As Visa Stages a Comeback From Covid, It Scopes Out Its Chances in Open Banking

Visa Inc. along with many other payments companies was thrown for a loop by the coronavirus pandemic, but now it’s clawing it’s way back on the strength of debit cards, e-commerce, and a real-time payments service called Visa Direct. “In the United States, we are actually back to our prepandemic growth trajectory,” Vasant Prabhu, Visa’s chief financial officer, declared late Thursday during a call with equity analysts to discuss the company’s fiscal first-quarter results.

Visa Direct, a push-payments channel, saw transactions grow almost 60% year-over-year in the quarter ended Dec. 31 as such applications as remittances and gig-economy earned-wage access grew in prominence, Prabhu said. These more recent uses add on to Visa Direct’s original application in peer-to-peer payments. “Visa Direct has the ability to grow on a number of vectors. We’re in the early innings,” said Alfred Kelly, Visa’s chairman and chief executive. “This platform will for quite some time be really important to us from a growth perspective.”

But probably no payment method at Visa drew more momentum from the effects of the pandemic than debit, which includes prepaid cards and cash access along with retail spending. The category ballooned fully 17.4% year-over-year in the U.S. market to $741 billion. That performance follows a 22% leap in the third quarter (Visa’s fiscal year ends Sept. 30). Debit’s continued momentum helped offset a 4% downdraft in credit card volume in the quarter, to $542 billion.

As with other payments companies, Visa has also seen a dramatic rise in adoption of contactless cards in response to infection fears. The network now has some 300 million tap-and-pay cards in the U.S. market, Kelly said, making the United States Visa’s fourth-largest market for contactless.

Now, Kelly said, Visa is eyeing digital currencies. He announced Visa will work with cryptocurrency wallets and exchanges to ease the way for users to buy or cash out crypto holdings. So far, some 35 “leading exchanges” have agreed to issue Visa cards, he said, adding, “We believe we are uniquely positioned to make cryptocurrencies more safe.”

For all the optimism, one hard decision for Visa arrived earlier this month when it announced it was abandoning its $5.3-billion deal to acquire the data network Plaid Inc. The acquisition would have handed Visa a leading player in the crucial market for open banking, but the Department of Justice had sued on antitrust grounds to stop the deal.

Still, Visa isn’t giving up its pursuit of this market. “We’re focused on being a real player in open banking,” Kelly declared. “We still have the ability to partner with Plaid and other players.” Open banking refers to the business of connecting fintech apps with users’ bank accounts to verify balances and move funds.

Many observers see these fast-growing networks as alternative avenues for moving money. And now there are competitive implications. While Visa’s deal was stymied, rival Mastercard closed on its acquisition of Finicity Corp., a Plaid competitor.

For its fiscal first quarter, Visa logged $5.7 billion in net revenue, down 6% year-over-year. Net income totaled $3.1 billion, a 4% drop.