Visa Inc. (V) Earnings Call Transcript & Summary

Welcome back to Evercore ISI's Eighth Annual Payments and Fintech Innovators Forum. We're delighted to host Visa management. Joining us from Visa are Chris Suh, Chief Financial Officer; and Jennifer Como, Global Head of Investor Relations. I'm David Togut. I lead the payments processors and IT services research team here at Evercore ISI. Chris and Jennifer, thanks so much for being with us here today. We greatly appreciate it.

No, thanks for having us.

So Chris, since you become CFO, how are you shaping Visa's finance organization to fit your management style? And in particular, where are you making changes versus your predecessor?

No. Thank you. Again, thanks. Hi, everyone. Thanks for having us. Yes, I've been at Visa now for just over 6 months. It's been a great 6 months. It's everything that I hoped it would be and my expectations when I came in. It's really a great company. The people are fantastic, an incredible culture, an iconic brand and an enviable market position that we have. And so it's really been a great 6-plus months. I was lucky that I inherited really a world-class finance team from my predecessor, Vasant. I really view my priorities over the -- we have this great growth pillars in consumer payments and new flows and value-added services. And I really do view my priority number 1 is to make sure that we are set up to sustain growth across our 3 growth pillars for the long term.

Great. Can you frame how Visa's financial model will evolve in terms of EBIT margin and return on invested capital as new payment flows and value-added services likely outgrow consumer payments over time? And then what are the longer-term implications for client incentives as value-added services and new payment flows outgrow consumer payments?

Yes, sure. We've talked a lot about value-added services, about new flows. We're incredibly excited about the growth runway in front of us. And as you said, we do anticipate the growth rates for those 2 growth pillars to continue to be higher than our consumer payments business overall. And so these are great opportunities in front of us in terms of top line revenue growth. From a margin perspective, as you talked about, it's really helpful to sort of understand and think maybe decompose the businesses a little bit, understand what's beneath the layers. We'll start with value-added services. It's not a single line of business, as you know, David. It's really many, many services that we categorize internally along 5 lines of business. It's around issuing solutions, acceptance solutions, risk and identity and advisory and open banking. And so across those 5 lines of business, if you sort of look at the products and services that are underlying those, so you have issuer processing, you have fraud and risk management, you have CyberSource, you have advisory services. Many of those are structurally similar in margins to our core business. And so you see many more similarities structurally in them than dissimilarities. Let's do the same for new flows. For new flows, the 2 biggest categories of services are around our commercial business and around Visa Direct. Now our commercial business, there's a lot of attributes that are very similar, again, to our core, around card issuance, around acceptance and around payment volumes. So again, strong margins, structurally similar, operates at scale. And Visa Direct. Visa Direct, even though it's a newer business for us, one that we're really excited about, it does operate at scale in the sense that the bulk of the transaction runs over VisaNet. So it has the advantages of scale. So you look across VAS, you look across new flows, and you'll see that, again, there's many more similarities to our core business. And so it does have a similar margin characteristics over time. And so we feel really good about our ability to continue to grow those. They'll be accretive to our top line growth because they are faster growing. But from a margin perspective, they're structurally more similar.

Great. And then just any -- any impact on return on invested capital? Are any of these services less capital intensive or more capital intensive than core...

Yes, they're more similar than dissimilar. Like I said, they run at scale across VisaNet in many cases, and they have similar attributes, their network, they attach to network transactions in many, many ways. So we do view those opportunities from a margin perspective is very, very similar.

Great. A barbell question on consumer payments. First part is on short-term consumer spending and payment volume trends that you're seeing? And then the second part is longer term around the runway for growth for consumer payments, both in the U.S. and internationally.

Yes, great. Let's start with short term. We're -- we had a -- going back to maybe the beginning of the fiscal year, just because that's my perspective on short term. We had a solid start to the year. We came in at revenue at the high end of our expected range. And so -- and cross-border was strong. And so we had a really solid start to the year. We're about a little past halfway into Q2 now. And so I can provide a little bit of update in terms of trends that we're seeing. And so those trends through February 21, it's going to sound a lot like I talked about, in fact, in our Q1 earnings. And so, a, from a consumer demand standpoint, we see resilience in consumer broadly; b, from an underlying health of business, when you look at our total payments volumes, the growth rate that we're seeing through the 21st of February is, in fact, quite consistent -- relatively consistent to what we saw in the first quarter. And that applies to the U.S. as well as other major markets. And the same goes for our cross-border business. We had a strong start to the year in cross-border growing [ 16% ] so far through the 21st of February, again, we're seeing relatively consistent growth rates as well. So stable environment, resilient consumer, all in all, feeling pretty good about it.

