Visa Inc. (V) Earnings Call Transcript & Summary

Good afternoon, everyone. Thanks for joining us today for the 38th Annual Strategic Decisions Conference. I'm Harshita Rawat, the senior analyst covering payments at Bernstein, and I'm delighted to be joined today by Vasant Prabhu, the Vice Chairman and CFO of Visa. Vasant, thank you so much for joining us today.

Nice to be here, Harshita. Good to see you in person, and all of you.

So a very quick housekeeping item before we begin. Investors are able to submit questions through the Pigeonhole link available on the conference website. And with that, let's begin.

So Vasant, let's start with the 8-K you put out yesterday. Can you share your thoughts on the current spending trends you're seeing, both in domestic and cross-border spend?

Well, we issued the 8-K in your honor so we'll have something to talk about today. No, just kidding. We've been doing these mid-quarter updates because the world is fairly uncertain. And if you look at the numbers, I think what you would see -- so we reported numbers yesterday all the way through the 28th of May. So essentially April and May. The new news there is, since our last call, which was towards the end of April. And if you look at the numbers, essentially, there was no change in trend between April and May. In fact, the trend has been quite stable for quite a while. In total, U.S. volumes, payments volumes, indexed at about 148 to 2019, which -- we look at 2019 because looking at last year, there's just so much noise. So takeaway from that is things have been very stable. I know there's a lot of talk of slowdowns and so on, and we certainly are not going to be economic prognosticators. But if you look at the data, at least through the 28th of May, the consumer was essentially spending at the same level as they were in April and actually prior to April because the trend has been in that range for quite a while. If you also look at the compound annual growth rate of 148, it's a very healthy rate of growth over the last 3 years, which means that the growth has been faster post-pandemic than it has been pre-pandemic. So those are key takeaway. Then you take the debit part of the business, it's indexing in the 150s, which is, again, an even higher rate of growth. And that's driven by the fact that the cash digitization engine is in incredibly good shape. Through the pandemic, as you know, more people have gotten comfortable with using digital forms of payment. More merchants have realized that they have to accept digital forms of payment. And infrastructures for paying digitally have gotten better. In particular, more and more people are embracing e-commerce, even in categories they didn't do before. So that explains a lot of why debit has been growing so strongly and even faster than it was pre-COVID, and has stayed resilient even as credit has recovered. And if you look at the numbers for credit, the index at about 140. And that, on a compound annual growth rate, again, is faster than it was pre-COVID. Which would mean that credit, which was slow to recover, has not only gotten back to the pre-COVID trend line, but is now getting past it. So again, quite a bit of strength there. And what we see here is not that dissimilar to what we're seeing around the world. And if you look below the surface across spending categories, it's fairly intuitive in that, for a while, people stayed at home because they couldn't do anything else and bought a lot of product. Now people are spending on services. So that thing is -- the pendulum is swinging back to -- it swung towards product, it's swinging back towards services. We don't see much difference between essential goods people are buying. There's still a lot of discretionary buying going on. The fastest-growth areas are things people can do now that they couldn't do for a while, like travel, like restaurants, like entertainment. And then the cross-border business was -- had a very healthy May. It sort of was okay in April. Between March and April, it was around 90, 92, indexed in 2019. And it jumped by over 10 points in May. So the cross-border business has also been strong. So all in all, if you just strictly looked at the numbers, you would say consumer's doing the way they were before, business is strong and resilient and stable, and the categories that were slow to recover are recovering quite fast.

So Vasant, I want to follow up on cross-border. So as we've talked about before, had the pandemic not happened, your cross-border travel numbers would have been almost 30% versus 2019, I would argue even higher because inflation is running much higher. So what do we need to see for cross-border travel to kind of return to that pre-pandemic run rate now?

