Jim Daley - Visa Inc. divulged both grim and hopeful payment data Thursday that largely reflects what its rivals have been seeing after the early weeks of the Covid-19 pandemic.
“After strong growth in January and February, payments volumes dropped precipitously in the second half of March as lockdowns went into effect across the U.S.,” chief financial officer Vasant Prabhu said in reviewing March and April U.S. data during a conference call with analysts. F
“E-commerce will explode coming out of this,” says CEO Kelly.
Falling the farthest was travel spending, off 80% from year-earlier levels. Volume in retail, automotive, health-care, education, and government categories fell anywhere from 15% to 50%. Through April 28, U.S. payment volumes are down 19%—only 6% on debit cards but 31% on credit cards, which consumers typically use for more discretionary purposes.
Debit spending crossed into positive territory in the last two weeks of April as the first wave of government stimulus payments hit consumers’ pocketbooks, but Prabhu cautioned against reading too much into that. “It is too early to tell if this uptrend in the second half of April is the start of a recovery, a new plateau, or will fade in a couple of weeks,” he said.
E-commerce is Visa’s bright spot, as it is for Mastercard Inc., now that so many stores are closed and restaurants are relying on order-ahead sales. Excluding travel, Visa’s U.S. e-commerce volume was up 18% year-over-year for April through the 28th, and had even edged up toward 30% by month’s end.
Visa chairman and chief executive Alfred F. Kelly Jr. said on the call that many consumers sitting at home have become comfortable buying items online that they formerly bought in person, such as furniture, electronics, and clothing. “In general e-commerce will explode coming out of this,
” Kelly said.
Another apparent pandemic winner—contactless payments, as many consumers try to avoid handling what they perceive to be infection-carrying cash. At of the conclusion of the company’s second fiscal 2020 quarter ended March 31, “almost 60% of face-to-face transactions, excluding the United States, were tap to pay, and tap-to-pay transactions grew over 40% year over year,” Kelly said.
U.S. Visa card issuers now have 175 million contactless cards in circulation, and Kelly has said he expects that number to grow to 300 million by year’s end.
The pandemic storm hit late enough in the second quarter that it didn’t do serious damage to Visa’s financials. In fact, the San Francisco-based company reported net income of $3.08 billion, up 4% from $2.98 billion a year earlier. Net revenues rose nearly 7% to $5.85 billion from $5.49 billion in fiscal 2019’s second quarter.
U.S. payment volume in the quarter rose almost 6% to $984 billion. Credit card spending increased 4% to $492 billion while debit payments also hit $492 billion on a nearly 8% boost. Transactions processed on Visa’s global network rose 7% to 34.9 billion.
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