispute management platform for their merchants. All of these efforts are part of our strategy to build and offer our solutions for both Visa and our network of networks.
Before I hand it to Chris, I wanted to note that we have commenced the exchange offer for Visa's Class B-1 common stock that is set to expire at the end of next week. I also wanted to highlight that this quarter, after nearly 20 years of litigation, we have agreed to a landmark settlement with U.S. merchants, more than 90% of which are small businesses, lowering credit interchange rates and capping those rates into 2030 once approved by the court. The injunctive relief class settlement also provides updates to several key network rules, giving merchants more choice in how they accept digital payments.
Last, let me share a few closing thoughts on the quarter and beyond. First, our second quarter was marked by stable results and strengthened relationships with clients across the globe. Second, as we head into the back half of our fiscal year and beyond, new flows and value-added services remain key areas of focus. We also see significant opportunity in consumer payments by digitizing cash and check, enhancing our capabilities in ecommerce, and building new solutions for our network of networks. I could not be more excited for what lies ahead. Finally, all of this is possible because of the 30,000 Visa employees who come to work every day in service of our clients and partners. I am grateful for everything that you do. Thank you. And now over to Chris.