Great. And then just sort of longer term on the runway for growth of consumer payments, both in the U.S. and internationally, the U.S. question comes up a lot since you were a little tighter to PCE over the last couple of quarters.

Right, right. The other end of your barbell question. The first place I'd start was, when we look at the globe in the consumer payments business, which you asked specifically about and so putting aside value-added services and new flows for a second, which are big opportunities in all the markets that you're referring to, even in consumer payments, when we look at the amount of cash and check available globally, it's still a massive number. And it does vary somewhat by region in markets like Latin America, in CEMEA, in parts of Asia Pacific, certainly, the cash volumes relatively are significant. But even in the U.S., where we've had great success with digitization of payments, we still have a significant cash runway in front of us. And so, a, cash volume globally is still a massive opportunity. Our flywheel for growth really focuses on 3 levers. It focuses on growing issuance, which grew 6% this last quarter, focused on growing acceptance. Acceptance locations were up 17% in the first quarter. And it focuses on growing engagement, engagement in ways that can accelerate modern forms of payment. Two, important ones that we've talked about is, the fact that e-commerce for cash isn't really an option, is growing faster than in person has consistently done so, including in the U.S. The second is tap to pay. It's an important form of engagement. Globally, it's at 65% roughly. And that's 77% excluding the U.S., which is at 45% penetration in terms of tap to pay. And as studies have all shown, the more you tap, we get more transaction volume, more payment volume, and it really gives us an opportunity to penetrate into the long tail of cash spend. And so those are important engagement metrics. Of course, outside the U.S., as I talked about, significant cash opportunities in Latin America. We've grown issuance by 1.5x since 2019. We've grown acceptance by more than 2.5x since 2019. In places like Africa, the cash volume relative volume within PCEs, it was at high 80s, 86% in 2019. It's come down -- it's grown a lot, and it's down into the low 70s, 72% by 2022. And so you can see great progress already in the last few years and still ample runway in front of us. And so again, looking around the globe at the opportunity in consumer payments, we're very optimistic.

Thanks for that, Chris. Based on Visa's data, do you expect consumers to continue to overweight their spending toward experiences versus goods and services.

Well, we're not in the business of forecasting economic predictions, but I can tell you what we see in our data in Q1, it is consistent with the theme that you just talked about. We can kind of break it down and say, generally speaking, services are outperforming goods, even though goods are relatively stable, discretionary services, you think about restaurants and entertainment are doing better than discretionary goods like retail and apparel. But all in all, the trends are the mix of those things are kind of back to pre-pandemic levels. And so in some sense, a bit more normal. And then maybe the last one in the category spend travel, which has been strong at higher than pre-pandemic levels and has continued to remain elevated, has been also healthy. We talked about travel growing 19% in the first quarter as reflected in our cross-border results.

Great. Given the strength in global travel growth, which you called, that was up 19% year-over-year in the December quarter, can you speak to Visa's differentiation in airline co-brand cards? And where you see the biggest opportunities for co-brands with your largest issuers?

Yes. Co-brands. Let me maybe even zoom out a little bit and just talk about co-brands a little bit and then talk about airlines. We've been in the co-brand business a long time. We've had great success. We have -- in the U.S., we have 8 of the top 10 co-brand partnerships. And so this is really an important area for us. We differentiate. We have a very holistic view of how we think about our co-brand partnerships. So we really think about how do we bring differentiated value to our partners, and in turn, they offer differentiated value to their cardholders. How do we differentiate? There's a handful of ways that I can certainly talk about. How do we use our data as a differentiator to provide insights on customer behavior, to provide recommendations, again, providing differentiated value to their -- their ability to provide differentiated value to their cardholders. From a capabilities and solutions standpoint, we've invested tremendously in our capabilities and our differentiated product solutions. For example, CyberSource is a great example. It gives our co-brand partners the ability to monitor fraud, it gives them the ability to offer advanced services like tokenization to their clients. The third one I would point out is our brand. We're very proud of our brand. We've invested a lot to build that brand, what it stands for that brand offers value again to our co-brand partners. And then the fourth one I'd point to is a bit closely related to the brand, which is the value of the sponsorships and partnerships that we do. We have marquee partnerships with the Olympics, with the NFL, with FIFA World Cup and more recently announced F1 with the Red Bull racing team. And these offer opportunities to use those sponsorship assets again to benefit the brand and benefit the cardholders, the loyal customers of these co-brands. The Olympics coming up. Certainly, it's another opportunity to amplify those messages as well. As we think about airlines, we have extensive relationships with airlines across all the regions. And I'm sure I'm going to miss some of them, but in North America, United, Southwest, Allegiant; in Asia with Japan Airlines, Malaysia Airlines, ANA; in CEMEA with Emirates and Qatar Airlines; and in Europe as well with SWISS Air, Finnair, Norwegian Air. And so again, I'm sure I missed a few of them, but you can see the breadth of our airline partnerships. We continue to focus on co-brand partnerships with verticals like travel, entertainment. We announced 2 recently. We announced the deal with Universal in the U.S., which is another iconic brand. And then we announced a co-brand with a big retailer in Korea called Coupang, they have 20 million customers, and we're working together with their inaugural co-brand card. And so lots going on, on the co-brand space. This is an area where we spent a lot of time over the years, and we're really proud of the progress that we've made.

