Al Kelly
Chairman & Chief Executive Officer at Visa
Jennifer, thank you, and good afternoon, everybody, and thank you for joining us. Before I talk about the quarter, I wanted to acknowledge the passing of Dee Hock, Visa's Founder and Chief Executive Officer Emeritus. The whole Visa family deeply mourns the loss of a true visionary and a great man.
Even with several global and macro events from the war in Ukraine to inflation, to concerns over a broader recession, Visa's business model has proven to be very resilient, with strong financial performance. Net revenues grew 19% year-over-year and non-GAAP EPS was $1.98, up 33%. Total Q3 payment volume was 136% versus three years ago, up 1 point from Q2. In the US, payments volume index to 2019 was 146% in the quarter. US debit volumes were 155% and credit 138% of 2019, both up modestly from Q2.
Card-not-present, excluding travel volumes in the US, remained significantly ahead of prepandemic levels at 170% of 2019, consistent with Q2. International volume was 120% of 2019, down 1 point from Q2. Excluding China and Russia, it was 146% of 2019, up 6 points. Q3 cross-border volumes, excluding intra-Europe, were 123% versus three years ago, up 11 points from Q2, and this includes Russia in prior period numbers.
Travel-related cross-border volumes rose 22 points from 82% of 2019 in Q2 to 104% in Q3 as we continued to see strong recovery in consumer and commercial travel. Process transactions were 139% versus 2019, 1 point above Q2. Credentials increased 8% year-over-year and are up 11%, excluding Russia.
Before I dive into the client wins and progress towards our strategy, I wanted to take a moment to discuss two topics; recession and inflation. On the first, we're not economic forecasters, so I'm not going to predict the future or a potential likelihood of a recession. Instead, let's focus on the facts. From the numbers I just reviewed relative to 2019 levels, growth has been stable or improving in overall domestic payment volume, credit, debit, card present and card-not-present volumes. And this has been the case for most of 2022 with no indication of any slowdown including in more recent weeks.
In cross-border, of course, the recovery has continued to strengthen. While growth has been stable in aggregate, there are big shifts under the surface that continue to demonstrate the momentum of the recovery. First, from goods to services. Early in the pandemic, goods surpassed services. We were seeing the historic trend. Even as services have rebounded in the last six months, the percentage spending on goods in our payments volumes still remained high, higher than the pre-pandemic levels. For example, while US home improvement and retail good spending during the third quarter grew only low single-digit year-over-year, it remains well ahead of pre-pandemic trendline.
Second, many discussionary segments have further strengthened. If you look at US travel spend, it is not backed to the pre-COVID trendline, but grew more than 40% versus last year. Third, the affluent spend continued to recover, particularly in the areas of restaurants, travel and entertainment. At the same time, non-affluent spend remained relatively resilient. We mentioned the affluent spend returning to restaurants last quarter. That trend continued this quarter with affluent restaurant spend indexing in the 160% to 180% range versus 2019.
Similarly, in Europe in the last six months, luxury hotel payments volume and average ticket size outpaced growth in the overall hotel category versus 2019. At the same time, budget and mid-priced hotels saw modest improvements. Based on our numbers, we haven't seen any evidence of consumer pulling back spending in our markets.
Now, a few words on inflation. It's just too early to draw any definitive conclusions. A few observations though on inflation. One, keep in mind that the headline CPI inflation number does not necessarily apply to Visa as our basket of goods isn't the same. Consumers just don't buy homes or use cards with their Visa cards, for example. So, we see a several point gap between headline inflation and inflation in card-related spend categories. Two, thus far, US transaction growth relative to 2019 is strong and stable. Ticket sizes remain around 15 points above 2019 levels as they had for much of the pandemic due to several factors.
Three, historically, in the US, we have seen PCE growth, which is the most important metric that drives our growth, remains strong even during inflationary periods. That said, lastly, excessive and long-term inflation is not good for consumers or the overall economy. Looking ahead, we'll continue to monitor the potential impact of inflation to ticket sizes, transaction counts, as well as volumes across spend categories.