Yes. I mean, if you look at cross-border in total, right, I think you would have said cross-border in total should be at about 130 now. And if you look at the numbers we reported for May, if you look at cross-border in total, including intra-Europe, it's over 130 already. If you take out Europe, which is the right thing to do, take out intra-Europe, it's slightly below 130. I think it was 128. If you then take out Russia, because that's an apples-to-apples comparison, it's also already at 130. So effectively, the cross-border business in total has recovered to the trend line it was on pre-COVID because cross-border e-commerce is so much stronger, right? One of the big things that happened through the pandemic was the growth of cross-border e-commerce. I think one of the things we've all learned is that, as people embraced e-commerce more, they also become less sensitive to where the merchant is. If you're online and you're looking for something and you come across a merchant who may not even be domestic and you don't even know, you're comfortable buying it because we, Visa, protect you. Similarly, the merchant is okay selling it to you because we pay them. So we've enabled a lot of cross-border e-commerce which is indexing in the 160s right now, which is far faster than the pre-COVID trend line. So cross-border in total is back to 130. The travel part is not yet. It was, in May, around 108 or so. There's no reason why it won't get back because Asia is still recovering. Asia was indexing at around 40. In the second quarter, it's now indexing closer to 60. So just as we talked in April, Australia and New Zealand were opening up, many Asian countries were opening up. So clearly, we've seen the benefit of that. There's more to come. No question. We still have to see China open up at some point. Japan and Korea are still not fully open. Taiwan, same thing. We said that the U.S. had been recovering nicely. Inbound travel to the U.S. was recovering nicely in the second quarter. But on average through the quarter is about 70. That's now in the mid-80s or so. So that recovery trend has continued as the weather here gets better, as more Europeans and Asians come to the U.S., as Canadians come to the U.S. because that border has just opened. And then all indications are that travel into Europe is going to be very strong because it has really become strong right now. So we think there will be a good travel season in Europe this summer. So it's all happening as we expected. May was just a lot stronger than we expected. Now having said that, I mean, we'd like to see 10-point improvements every month. It's not going to happen. There will be fits and starts, so you can't do a straight line here. Just like between March and April, things sort of stabilized a bit, and then May was strong. So we'll see how it goes.

So Vasant , let's talk about the topic which is on everyone's mind, inflation, which is a tailwind for you because majority of your revenue is assessed as basis points and purchase volumes. But how should we think about the risk from rising inflation on consumers -- crowding out consumers discretionary spend, areas such as travel?

Look, I think inflation, in general, is not something anybody would like. And in the long run, economies are better off without inflation. And governments and central banks should do whatever they can to get inflation under control. As it stands today, it's not obvious that inflation is having meaningful changes in consumer behavior. Now I should say that everybody focuses on the headline number for inflation, whatever that number is, 8%, 8.5%, whatever. That may not be the inflation in the basket of things people buy using our credentials. So for example, you need to take out housing. People don't often pay for housing using our credentials. You need to take out used cars. And there are several other things you need to take out. And you'll get to things that are mostly bought on our kinds of credentials, and the inflation in those kinds of things is lower the last time I looked. Now there's gas in there, and gas is certainly a big contributor to inflation. If you -- and we're seeing that, no question. And if you take gas out, the amount of inflation and the things people are buying with our credentials is not anywhere near the headline number people see. So I think that's important for people to understand because that also has an impact on how behaviors might change. At this stage, it's not obvious that there are discernible changes in behavior. For example, our transaction counts have stayed quite strong. So it's not like people are using their cards less and buying things less frequently because of inflation. Our ticket sizes have become -- are still quite high. They haven't shrunk. Some of it may be because inflation has helped them. Some of it may be that consumption reductions are not meaningful yet. Some people say, well, because of inflation, people may cut back on discretionary spending. Well, on a year-over-year basis, the categories growing the fastest are what you might call discretionary categories, like travel, like restaurants, like entertainment because they're in a recovery mode, right? So maybe that's masking -- maybe they would have grown even faster, I don't know. It's hard to know. But if you look at our growth rate, you'd say there's no evidence of a pullback. So it's hard to know what it might have been. So I would say the short answer to your question is, at this point, it's not obvious whether people are pulling back on amount they consume or spending less on discretionary items and so on.

And Vasant, in light of the growing concerns around the current macro environment just more broadly, can you remind us how to think about Visa's financials or volume, transactions, revenue sensitivity in a potential downturn?