Thank you for that. In terms of new payment flows, Visa Direct continues to be the biggest growth driver. What are some of the most important new use cases you're exploring for Visa Direct?

Yes. Visa Direct is, in fact, one of the growth opportunities that we're really excited about. We've spent a lot of time. We've invested in really building the foundation for long-term success. If you think about what Visa Direct is, it really expands the flow of money from traditionally from consumer to business, which was our consumer payments business to all end points, if you think about B2C, P2P, G2C, it really enables all of the money movement to move both ways in the flow. What that takes is really a network of network strategy. We work with over 70 domestic payment schemes. We work with dozens of partners, RTP networks, other card networks, gateways. We've built out the infrastructure to enable this movement to happen. And the next layer, we -- then you have to sort of build the use cases, as you talked about. And so we have over 500 enablers, we have built thousands of programs and over 65 use cases already that are in market. All that comes together, we have more than 8.5 billion endpoints that are enabled to receive and send money flows through Visa Direct. And so you could send a card, you can send a wallet, you can send to account. It's really set up for all the infrastructure now, the groundwork has been laid for this business to continue to be a growth engine for Visa over time. Use cases. P2P has been the sort of the predominant use case to date, and it's still the biggest, but we're investing in new use cases. Really, some of the ones that we're excited about are in the B2C flows. So you think about merchant settlements, you think about gig worker economy payouts, think about marketplace disbursements. We announced some with Airbnb and Poshmark. This last quarter, we announced the ability to pay out the content creators on Meta. We have that new agreement. And so these sort of B2B -- B2C flows are new use cases that we're excited about as well. And so this is a great growth opportunity for us. We're expanding, ever expanding. And as I said, we've got the infrastructure and the groundwork really laid for us to grow over time.

That's great. Just more broadly on new payment flows, Chris. Where do you see the biggest new use cases across the $200 trillion TAM? I think what you've talked about including B2B, B2C, P2P and G2C.

Yes, lots of acronyms there. So the $200 trillion, you referenced, that was an updated market sizing that we gave this last quarter. It's obviously a very, very big number, $200 trillion market opportunity in our new flows business in aggregate, something that we're really excited about, and we see a long runway in terms of our ability to capture that. B2B is the most significant part of that $200 trillion. We sized it at about $145 trillion of that $200 trillion. And within that, I can sort of prioritize along 3 dimensions. In the near term, our short-term priority is around the card and virtual card business. That's about a $20 trillion opportunity. I think you're familiar with -- many of you are familiar, in many senses is more similar to our consumer business. There's issuance and acceptance and payment volumes that we run in the commercial business and aided by virtual cards and all the innovations that we're doing in that space. The second I put in kind of the medium-term category. It's really focused on cross-border B2B. We size that also at about $20 trillion of opportunity. We're focused on that with B2B Connect. And then the third one in the B2B category is a longer tail. It's a longer-term opportunity. It's -- we size it at about $105 trillion of the $145 million of B2B, and it's really in the AP, accounts receivable, and AP and AR space. And we're investing in some long-term opportunities there as well. The remainder of the $200 trillion, a lot of that has to do with the Visa Direct opportunities that we talked about. It's in the B2C, the G2C flows that we talked about and that comprises the majority of the other $55 trillion of market size estimate that we've updated recently.

Great. And maybe just following up. You called out B2B Connect in the cross-border B2B space. Any update on where Visa B2B Connect stands in terms of its build-out and volumes?

