Wednesday , August 12, 2020

Visa Remains Profitable Despite Pandemic Hits; eBay Volume Jumps 26%

Visa Inc. reported Tuesday that it managed to make nearly $2.4 billion in its June-ending quarter despite massive hits to its international volumes and credit card spending caused by the Covid-19 pandemic, and its chief executive also addressed the latest debit card controversy. Separately, online marketplace eBay Inc. reported its volume rose 26% as stay-at-home consumers flocked to its platform for e-commerce purchases.

On a conference call with analysts, Visa CEO Al Kelly answered a question about a letter U.S. Sen. Richard Durbin, D-Ill., and U.S. Rep. Peter Welch, D-Vt., sent last week to Federal Reserve Board chairman Jerome Powell. The letter alleges big debit card issuing banks and Visa and Mastercard Inc. are not giving merchants the full transaction-routing choices they should be afforded under the Durbin Amendment to 2010’s Dodd-Frank Act, particularly in card-not-present transactions. 

Kelly disagreed in a brief response. “Visa is fully compliant with all the requirements of the Durbin Amendment, and we don’t have any rules or requirements or other restrictions that inhibit a merchant’s ability to select their routing decisions, make the routing decision of their choice,” he said. “The merchants are free, and often do, route to various unaffiliated networks enabled on a debit card, so I think we’re in good shape as it relates to Durbin.”

“Visa is fully compliant with all the requirements of the Durbin Amendment,” says CEO Kelly.

That response came as Kelly and chief financial officer Vasant Prabhu reviewed results for the company’s third quarter of fiscal 2020 ended June 30. The quarter saw total U.S. payment volume decline 7% year-over-year to $949 billion. With travel and big-ticket spending down, U.S. credit card payment volume plunged 21% to $417 billion. But debit cards, including prepaid cards, boosted by their popularity with consumers for everyday spending and the infusion of government stimulus funds into demand-deposit accounts to counter the pandemic’s economic devastation, saw payment volume rise 8% to $532 billion. 

On a constant-currency basis, worldwide payment volume fell 10% to $1.95 trillion. With international travel nearly halted because of the pandemic, cross-border payment volume, excluding intra-Europe transactions, plunged 47%. Visa’s total transactions processed declined 13% to 30.7 billion in the third quarter from 35.4 billion a year earlier.

The reduced volumes translated into a 17% decline in operating revenues to $4.84 billion. Visa’s net income fell 23% to $2.37 billion.

Meanwhile, some observers might conclude that eBay couldn’t be moving to its new managed-payments platform at a better time. The platform, which replaces a reliance on PayPal Holdings Inc. and lets sellers take payments via a gateway arrangement with Adyen NV, is arriving just as sales on eBay’s e-commerce marketplace are exploding. 

Driven by pandemic restrictions that have crimped or closed businesses and kept consumers close to home, eBay’s volume totaled $27.1 billion in the June quarter, up 26% year-over-year and 27% over the first quarter’s sales, the San Jose, Calif.-based company reported. Volume for U.S. sellers totaled $10.5 billion, up 32% over the first quarter and a 35% jump from the same period last year. New eBay CEO Jamie Iannone called the results “the highest growth rates in 15 years.”

The managed-payments program began nearly two years ago but is picking up steam now that a long-term payments agreement with PayPal, which was once an eBay property, is expiring this month. The platform is active in the U.S. and Germany, with announced plans to expand to the United Kingdom, Canada, and Australia.

On a call with analysts Tuesday, Iannone said the reaction from sellers so far on the platform is “generally very positive,” largely because it has cut their transaction costs. Another plus, he said, is that the platform also keeps buyers and sellers on eBay’s marketplace.

“One of the benefits of managed payments is to make it easier for buyers and sellers to have wallets and payments contained on the platform…managed payments is a great example of a tech-led re-imagination of our marketplace,” Iannone told the analysts. 

EBay announced earlier that 255,000 sellers have enrolled in managed payments so far, a move that has cut transaction costs by a total of $17 million. But Iannone also gave a nod to PayPal, which he said “will remain an important partner moving forward.”

Overall, buyers on eBay’s marketplace grew by 8 million in the quarter, to 182 million, after a succession of quarters in which that number remained stuck between 171 million and 174 million. Revenue totaled $2.87 billion, up 18% year-over-year.

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