Yes. I mean if you loo at our business, the thing -- a few things to note is, I think you're going to find that this is a very resilient business. And this is a business that is incredibly well diversified, right? It's diversified across products and services. It's diversified across what you might call essential spending and what you might call discretionary spending. It's very diversified globally. It benefits from some things going on that could mask the impact of any slowdowns because we're coming into this time period with the cash digitization engine, which is our feedstock, right? Our feedstock is to take cash and digitize cash. The engine that does that has never been healthier because of the pandemic. So as I said earlier, through the pandemic, around the world, it's become a much stronger engine today than it was before. Just more people adopting digital forms of payments, more merchants accepting it, stronger infrastructures. We've seen our volumes in places like Asia and Latin America. I mean, Latin America and CEMEA are double in the last 3 years, which is way ahead of personal consumption expenditures. So you've got some things going on that will cause us to outperform because of what -- because of cash digitization. That's number one. Number two, there are some recovery trends in our business that most likely will continue because we think the pent-up demand for travel and for experiences people have been denied for a couple of years is extremely high, which is why we're seeing such an increase in spending on travel and restaurants and entertainment. Now could it have been even higher? We won't know. But the underlying trend is strong, and that could mask it. Our business today has more e-commerce than it did 3 years ago. And even in recessionary times, e-commerce is going to grow faster than consumption expenditure in total or in-store spending, and that could mask it. So we think our business is going to be quite resilient through a slowdown, if there is a slowdown, right? I mean, we are not forecasting anything. We're not in the forecasting business. The evidence we have today would say there's been no change in trend. But I think there's a lot of resilience in our business. Our debit business is heavily skewed towards essential spend anyway. Consumer balance sheets are generally still strong on the credit side. So there's a lot here that suggests that you will find a very resilient business more so than a lot of other businesses should there be a slowdown. But time will tell. I don't want -- we really don't want to get into the prediction business.

So Vasant, you touched upon some of the structural changes happening in Visa's business. So let's talk about Visa's growth opportunity. And you've talked about how Visa's opportunity set post-pandemic is now structurally better. Now on one hand, I think people can argue that the pandemic almost pulled forward cash-to-card conversion, and the penetration of cards is already very high in developed markets. But on the other hand, you've clearly been very active in growing acceptance points, growing partnerships with fintechs and expanding into new flows. So let's talk about the balance between the 2, which is the pull-forward of demand versus kind of growth of acceptance partners and new flows. And why do you believe that Visa, coming out of the pandemic, is going to have a better growth opportunity?

Yes. I think this idea that the pandemic in some ways has reduced the future opportunity is very flawed because the amount of acceleration that happened through the pandemic, based on the best calculations we can do, is maybe we brought forward 1 year's worth of cash digitization. Now you're talking about an ocean of cash, and it truly is an ocean. And it's an ocean not just in emerging markets, where it's truly extraordinary opportunity because the penetration levels of cash in almost every emerging market are still very small. I mean, if you just look at CEMEA and Latin America, as I said earlier, our payments volume has doubled over the last 3 years, right? I don't think PC, personal consumption, expenditures grew anywhere near that over the last 3 years. And it's all because of cash digitalization. And the starting points were so low. So we've got a long way to go. One metric we look at is, in a lot of these markets, people had a habit of going to an ATM, getting cash and then using the cash to buy things. We see some significant reductions in that kind of behavior. So there's just so much cash to digitize that, for people to believe that, somehow, the opportunity has been significantly reduced for the future, is just flawed. Even in developed markets. So if you look at the U.S., tap to pay is not even fully here yet. And this is one of the largest markets in the world. There's still large amounts of cash in the U.S. economy. And tap to pay is going to digitize a lot of transactions that today are not digitized, because we saw it in every other market. Because once you can just tap, it's so easy that you use it for just about everything, including tiny transactions, and it becomes an engine for cash digitalization. The same with -- you look at the number of credentials and they've been going up at a faster clip in the last 3 years. You look at the number of merchants accepting payments, it's never been cheaper or faster to become an acceptor of payments, right? All you need is a smart device and a mobile line, and you can be in business. And then of course we've expanded the use cases so dramatically, from consumer payments into all kinds of other things, with Visa Direct and the other initiatives we have. So I would say the amount of cash is still an ocean. And maybe we've taken a year's worth of supply out sooner than we thought. But if you had a 100 years of supply, and then many, many years of supply, I don't think there's any constraints on growth from that standpoint.

And Vasant, one thing which is really different from 6 years ago is Visa Direct, which you launched as a capability many years ago. So what are you hearing from your partners regarding growing use cases of Visa Direct? And its value proposition versus, say, real-time payments network? And then just a related point. Visa Direct is already contributing to volumes in a meaningful way. When can we start seeing contribution to revenue?