If you think about the genesis again of something like a B2B Connect, we listen to our clients. We listened to their experiences. They shared with us some of the challenges that they have historically with large ticket cross-border money movement, the ability to track that movement, the ability to predict when, how, how much, things like this that were sort of based on historical technology. And so we reimagine that experience in total, and we said, hey, I think we can build a better solution. B2B Connect was born as a result. It's a multilateral rich payment data attached, rich data attached that payment. So it gives customers and clients the ability to track that payment through the various cycles. We've seen great early progress. It is early days. And again, kind of like what I described with Visa Direct, we're focused on building the foundational elements to enable long-term growth. One of the first steps in going to do that is to bring in more banks that can participate in something like the B2B Connect experience. We've had -- in 2023, we had 70% more banks sign up to enable B2B Connect, and we've had over 100% growth in transacting banks during that year. It is early days. It's building a very significant capability for us, but we're happy with the early progress.

Great. Thank you so much for that. Value-added services, a clear standout revenue up 20% year-over-year in the December quarter. What are some of the biggest near-term drivers of growth in VAS? And then along with that, what do you see as some of the bigger longer-term drivers among risk and identity advisory acceptance of banking?

Yes. Good question. We're really excited about value-added services. You could tell by the way. We've talked about it consistently when we have the opportunity. As I mentioned in the previous question, value-added services is a host of services across multiple business lines. Our strategy really has been to think about how do we use value-added services to deepen existing client relationships? How do we grow into new markets and geos? And how do we bring new services and capabilities to our clients globally? That strategy, as you pointed out, is resonating. We are over $2 billion in the first quarter of total revenue, growing 20%. And that 20% level has been generally the level that we've seen. We've seen high teens to low 20s percent growth in value-added services over recent periods, and it's -- so it's a high-growth business for us. The second part of your question, really talking about opportunities, and how do we grow and how do we continue to grow? I think it's instructive maybe to look at each of the businesses because they are a little bit different. And so you can look at each one of them. So I'll just go through each of them with a little bit of detail. If you think about the first one that I called out, which is issuing solutions. In the first quarter, growth has really been driven by success in card benefit fees. That's been a successful business for us. The second category in acceptance solutions, CyberSource network -- other network products as well as fraud detection and prevention. Those have all been tailwinds to growth in our Acceptance Solutions business. So we're seeing great progress there. Third in risk and identity solutions. Two standouts, we've talked about, VAA and VRM, which stands for Visa Advanced Authorization and Visa Risk Monitoring. Those products have expanded globally. We've had great penetration around the globe. And they -- in terms of value provided, they -- we estimate they've prevented approximately $30 billion of fraud between mid-'22 to mid-'23 when we last did study on it. So they're really resonating. And then lastly, on advisory, which is maybe the one that's slightly different from the other 3 in the sense that it's your consulting services, it's marketing services, we had over 3,000 engagements in FY '23, clients continue to see the value, the expertise, the insights that Visa brings and so we're seeing great demand for our value-added services as well across the board. The other important thing, maybe the final thing I'll say about value-added services is that growth, the 20% growth that you talked about, it's broad-based. We're seeing double-digit growth across all 5 of the categories. And importantly, not just in 1 or 2 of the categories. And so we do think about them growing with network transactions, the ability to grow beyond that and the ability to price the value over time. And so excited about the opportunities ahead with value-added services.

Thank you so much for that. Continental Europe payment volume just grew 20% in constant currency in the December quarter. 8 years post the Visa Europe acquisition, if you can frame for us country and at the service level line as well, consumer payments, new flows and VAS, what do you see as the biggest TAM expansion opportunities for Visa in Continental Europe?

Yes. Let me talk about Europe maybe broadly, you sort of covered a lot of territory there. And so let me try to break that down a little bit from our perspective. Great momentum, great progress in the continent. The pipeline looks great, and we're competing well market by market. We talk about client wins. We talk about renewals and new deals each quarter. We highlighted 3 in the first quarter. One was a renewal with Isbank, which is the largest private bank in Turkey, another was with a bank in Poland called PKO Polski, who is the largest issuer and acquirer in Poland and Eastern Europe, a new deal with them, 33 million cards. The third is with a bank called Piraeus in Greece, which is the largest bank in Greece. We had -- we expanded our partnership with them. And so you continue to see we continue to win clients and build great relationships across the continent. And so we're really happy about that. From a product and innovation standpoint, we partner with over 100 fintechs in the continent. We've expanded capabilities through Tink and Currencycloud, and we continue to be excited about the opportunities to bring new services to market there. And then from a new flows and VAS perspective, we have -- for Visa Direct, we have over 100 enablers, over 1,000 programs, and we continue to see great traction. We've grown transactions by over 3x over the last 2 years in Europe. And then for value-added services, we've talked about the expansion of VAA and VRM as 2 products that are doing really, really well. VAA alone, we've seen tremendous growth in transaction volume there in number of transacting clients, and so we're seeing great progress in terms of our geo and market expansion. So all in all, when we look at Europe from a client and competitive landscape, from a product and innovation landscape, across new flows, across consumer payments, we continue to be excited and optimistic that we'll continue to see great growth across the continent.