With all of that as backdrop, I'll now provide an update on progress with clients. Traditional issuers remain a key component of our consumer payments growth. In this quarter we had several important partnership renewals globally. First, in China, we renewed our partnership with ICBC, the largest bank in the world in terms of assets and the biggest credit card issuer in China in terms of the number of cards. In Japan, we renewed one of the country's largest credit issuers, Credit Saison, and expanded our issuing relationship with Toyota Finance. In Australia, we extended our credit and debit issuing agreements with NAV and CDA, two of the largest banks in the country. And in the US, we recently renewed our relationship with Green Dot, a top 20 issuer in debit and a top 10 issuer in prepaid.
Fintechs are also key to our consumer payments growth. In Europe alone, we have more than 100 fintech programs that continue to deepen our relationship with these partners. Revolut is a great example. They already utilized a number of our capabilities, including Visa Direct and Currencycloud, and we just renewed our global issuing partnership. They also recently selected Tink for payment initiation services, which will allow users across Europe to seamlessly move money into their Revolut accounts.
In many countries, the mobile operators are particularly important partners. We previously mentioned our partnerships with M-Pesa Africa and Safaricom, and I'm happy to report that we have begun issuance with these partners who are part of the Vodacom Group that cover 130 million customers in Sub-Saharan Africa. In a similar light, we also recently signed partnerships to issue Visa credentials, and in some cases, also enabled Visa Direct with other mobile operators around the world; Mobily in Saudi Arabia with 10 million customers, Ooredoo in Qatar with around 2 million customers, Azercell in Azerbaijan with 5 million customers, and Orange Egypt with 27 million customers.
I now want to dive a little deeper on two important markets, Brazil and India. Starting in Brazil, over the past two years, we have grown our business through issuing agreements with Itau, Mercado, Pago, Pataday and Caixa, with a 70% increase in credentials. In addition to traditional credit card issuance partners like Banco do Brasil have been growing their credit base by utilizing Visa's digital acquisition platform that allows them to instantly issue cards in a digital environment. Further, our fintech partners in Brazil, including Banco XP and Neon Pagamentos have issued more than 20 million credentials over the past two years.
On the acceptance side, we've doubled acceptance points since 2020, reaching more than 10 million merchant locations in Brazil. The results of our efforts over the past 8 to 10 quarters is evident in Brazil's payment volume, which in the third quarter was more than 200% of 2019, with e-commerce nearing 300%. In India, our efforts over the last few years are paying off and Q3 payments volume was 184% of 2019, with e-commerce above 300%. Building on that momentum, we had co-brand wins with two of the largest multibillion-dollar revenue Indian conglomerates that collectively represent millions of potential credentials. One with TataNeu, a super app for e-commerce financial services and loyalty programs across the Tata Group; two, with Aditya Birla Finance and SBI Cards, provide rewards for spending across all of their group companies. We also signed a co-brand with IndiGo, India's largest airline by number of passengers.
And let me briefly touch on the US where there's still great opportunity for cash digitization. We're excited about Tap to Pay, which has now reached 24% of face-to-face transactions in Q3. We're seeing positive trends in terms of additional spend and transaction lift in the US. In 2021, the average contactless active debit cardholder had two more transactions and $65 in additional spend each month. We expect this trend to continue, driving incremental payment volumes and transactions for contactless card issuers through faster, simpler POS experiences.
Now moving to new flows, which in Q3 had over 20% revenue growth. In B2B, our Q3 commercial payments volume was 145% of 2019, up 6 points from Q2, driven by the return of travel. Q3 was the first quarter in which spend on business travel surpassed 2019 levels. This quarter, we're excited to have reached a significant multiyear agreement with WEX to enable their travel, health and corporate clients to make payments using Visa virtual card capabilities. WES is a global leader in financial technology solutions for commercial payments, and we are proud to partner with them.
In the fleet space, we reached an agreement with M-PESA, a fintech based out of Kenya. Their fleet and expense management digital platform will address the problem of paying cash in the African trucking business through Visa prepaid reloadable credentials. Visa Direct is a powerful capability for many of our new flows. In this quarter, transactions grew 35%, excluding Russia.
On the remittance side, Western Union has enabled Visa Direct for their US customers to send money to select countries globally, expanding upon their initial rollout across Europe in 2021. We also expanded our agreement with Remitly, one of the world's premier digital service remittance companies to offer Visa Direct cross-border payments originating from Canada to bank accounts globally.
