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More than 750,000 locations representing 17% of the U.S. face-to-face card-accepting merchant base are now enabled to accept EMV chip cards, Visa Inc. chief executive Charles W. Scharf reported Thursday. The EMV acceptance base is up 42% from the 529,000 locations active as of October, when the card networks’ U.S. EMV liability shifts took effect.
“Based on our recent client surveys, we expect 50% of locations to be enabled by the end of this year,” Scharf said during a conference call to review financial results for the first quarter of fiscal 2016 ended Dec. 31. “While we know we have long way to go over the next few years to reach the critical mass of adoption that we desire, we feel very good about the progress to date.”
On the card-issuing side, Scharf said more than 200 million Visa-branded U.S. chip cards had been issued as of December—more than in any other country even though the U.S. is a late-comer to the EMV party. Forty-three percent of Visa credit cards representing 72% of purchase volume, and 21% of debit cards representing 45% of purchase volume, now have chips, he said.
Seeking to reduce card fraud, Visa started the EMV conversion in the U.S. in 2011 when it announced its planned liability shift, and the other major networks followed. The conversion has been controversial and costly and, as Scharf indicated, is far from complete. But the analysts on the call were more concerned about other matters, particularly mobile and online payments and the effects of the strong U.S. dollar and weak economies in many countries on Visa’s massive international business, which had $2.27 trillion in purchase volume last year.
The CEO fielded a number of questions about Visa Checkout, the network’s digital-wallet service. Scharf reported that it now has more than 10 million users in 16 countries, up from 7 million three months ago. More than 200 financial institutions and 250,000 merchants support it.
Also on the digital front, Visa recently launched the Visa Commerce Network, a service built on the TrialPay platform that Visa bought last year. The platform enables merchants to deliver simplified discounts and offers to customers. Users include Dunkin’ Donuts and Uber.
Visa also is beefing up its Authorize.net gateway for small and mid-sized online merchants. Authorize.net, a part of Visa’s CyberSource fraud-control and online unit, was an early leader in e-commerce, but it hasn’t been in the news much since Visa bought CyberSource in 2010.
“We’ve just made a series of changes internally, with some leadership changes that we’re very excited about, to help re-energize the business there and to be in a position to compete,” said Scharf.
Also on the digital-commerce front, an analyst asked Scharf if he had a competitive response regarding mobile-payments leader PayPal Holdings Inc. Many PayPal users fund their accounts through Visa and MasterCard cards, but PayPal prefers lower-cost automated clearing house funding and has a growing array of services that compete with Visa and other payments providers.
Scharf said he wouldn’t comment on specific companies, but he quickly added that Visa’s preference is to work with firms “that we think are good for the payment system and preserve our clients’ roles and our role in the ecosystem.” But those “whose business model is built around dis-intermediating us eventually, and our clients, is not something that we like … not something that we’re just going to sit idly by and watch.” He said Visa’s first preference is “partner with people,” but if that doesn’t happen, it will compete directly with them. “That will evolve in the near future, so more to come on that.”
Meanwhile, Scharf said Visa Inc.’s planned $23.4 billion buyout of the London-based bank card network Visa Europe is on track, having cleared two of three required regulatory approvals, with the European Commission sign-off remaining.
Visa Inc. posted $713 billion in U.S. payments volume in the first quarter, up 9.5% from $651 billion a year earlier, on 14 billion transactions, up 11.4%. Credit card payment volume increased 9.2% to $358 billion while debit volume grew 9.8% to $355 billion.
The card network reported quarterly revenues of $3.57 billion, up 5.4%, and net income of $1.94 billion, a year over year increase of 23.7%.
