Visa’s Bullish on Contactless And Franchise-Broadening Acquisitions, Cautious on Libra

Visa Inc.’s net income jumped by a third in the quarter ended June 30, a period when the leading payment card network’s global transaction volume rose nearly 12% and the company completed or announced several acquisitions to broaden its franchise.

Visa chairman and chief executive Alfred F. Kelly Jr. told analysts during a late Tuesday conference call that he expects the number of Visa-branded contactless cards in the U.S. to triple by the end of 2020 to 300 million from the expected 100 million at the end of this year. He further announced that Visa had renewed through 2029 its partnership with JPMorgan Chase & Co., the nation’s largest credit card issuer and a big debit card issuer.

But Kelly sounded a cautious note about Libra, the cryptocurrency project backed by Facebook Inc. Visa is one of 28 partners, a group that includes Mastercard Inc. and PayPal Holdings Inc., that have said they plan to join the Libra Association, the entity that will oversee the controversial project. Consumer groups, lawmakers, and regulators in the U.S. and abroad all have questioned Libra on security, privacy, and other grounds. An analyst on the call said there is “confusion on the market” and asked Kelly if he views Libra as “a strategic partner” or potential disruptor.

Kelly replied that Visa so far has only “signed a non-binding letter of intent to join Libra.” 

“No one has yet officially joined,” he said. “We’re in discussions, and our ultimate decision to join will be determined by a number of factors, including, obviously, the ability of the association to satisfy all the requisite regulatory requirements. In my estimation it’s really, really early days, and there’s just a tremendous amount to be finalized.” He added, however, that “we actually believe we could be additive and helpful in the association.”

Earlier in the call, Kelly quickly reviewed Visa’s recent completed or pending acquisitions that include cross-border payments provider Earthport PLC, the token and smart-ticketing businesses of Rambus Inc., and Payworks GmbH, a Munich-based developer of cloud-based point-of-sale payment-gateway software. The company also has announced investments in various payments companies in Asia.

The deals “will accelerate our progress in capturing new payment flows and extend the boundaries of our capabilities and our network,” Kelly said.

Visa reported $1.02 trillion in U.S. payments volume in its third quarter of fiscal 2019, up 8.8% from $938 billion in the year-earlier period. Credit card volume rose 7% to $528 billion while debit volume increased 10.7% to $493 billion. Worldwide payment volume rose 4.9%, or 8.7% on a constant-currency basis, to $2.23 trillion.

The VisaNet network processed 35.4 billion transactions in the June-ending quarter, up 11.7% from 31.7 billion a year earlier. The higher volumes helped push Visa’s net income to $3.1 billion, a 33% increase from $2.33 billion in fiscal 2018’s third quarter. Net operating revenues increased 11.5% to $5.84 billion.