Another Visa Direct P2P expansion is with LINE Pay in Japan. Already a large wallet issuer, 6 million Visa credentials, LINE Pay is now enabling Visa Direct for cross-border and domestic use cases such as remittances and cash outs. On wage disbursement, GrubHub, a leading food ordering and delivery marketplace available in over 4,000 US cities, will enable drivers to quickly send their earnings to their eligible debit cards using Visa Direct. We are excited for them to join our other food delivery platforms, including DoorDash and SkipTheDishes.
We also reached an agreement with the US tip enabler, Kickfin, to enable millions of tips disbursements to be pushed to employees' accounts through eligible debit cards at thousands of restaurant locations they serve. For Kickfin, 90% of tips in the United States are still dispersed with cash today. In Canada, we reached an agreement with a large fintech, Wealthsimple, for accounts funds in and funds out for their over 2 million clients.
Finally, enablers are key to our success in Visa Direct and we recently signed a deal with Finastra, one of the world's largest financial services software companies and open banking platforms with 8,600 customers and serving 90 of the world's top 100 banks. Together, we will offer Finastra's clients access to cross-border business, to small business at B2C payouts, to eligible accounts in multiple currencies and countries.
While the US was one of our first markets to achieve scale for Visa Direct, we have many other countries and regions that are growing and scaling. For example, in Latin America, third quarter transactions quadrupled versus last year. We have over 20 domestic and cross-border P2P programs commercially launched or in pilot, such as PLIN and Yape in Peru, WhatsApp in Brazil and Cash across Central America, in addition to many other programs for other use cases.
Now let me move to value-added services, which had Q3 revenue growth of almost 20%. Our value-added services grow through new and existing clients, existing services, expanding geographically and adding new services both organically and through acquisitions. Today I'll provide an update on recent wins with some of our acquired entities. First, one of our earlier acquisitions, CyberSource, recently added NCR and Global Payments as partners, both intend to offer CyberSource capabilities to their merchant clients. This is an important strategy as our merchant base utilizing CyberSource through acquirers is growing payments volume twice as fast as the rest of our CyberSource business.
Cardinal Commerce, our network-agnostic authentication capability, has grown transactions 30% globally year-to-date, with more than double that in Europe, where the secure customer authentication requirement has driven faster adoption of 3D Secure. VERIFI, our network agnostic dispute resolution solution, recently extended its agreement with PNC for VERIFI's cardholder dispute resolution network product. YellowPepper, the network agnostic connectivity platform, just signed Vex, the Brazilian bank that offers its $50 million corporate and individual clients worldwide trade, e-commerce, staff solutions and most recently an FX API platform. Vex will use YellowPepper's payment initiation services to enable cross-border money movement starting with Visa Direct to send payouts to eligible cards.
I mentioned Tink's recent win earlier. Our other acquisition from this fiscal year, Currencycloud, has signed more than 100 Fintech clients since December to provide innovative foreign exchange solutions for cross-border payments. And finally, the tokenization capabilities we acquired now called Token ID have been selected by several partners. First, Global Payments will use Visa's Token ID as their strategic go-forward solution for multiple EMV network tokenization services to reduce card-not-present fraud and realize operational efficiencies for their clients.
Second, the Clearinghouse, the first US real-time payment network in one of two US ACH networks, chose Visa's Token ID solution to power the secure token exchange. This industry-first account tokenization solution in the United States is utilizing Visa's Token ID payment account tokenization technology to replace sensitive customer account data with unique tokens and reduce the amount of exposed payment data.
Our internally developed value-added services are just as important. One very compelling solution is from Visa consulting and analytics. Together with FIS, we recently launched a risk-as-a-service solution powered by data and risk experts. Key components of progress over the past 12 months include our real-time monitoring through our AI-enabled platform has blocked over $2 billion in fraudulent payments volume.
Our analysis of potential fraud for a proactive testing identified a $15 million exposure to clients. Our capabilities to proactively detect and mitigate cyber criminals attempts to inject payment skimming malware onto online merchant checkout pages has prevented over $10 million in e-commerce-related losses. And our ability to detect terminal cloning has successfully blocked $3 million in fraud from attempted downloads.
In sum, we had a very strong quarter and our results showed it. We made progress continuing to build relationships and solutions across consumer payments, new flows and value-added services that will fuel future growth around the globe. We remain vigilant in monitoring the trends in our business and the economy and confident on our strategy as we enable the movement of money globally.
With that, let me turn it over to Vasant.
