Visa Kicks Out Handsome Profits, but CEO Kelly Admits To Being ‘a Bit Paranoid’

The Visa Inc. transaction machine continued to spit out profits in the payment network’s final quarter of fiscal 2017, but chief executive Alfred F. Kelly doesn’t want anyone to think he ignores competitive threats such as the rise of China’s Alipay or real-time payment services from other companies.

“I think a good characteristic of any CEO is to be a bit paranoid,” Kelly said Wednesday morning in a conference call in response to an analyst’s question about the competition. “We are really laser-focused on the future, and the fact that there are disruptive forces in the marketplace.”

Visa is in no immediate danger of being dethroned from its top network perch. Boosted in part by its June 2016 of its European franchise Visa Europe, Visa reported net income of $2.14 billion in the fourth quarter ended Sept. 30, up 11% from $1.93 billion a year earlier, on operating revenues of $4.86 billion, an increase of 14% from $4.26 billion.

Fourth-quarter transactions processed on the VisaNet network grew 13% to 29.2 billion. For all of fiscal 2017, transaction volume jumped 34% to 111.2 billion. The growth rate was 13% when normalized to include Visa Europe in all of fiscal 2016.

In addition to displacement of cash transactions by card payments globally, Visa picked up new volume from numerous sources, including competitive wins in the United States, expansion of digital payments, and more cross-border payments. Total U.S. payment volume hit $836 billion, up 9% from $768 billion in fiscal 2016’s fourth quarter. Credit card volume grew nearly 10% to $499 billion and debit volume rose 8% to $388 billion.

U.S. volume grew in part thanks to Visa’s mid-2016 additions of the Costco cobranded card formerly issued by American Express Co. and now issued by Citibank as a Visa credit card, plus the conversion by big issuer USAA of its Mastercard credit and debit cards to Visa.

In digital payments, the Visa Direct service that enables person-to-person payments grew 75% year-over-year in the fourth quarter, Kelly said without revealing transaction volumes. And on a constant-currency basis, cross-border volume grew 10% in the fourth quarter and 11% for the year when normalized for the addition of Visa Europe.

For all of fiscal 2017, Visa reported net income of $6.7 billion, up 12% from $6 billion the prior year, on net revenues of $18.4 billion, up 22% from $15 billion.