Despite the prevalent challenging economic conditions, Visa Inc, the biggest payment processor in the world did better than Wall Street expected, as the company’s shares went up 1.4% to USD 227.82 in January 2023.
Cross-border volumes, a crucial indicator of card usage outside of the nation of issuance, increased by 22% yearly on a constant dollar basis as a stronger currency helped increase travel outside of the United States by reducing the adverse effects of inflation and rising interest rates.
The total volume of payments increased by 7%. However, the growth was far less than the first quarter of 2021’s 40% growth in cross-border volumes and 20% growth in payments volumes.
Vasant Prabhu, chief financial officer at Visa, told Reuters that when the large (pandemic) rebound wears off, “Year-over-year growth rates are going to moderate.”
Visa’s sales went up by 12% to USD 7.9 billion, which is the slowest growth rate in the last seven quarters.
Vasant Prabhu said on a call after the earnings report that the company’s decision to leave Russia will affect the growth rates of reported payment volumes in the second quarter.
Mastercard Inc., a competitor, said that revenue growth for the current quarter would be lower than expected because of pent-up demand for travel in the future.
Ted Rossman, senior industry analyst at Bankrate.com, told the Global Banking and Finance Review, “Growth in the travel sector may be harder to come by in 2023 as some of the pent-up demand that piled up during the pandemic and was unleashed in 2022 is fading.”
According to Refinitiv, Visa recorded a profit of USD 2.18 per share, surpassing the analysts’ USD 2.01 projection.
For the fourth quarter, Visa’s payments volume rose 10% year-over-year and the number of processed transactions increased by 12%. The company’s cross-border volume leapt 36% as international transaction revenue soared 52% to USD 2.87 billion.
Visa’s first quarter fiscal 2023 earnings and revenue rose for the seventh straight quarter with its report. Adjusted earnings jumped 21% to USD 2.18 per share on a 12% revenue growth to USD 7.9 billion. Wall Street anticipated an 11% earnings increase to USD 2.01 per share on a 9% revenue growth to USD 7.7 billion.
Total payments volume increased 7% year-over-year and the company’s cross-border volume leapt 22% for the first quarter. Services revenue rose 10% to USD 3.5 billion and data processing revenue climbed 6% to USD 3.8 billion. International transaction revenues soared 29% to USD 2.8 billion.
In mid-December, Visa announced a pledge to invest USD 1 billion in Africa over the next five years to scale its operations and deepen connections with governments, financial institutions, merchants and other strategic partners. Visa says the investment will help create more inclusive economies across the continent and enable greater access to digital payments.
Visa stock rose 3% following its earnings reports. V stock is up more than 11% over December 2022.
Rival Mastercard’s gross dollar volume grew 14% through the first three quarters of 2022, to USD 6 trillion. The company’s cross-border volume spiked 51% during 2023, generating USD 4.8 billion in cross-border fees.
For the fourth quarter, Mastercard’s adjusted earnings rose 13% to USD 2.65 per share on a 12% revenue growth to USD 5.8 billion. That just beat Wall Street expectations of 9.4% earnings growth to USD 2.57 per share on 10.9% revenue growth to USD 5.79 billion.
For Q4, gross dollar volume grew 8% to $2.1 trillion. Cross-border payments volume leapt 31% to USD 1.8 billion and transaction processing fees rose 12% to USD 3.3 billion.
The results mark seven consecutive quarters of increasing earnings and eight quarters of revenue growth. However, earnings gains slowed in the last four quarters. And sales growth decelerated over the past seven quarters, falling from 36% growth in Q2 2021.