Yes. I mean, Visa Direct is already contributing to revenue. We just have not broken out the revenue because it's early days and so on. But it's a meaningful contributor to revenue. It would be -- if it was a startup, it would be a unicorn times whatever to the power of 2 or a power of 5 or whatever.

Into -- EV to gross volumes.

And will have profits. It will be making money, et cetera. So yes, Visa Direct is definitely doing extremely well. And at some point, we'll continue to provide more and more information about Visa Direct. Clearly, Russia going away was a little bit of a setback, but we'll recover from it. The reason it is superior to alternatives is RTP networks are local, Visa Direct is instantly global, right? There's no RTP network that crosses boundaries, number one. Our global network is always more valuable than our local network. Second, Visa Direct has all the value-added that we offer. And I would highlight 2 things that RTP networks often don't offer, which is the ability to get your money back, dispute resolution; and to manage fraud in a way that is as good as you can find. So Visa Direct has that. Clearly, Visa Direct is instantaneous. Not all RTP networks are truly real-time. Visa Direct is -- effectively, the transaction is done when it's done. You can be sure you're getting paid because we stand behind it. It has immediate access to all the credentials we have, which offers more scale and scope than any other network, right? And if you're going to be in the network business, the value of your network is the square of the nodes. So instantly, you've got a network that is multiples bigger than any other RTP network. Forget the fact that it's global. Even within a domestic market, it can often have more nodes than an RTP network. So the value it adds are pretty obvious. The goal is about -- the challenges to then scale all these use cases, and that's where partners come in because partners will develop solutions, whether that's for cross-border remittances or on-demand payroll, we allow them to scale faster than any other network can. And then don't underestimate the Visa brand, right? The brand stand -- and people are deeply conservative when it comes to their money. The brand stands for trust. We've never failed them. The network is always available. The network is secure. We guarantee that they won't be the victims of fraud because we stand behind the transaction. People who use the network know they get paid every night. It's always happened, never failed. It takes a long time to build that kind of franchise, and people underestimate how hard it is to do that. So those are all the advantages that Visa Direct would have over alternatives. And then going back to your previous question about the rate of growth being faster than pre-COVID. It's not just the cash digitization engine being stronger. It's the fact that we have more e-commerce in our mix right now. So think about the simple math, right? If you had x amount of e-commerce before COVID, now that percentage is higher and that business will grow faster. We know that because there's still -- e-commerce penetration of retail sales has still got a long way to go in every market. So you've got a faster-growing business that is a large part of your mix. So you've structurally got a higher growth rate. Then you layer on the fact that, in the cross-border business, you also have that e-commerce phenomenon helping you. Then you have all the Visa Direct new flows business, which is use cases that have massive total available markets that we're still in the early stages of developing and can have growth rates that are faster than consumer payments. And that business is going to become a larger and larger part of your mix. And then you have a value-added services business that is growing much faster than your consumer payments business and is becoming a larger part of your mix. When you put those 4 things together, that's why we feel better that we can sustain a higher growth rate post-COVID than we had pre-COVID. Those are all the reasons why. And it's not just cash digitalization, which I think remains a very healthy source of growth.

And Vasant, I think one part of the growth opportunity is also expanding partners in the ecosystem. So let's talk about partnerships. And you've been saying for a while that many disruptive fintechs are natural partners for Visa. This is something investors have closely watched for many years, but we are now seeing evidence that, for many fintechs, Visa is indeed a natural partner. So tell us more about that. What's the value proposition that Visa is bringing to the table?

