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Stressing new services such as tokenization, online checkout, and mobile payments, Visa Inc. chief executive Charles W. Scharf on Wednesday left no doubt where the sprawling card network’s future lies. “The things we are doing are all about having the best products in the market to capture where the growth is, which is in the digital channels,” Scharf told stock analysts listening in on Visa’s fiscal fourth-quarter earnings call.
Two big initiatives in Visa’s digital strategy, Apple Inc.’s Apple Pay mobile-payments service and the streamlined Visa Checkout system for e-commerce, have both looked promising so far, Scharf said.
In support of that digital future, Visa will go on hiring binge, Scharf announced. The company plans to bring on 1,000 engineers in the United States alone in the coming months, he said.
At the same time, however, what could be a key element in Visa’s digital strategy appears to be stumbling. Visa revealed slowing growth at its CyberSource unit, a leading e-commerce gateway it acquired in 2010 for $2 billion in cash.
“We’re excited about Apple Pay,” Scharf said about Apple’s mobile wallet, which launched last week to the most fanfare yet seen for such a service in the United States. Visa has endorsed the service and is providing tokens to replace actual card account numbers for participating Visa issuers, with fees waived for the first year of the Visa token service, which launched this fall.
“It’s early days [for Apple Pay], but it’s encouraging,” Scharf told the analysts. “But it’s only the beginning. We expect a bunch of digital services leveraging our capabilities.”
For Visa Checkout, which launched this summer, the company has now attracted more than 200 supporting financial institutions, Scharf said. Recently signed merchants, he said, include The Gap, Gymboree. Crutchfield, and Orbitz. The successor to V.me, Checkout represents Visa’s own digital-wallet gambit. It stores consumers’ payment credentials for an expedited checkout when they’re ready to buy on a merchant’s online or mobile site.
Overall, merchants accepting Checkout represent more than $33 billion in “addressable volume,” Scharf told the analysts, with another $30 billion signed up. In online commerce, Scharf said flatly, “We intend to win.”
At CyberSource, though, the story seems less rosy. Growth at the 20-year-old e-commerce processor, still a giant in the gateway business, has hit a slow patch according to numbers Visa released Wednesday. Billable transactions totaled 7.55 billion in the year ended Sept. 30, up 16% for the year. That’s down from 26% annual growth in the prior 12-month period. Growth for the latest quarter was 12%, half the growth rate in the year-ago quarter.
When questioned by analysts about the CyberSource performance, Visa chief financial officer Byron Pollitt conceded disappointment. “We’re not happy with the growth,” he said, adding, “You should expect anemic growth to continue for a couple of quarters.” That could complicate things somewhat for Visa’s digital plans. “We have an important role for CyberSource to play in our future growth,” Pollitt said.
For the quarter ended September 2014, U.S. credit card volume reached $313 billion, up 13% from the $277 billion notched in the same quarter last year. For debit cards in the quarter, volume hit $319 billion, a 7% increase from $298 billion last year.
Total U.S. credit cards as of the end of June came to 295 million, up 6.5% compared to June 2013; U.S. debit cards totaled 447 million, a 4.9% jump.
