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A year ago, you might have heard payments-network bigwigs complaining about the pandemic’s impact on revenues and volumes. Now, not so much. But, late Tuesday, Visa Inc. indicated it has been hit by a fresh development—Russia’s invasion of Ukraine. That war, which began Feb. 24, trimmed 4 percentage points off Visa’s revenue for the quarter ended March 31, the company said. “Visa’s performance was very strong, but we’ll have a reset due to Russia,” said chief executive Al Kelly during a conference call to discuss the company’s results.
At the outset of the invasion, Visa along with other payments networks ceased processing transactions originating in Russia. The networks’ action does not affect transactions that stay within the country’s borders. Now, Visa has found its action in Russia has particularly hammered its Visa Direct business, a product for which Russia accounts for 17% of transactions, second only to the United States. Visa Direct allows cardholders to receive near-instantaneous funds transfers. “This was an unfortunate effect,” noted chief financial officer Vasant Prabhu, who also spoke during the call.
The impact may have been “unfortunate,” but it only muted what was a strong quarter for Visa and Visa Direct, for which transactions grew 20% overall. Meanwhile, Visa last month closed on its deal for the European open-banking platform Tink AB and found itself relatively unruffled by rapidly rising inflation in the U.S. market. The inflation rate in one year has climbed to 8.54% from 2.62%.
“Inflation has puts and takes,” said Kelly, pointing out that rising prices inflate dollar volumes but also can depress consumption. “So far, we’re really not seeing much impact that’s causing us concern,” he said. In fact, he pointed out, inflation historically “has been a net positive for us.”
Meanwhile, Kelly made it plain he has big plans in open banking, leveraging the technology from Tink, which operates across 18 markets in Europe. “Our goal is to position ourselves in the center of open banking where it is most advanced, which is in Europe,” he said. “Then we anticipate we will leverage [Tink’s] capabilities in other markets.”
Open banking networks allow financial providers to verify the ownership of users’ bank accounts as a prerequisite to moving funds directly between those accounts and accounts held by fintechs. This account-to-account movement is a business both Visa and rival Mastercard have been eager to build. The U.S. Justice Department in January last year stopped Visa from buying one of the largest open-banking platforms, Plaid, on the ground the move was anti-competitive.
Tink’s network reaches 250 million consumers and serves some 300 bank and fintech clients. Visa did not disclose the price it paid for Tink, but the company’s valuation in 2020 came to $824 million, according to a report from William Blair & Co.
For the quarter, payments transactions overall totaled 57.1 billion worldwide, up 16% year-over year, while in the U.S. market the total came to 21 billion, up 10%. Dollar volume totaled $2.78 trillion, up 17.1% on a constant-dollar basis. For the U.S., the total was $1.34 trillion, a 15.5% increase. Revenue came to $7.2 billion, a 25% increase.