Absolutely. I think this is really important because there's often been a lot of confusion about innovation at the nodes of our network versus anything that's disrupting the network itself, right? So our job is to -- this is an exciting and extraordinary time in our business. There is so much innovation and there's so much opportunity. And I think what people often don't realize is that we are the biggest enablers of innovation because without us, some of these innovative ideas could not scale. So our job should be at all times to make it very easy for anyone who has a new way to pay or be paid to think of us as the go-to network, right, to do that. Because we have to make it, a, easy for them to use our network. So it's the on-ramp should be -- connecting to our network should be easy. The second thing we need to do is that we have to be able to adapt our network to their needs. Just having a network is not enough. Every use case is different, and you have to figure out how to make that use case work on your network. And people often forget that. And they don't -- just having a network doesn't mean you'll get a transaction. Your network has to be tailored to meet the needs of that transaction. And we have to be good at that because these transactions and use cases are all quite different. And then the economics have to work for them. And as long as we can do that, then we will be the network of choice for any innovator. And often, before they know it, and we've told you this before, they may think they're going to compete with us but they really will benefit from partnering with us. And we've seen that over and over again because what they realize over time is that, going it alone makes it -- takes much longer, costs a lot more and poses greater risks than just coming to us and letting us help them scale. Because what happens is if they want to do it on their own and a competitor chooses to go with us, the competitor will scale faster because we don't pick winners and losers. Our job is to enable everybody. We're not trying to decide whether oil is going to be the next form of energy or coal, right? We'll carry both coal and oil, and you will decide whether you want to use coal or oil. We always said that BNPL is not an enemy. We welcome them on to our network. If buy now pay later is a way people want to extend credit or use credit, that's fine with us, we'll enable it. And consumers and merchants will decide whether this is a good idea or not. And we did the same with wallets. Wallets came along, and for a while, they were talking a closed loop story. And then we persuaded them that, if they have met our credentials in the wallet, it's good for them, it's good for everybody, because it allows them to open up their merchant networks to our card credentials, who their merchants want. And it opens up their wallet holders to our card credentials that they can use anywhere now, not just within this closed loop. And we see that over and over again. So the important point here is for us to make sure that we are of value to them. And as long as we can do that, it's a mutually beneficial proposition. In fact, most of our growth comes from all these innovations.

So Vasant, I want to switch gears and talk about "disruptive risk" as perceived by investors to Visa. So there's so much noise and concern about disruption as it relates to payments more broadly, for example, from the growth of account-to-account payments, government nationalism, domestic schemes, crypto, fintechs, and I think you mentioned some of these things earlier. But taking a step back, what are you seeing in the market today as it relates to the so-called disruptive risk?

Look, I think having a network by itself doesn't mean -- just like you build an airport, doesn't mean planes are going to fly into it. You build a highway, doesn't mean you're going to have cars on it. I think people often assume that, if there's a network, there's going to be volume, right? There's a lot you have to do to make that network worthwhile using. For example, Vocalink has been in the U.K. for over a decade. It was one of the early RTP systems. There have been multiple, multiple attempts, including one after it was acquired, to try and make Vocalink relevant for consumer payments. They've all failed. They've all failed for a lot of reasons. And I won't get into all the reasons why. So the existence of a network doesn't mean that the network is viable for various use cases. There has to be sufficient incentive for you as a consumer to use it. There's to be sufficient incentive for the merchant to use it. There's lots of factors at play here. So we view ourselves as in the business of moving money wherever you want to move it, and we're network-agnostic, we've said that before. Where we will move it on our network, but to the extent that we need to use other networks to move it, we will use other networks to move it. That's why we did the Earthport acquisition to get access to bank accounts should we need to move money to bank accounts. We did the Tink acquisition, which is at this point, mostly a data business, but it allows us down the road to use those kinds of capabilities to move money account to account. So our view is that we are the Visa brand. Our business is to get your money where it needs to go. We provide a certain set of promises when we do that. And those promises are we're always going to be reliable, we're always going to be secure, we're always going to be real time and you can trust us because, if anything goes wrong, we stand behind the transaction. Whether you're a consumer or a merchant or anybody using our network, we will provide that promise, and we're okay if we have to use some other rails to get your money there for certain transactions. So once again, I mean, we view these other networks, and most of them are open to us because they are generally available to anybody who wants to use them. We would use them and we would work with them to create businesses. And much as I said earlier about other partners, I mean, these are our partners, too.

So Vasant, I want to follow up on some of the points you made and ask about account-to-account payments specifically. So as we see this proliferation of real-time payments globally, along with the growth of open banking, are you seeing tangible use cases of A2A in consumer to business payment flows?

