Visa Eyes More Contactless Cards And More Volume From Visa Direct

Visa Inc. saw payment volume growth of nearly 11% in the quarter ended Dec. 31, and sees ever-more contactless cards and volume on its Visa Direct real-time payments service in its future.

Visa on Wednesday reported a respectable first quarter of fiscal 2019, according to its chief executive, despite the beginning of the U.S. federal-government shutdown, Brexit worries in Europe, and weakening cross-border payment growth. Worldwide payment volume totaled $2.2 trillion, up 10.7% year-over-year on a constant-currency basis. In the U.S., quarterly payment volume grew 10.6% to $980 billion from $886 billion the year before.

CEO Alfred F. Kelly said contactless transactions continue to be a major growth focus, both in the U.S. and abroad. “Excluding the U.S., 44% of domestic face-to-face transactions that run over our network are now tap-to-pay,” Kelly told stock analysts on a late-afternoon conference call. Kelly already has said Visa expects 100 million of its cards will be contactless by the end of 2019, with its largest issuer, JPMorgan Chase & Co., expected to convert its credit and debit cards by year’s end.

“Additionally Wells Fargo and Bank of America will start issuing tap-to-pay cards this year,” Kelly revealed on the call. Wells Fargo & Co. will begin cranking out contactless cards “in the upcoming months” and Bank of America Corp. will follow in the summer, according to Kelly. He didn’t say how many contactless cards the banks will issue, or by when.

Another big growth driver is Visa Direct, the network’s real-time debit service. “Visa Direct continues to expand use cases, geographies, and usage by leveraging scale partners,” Kelly said. “Transaction-count growth continues to be over 100%.” 

Visa Direct contributed to the 13% jump in U.S. debit payment volume to $461 billion from $408 billion in fiscal 2018’s first quarter. But Visa is pitching the service elsewhere in the world, too. Latin America’s largest merchant acquirer, based in Brazil, will offer the service for real-time disbursements, according to Kelly.

Visa’s U.S. credit volume came in at $519 billion, up 8.5% from $478 billion a year earlier. The big Visa cobranded Cabela’s card portfolio issued by Capital One Financial Corp. began converting to the Mastercard brand during the first quarter.

Visa reported processing 33.9 billion transactions on its network in the first quarter, up 11.2% from 30.5 billion year-over-year. Those transactions helped boost net revenues to $5.51 billion, a 13.2% increase from the prior year quarter’s $4.86 billion. At the same time, net income jumped 18% to $2.98 billion from $2.52 billion.

On other matters, Kelly left analysts guessing about the status of Visa’s planned buyout of London-based Earthport plc. Rival Mastercard Inc. last week swooped in with a bid for the business-to-business processor 10% higher than Visa’s. “We’re considering our options, and a further announcement will be made in due course,” Kelly said, adding that British law prevents him saying anything further now.

Kelly also reported that the U.S. District Court in Brooklyn, N.Y., last week gave preliminary approval to the damages portion of the recent settlement offer by Visa, Mastercard and some banks in the long-running litigation with merchants over credit card interchange known as MDL 1720. The proposed settlement announced in September would pay card-accepting merchants  $6.24 billion. Merchants will be notified of the preliminary approval and given the option of opting out, Kelly said. Final approval is expected in November. Some large merchants have already expressed skepticism about the proposal.