No. In A2A, consumer to business flows are still a tough category, right, meaning there's not much going on. A2A, you see some of it in things like bill payments, et cetera. There are a few use cases. There are parts of the world where A2A came before we came. In that case, A2A is a big business. Like if you go to the Nordics, right, the Nordics were early adopters of A2A long before A2A was even talked about as A2A and long before we were even a major force in the Nordics. But where we are already there and providing a service, there's not much A2A going on for consumer payments. Now remember, open banking is a horrible misnomer. There's a lot of people who look at the term open banking and say, "Oh, it's all about banking and money movement." It's open data, really. That's all it is right now, as you know. What open banking does is it's a regulation that allows you access to people's bank account information with their permission, and you're not allowed to deny access. If you're in Europe, a rule says you've got to provide it. So all these open banking businesses are data businesses. The business we bought, Tink, is a data business. What they do is they allow you to verify that somebody has a bank account. You can even look at their transaction flows and maybe do some credit scoring. You could do their transaction scores. And you can look at their transactions and do some, making sure they have the money for a particular transaction and so on. It's not yet about moving money. Now at some point, we think that we could use that kind of data and also facilitate the movement of money, but open banking today is not about moving money. And I think it's a big misunderstanding because of the term banking attached to open, right? It's more about open banking data or open data. So you shouldn't assume that open banking is resulting in a lot of account-to-account money movement. It really isn't.

So Vasant, I know -- continuing on this theme of disruption. So I know government nationalism is something Visa has navigated for -- through over a decade, if not decades. So given Russia's invasion of Ukraine and your suspension of operations in the country, are you seeing any changes in terms of how governments are looking at their own domestic payments infrastructure? And how is Visa engaging?

Look, I think, as you said, nationalism is not new. And there's nothing wrong with nationalism, right? I mean every country has to take care of their own sovereign interest, and we deal with it all the time. And our job is to persuade people that we can help them solve their problems. And I know there's a lot of talk on nationalism today in certain emerging markets and so on. But 50 or 60 years ago, when Visa was first into Europe, there was a lot of nationalism, what you might call nationalism. And every European country created domestic schemes and domestic networks. We dealt with it. We have a good business in Europe. We'll deal with it everywhere, we have to deal with it. We are very open to talking to governments about their sovereign requirements. We have to do things to meet those requirements. Of course, we will. All we ask for is that we are able to compete on a relatively even playing field. It's not even dissimilar for government -- uncommon for governments to maybe even tilt the playing field a little, right, in favor of domestic players. Fine. I mean, we'll play with a tilted playing field if they want to tilt the playing field a bit. We're used to that. We do it everywhere in the world. And our job is to provide a service that is superior enough that we can win on the merits. The only places where we will have an issue is when the government is actively hostile to the U.S., effectively views the U.S. as a strategic enemy. That's when they keep us out. And it's only one country and another one we chose to leave, and that's it. Everybody else does not view us as people that they have to keep out. They view us as, we provide a service, we know how to do these things, we engage with them on a regular basis. And all we ask for is the ability to compete and to compete and win if we are better.

So Vasant, you talked earlier about how India and Brazil are some of your fastest-growing markets right now. In places like India, you have UPI, Brazil, Pix pay. So how do you think about the addressability of huge amounts of cash and check in those countries vis-a-vis the local domestic payment methods?

We welcome other people coming in to develop a market, right? It's always good to have help when you're developing a market because then the market just develops faster. And yes, it means you have to share the market with more people, but we'd rather have a big chunk of a business of a market that's 10x as big than a bigger chunk of a market that's 1/10 the size. And that's effectively what happens when governments, let's say, do what the Indian government did with UPI, or Pix. When the government gets in the game, it's good for the market because more people are given digital credentials, more people are encouraged to use digital forms of payment. It's very hard for us to do on our own. When the government gets in, it can really give it a big boost. The second thing is that merchants have an incentive now to accept digital payments because there are more people walking around with digital credentials. Often, governments will then invest in the infrastructure also to make these payments more reliable. And so the whole market grows. And so you have a market where there's a greater propensity towards paying digitally, a greater propensity towards accepting digitally, a better infrastructure. And if we can offer a better service that is higher-value than the alternatives, then it's good for us. If people value our brand more, if people trust us more so they will give us the higher-value transactions, if people think that our security is better or our dispute resolution is better, and therefore if they have any transaction that is anything meaningful to them as opposed to tiny little transactions, they might come to us versus going to an alternative. So our experience has been -- and we said that when all this happened, that this is a good thing. It will expand the pie. We have to be good. We have to stay ahead of the pack. And if we do, then we will have a really nice chunk of a much bigger pie, and it will be a bigger business for us. And that's exactly what's happening in India and Brazil. Had some of this not happened, the markets may not have grown as much and we may not have grown this fast.

So Vasant, I also want to ask about online debit routing. So there is some concern amongst investors around potentially greater competition in U.S. online debit routing if the Federal Reserve clarifies some of the rules. Can you take a step back and highlight for us why a merchant prefers Visa for routing when they have a choice between 2 unaffiliated networks? And why that becomes even more important in an online context?

Yes. Look, I mean, we enable 2 networks, as you know, on all our credentials. So per the law, we are required to have our network and an unaffiliated network on every card, and that is the case today. Why do merchants online tend to use our network more than alternatives? I mean, I don't want to speak for merchants, but I can highlight a couple of reasons. Number one, some merchants like our dual-messaging capability. A lot of alternatives are what I'll call single-message alternatives. What does that mean? It means that if I'm, for example, a restaurant, as you know, they charge the bill on my card, then they come to my table and I put a tip on, and that's your second message. So a lot of restaurants will say, I can't use another network because I want dual messaging and they might pick us. Similar things happened with hotels. Similar things could happen to an e-commerce merchant, where maybe you order 10 items, they can ship 3 tomorrow and they'll ship the rest later or they'll ship it in 3 different tranches. Having dual messaging is useful because you can do that. Whereas if it's single message, you can't do that. You have to wait until the whole order is together. So there will be a bunch of merchants who use dual messaging because it's useful to them. As you know, once the chip came around, the fraud in-store has gone close to 0, and most of the fraud is online. And we've done a great job of reducing fraud online. And merchants in the end online are accountable for their fraud. They have to deal with it. And if a network offers better fraud capabilities, then they might pick that. The other thing is when you are buying online, they don't want you to abandon your card. They want to make it as easy as possible for you to use your card and they want the transaction to be approved. If because our fraud capabilities are better and our rules are better, more of our transactions are being approved versus if they're routed on another network, perhaps, they might pick us. So again, you should ask merchants this, but those are some of the reasons we can think of, why we get more of the transactions. And as to what happens in the future and are there going to be any changes in these rules? We don't really know. We'll have to wait and see.

And Vasant, I also want to ask about crypto. So it's -- on one hand, it's often perceived as a long-term risk to Visa. But on the other hand, you're enabling a lot of crypto transactions on you -- by -- through Visa credentials, you're partnering with dozens of crypto wallets. And now you also have capabilities for stablecoin settlement on the network. So how do you think about crypto vis-a-vis Visa's network?

Sure. Look, I mean, again, we don't view as crypto anything other than another partner. Look, we've been -- what is crypto, right? I mean, it's a token. In the end, it's tokenizing -- well, we should set aside the true cryptocurrencies. When it comes to stablecoins, all you're really doing is tokenizing a dollar. And we were in the tokenization of a dollar business 60 years ago when we took cash dollars and digitized them and created the Visa network. So there's nothing new about this. It's all about tokenization of a physical dollar, so to speak. And this time, it runs on a blockchain. So right now, I mean, we've done the obvious things. We're the on-ramp and the off-ramp. So anybody who wants to buy cryptocurrencies often use our credentials, buys them on one of these platforms. And now many of these platforms issue credentials. If you're on Crypto.com, you can get 8% off on every purchase if you use your Visa card. You go to a merchant and you can pay with a Crypto.com Visa card. The merchant gets paid in euros or pounds or whatever. Crypto.com sells your Bitcoin and pays us in -- you know. So we're doing all that. And it's a nice business for us, especially the part where you're paying for purchases with your crypto in the Crypto.com account, that's growing very nicely. But we're also looking at how do we accept stablecoins? How do we allow people to pay us in USDC? It's very early days. And I can go on and on about this. I mean, people have to do their homework on crypto in that blockchains are not yet at a point where their speed and cost has gone to the point where they can reliably do our kinds of transactions. Remember, to do our kinds of transactions, you have to do it in milliseconds for millicents, right? And inherent in the blockchain technology is a puzzle that they have to solve, which is you're trying to balance between security; decentralization, which is sort of the -- what do you call it, the centerpiece of what everybody in the blockchain world believes in, is decentralization is the heart of the whole universe; cost; and speed. If you want to reduce cost and speed, you have to give up on security and decentralization. So there's a technological problem to solve. And the solutions to those problems are not easy because giving up decentralization is something people don't want to do because it gets at the heart of what a blockchain has to offer. And then security has to be there. So they have to solve the technological problem and they haven't solved it yet. Even though some people say they have, there's still big debates about how much they've given up on decentralization and security, for example. And even after you solve the technological problem, just like an RTP network, you still have to figure out how to make it -- make use cases work, right? So how do you do dispute resolution in blockchain space? And humans are deeply, deeply conservative when it comes to money. And let's say you use a blockchain to settle a transaction and you want to like fix it, like you sold your Bored Ape. You hear these stories all the time, right? It was I sold it for $3,000. It was a fat finger, it was worth $30,000. I was going to list it for $30,000, but I listened it for $3,000. I want to fix that. You can't fix it. And there's no human to call. There's nobody to call. You just sit there and fume because that's it, it's over. You've got to solve these kinds of problems for them to become viable for our kinds of use cases. Now I can go on and on, so I'm going to stop right now, but there's a lot of issues to solve. What I would urge people to do, if they're hearing a story about this, is to dig deeper and ask a few questions. And more importantly, ask like, okay, how many transactions are you doing actually right now versus experimental ones? And what use cases are you serving right now? And there's not much going on.

So Vasant, I'll ask -- another question that came in through the audience. I know you don't have a business in domestic China, but what are you seeing in terms of activity on the ground in China? And have the shutdowns impacted your business, particularly from a supply chain perspective on cross-border?

We've been looking for supply chain impacts on our business for quite a while. We haven't seen any, right? Partly because I think our business is so diversified that it's hard to see. So for example, if you went to Amazon and you couldn't find a product because they couldn't get it, you may go look for it, and you may find a merchant somewhere in the world who has the product and you may buy it and we may still get the transaction. Or you went to buy a product and you couldn't get it, and you just said, "Okay. I don't want that. I'm going to buy that." We may still get the transaction. So we've been hearing about supply chain disruptions, as you know, for quite a while. We've looked hard at our numbers week after week. There's no evidence of it, right? I mean, we've -- you've never heard us say our numbers are down because of supply chain disruptions because we haven't seen it. And it may be because of this extraordinary diversification we have in our business. As it relates to China itself, we make a little bit of money on domestic transactions in China. We are not officially in the domestic business, but we have these dual-branded cards. And based on some historical considerations, we do get paid a little bit on them. So we do get to see some of the domestic transactions in China. And of course, the lockdowns have impacted the business. Certainly, they've impacted the cross-border business. And we'll see when it opens up. Clearly, China is the most impacted right now of any country in the world.

So Vasant, we are running out of time. So my last question for you. What are the top 2 competitive or regulatory risk as it relates to Visa that you're most worried about?

You're talking about just regulatory risk?

Just broader competitive, regulatory, disruptive risk.

Yes. I mean, when it comes to worrying about regulatory risk, I think we just have to manage them. I think the 2 risks we have to manage are what I said earlier, which is, this is a time of extraordinary innovation, and we need to make sure our network is relevant to innovators. Which means that it has to be very easy to use. It has to be very flexible to adapt to their needs, and it has to be economical for them to make their business case work. And if we don't do that, then shame on us, right? And so that is something we have to work hard on relentlessly, and it's not always easy. So I think making sure we do that is clearly a big worry. The second is, this is a time of extraordinary opportunity, and underinvesting would be a big mistake. Are we investing the right amount of money in the business? You've got so many opportunities you have to prioritize and sequence and hope you got it right, and you can make mistakes. So I think it's the challenges that come with the sort of the scope of the opportunity more so than sort of the defensive aspect, right? So I think the 2 things that worry all of us within Visa is those 2 things, that we are doing everything we can to capture the opportunities out there, and we're doing everything we can that we're enabling the innovation that we need to grow our business, that others are doing.

Fantastic. Listen, thank you so much for such an insightful conversation. And thanks, everyone, for joining.

Thank you. Bye.