Great. And then regulation is a big topic. A lot to talk about here. You've got Reg II from Durbin, Credit Card Competition Act in terms of -- seems to be moving slowly through Congress, Durbin 2.0, PSD3. So how do you assess the impact from kind of a host of these regulatory actions on Visa, either directly or more broadly on the payment ecosystem?

Yes. There's a lot to unpack there. You called off 2 or 3 things. So maybe I could just go through each one of them at some level and happy to go deeper, too. At the top level, before we get into each of the individual ones, I think our approach has been to consistently have constructive engagement with both legislature, regulators, alongside our client partners to make sure that we're both educating, but also making sure that they understand our point of view, the point of view that is good for consumers, good for our clients and good for the economy broadly. And so we do continue to have constructive engagement. You called out, I think Reg II, CCCA, and what was the third one you called -- you called out a few...

Durbin 2.0, [indiscernible] interchange down another 28%.

Okay. So let's go through each of the 3. Reg II. Reg IIs regulation that came into effect about 6 months ago in the summertime. For those not close to it, it basically is a regulation that requires issuers to have a second unaffiliated network associated on debit for card-not-present transactions. That went into effect in the summertime in July. So we've had 2 quarters of experience on it. The way we've characterized it over the first 2 quarters is basically some range of not meaning a modest impact in the last quarter. And we saw a little bit of impact that started in -- at the beginning of the quarter and stayed stable throughout the quarter. The thing that I would emphasize is actually the statement that Ryan made, Ryan, our CEO, Ryan McInerney made on our earnings call in the first quarter, which is, with the implementation of Reg II, it's actually given us an opportunity to engage with clients, with partners on the merchant side and to really highlight how we differentiate ourselves. How Visa's capabilities, how our value proposition is differentiated from others in the market. What are some of those differentiators? You think of merchants ultimately will have a choice under Reg II, and that choice comes down to not only cost, but to capabilities and liability. And so from a capability standpoint, there's 2 that I would highlight. One is around this notion of dual message support versus single message. And so Visa supports dual message, many of the -- most of the pin debit networks, which are the alternative networks that many times on the back of the card are single message. And what is dual message and single message? Well, dual message supports transactions where the final price is different from the initial price. So think about restaurants and tipping or hotels. Also applicable scenarios is in e-commerce, where you can't -- where a merchant can't bill until the products are shipped. And so if you have to ship in multiple packages, it really inhibits your ability to bill in multiple pieces. Liability is another really important one for our clients. In the e-commerce world, merchants bear the cost of that liability. And we've invested for decades in advanced fraud detection and tokenization efforts and things that really add a lot of value to that transaction. And so we feel good about Reg II. We feel good about our ability to operate in that regulatory environment. Remember, we've been operating under sort of Durbin 1 since 2011, it's been over a decade, and we've learned how to navigate in that environment. The second one is CCCA, which is a Credit Card Competition Act. We've been pretty clear about our position on this one. I know it's been in the headlines a bit lately. But again, we and our partners have been pretty clear on our position. A, we think it's unnecessary. We think the markets are working great. We think there's plenty of competition. We think it's -- the markets work effectively, good for the economy, good for consumers. Two, we think it's actually harmful. We think there's potentially the impact to have less credit available. It will take away rewards for consumers. There's many things that don't benefit consumers associated with the act. And the third one is it's -- they're probably underestimating how complicated and how expensive it is going to be to implement. Credit networks aren't built on the same as debit networks. And so to rewire the whole system in order to support a dual routing is very, very complicated and difficult and onerous to the whole industry and therefore, not good for the well-functioning of the payment markets in total. We made our point of view very clear on that. We continue to have constructive dialogue on this one as well. And I think the third one you asked about was debit -- potential debit cap regulation. Again, I point to the fact that we've been operating under regulated debit environments for some time. We've become adept at it, both regulated and unregulated markets with different varying levels of interchange. It's also worth reminding folks that interchange isn't revenue to Visa, interchanges and exchange of value from merchant to issuer, and we're sort of the enabler of that in the middle. But this is one -- I think history again, has proven that heavy-handed regulatory oversight on something like this doesn't translate to benefit to consumers, to merchants, to issuers, to all participants in the ecosystem. We've continued to express our point of view on that. I think they are taking some extra time to take feedback as I understand it, and so we'll continue to engage constructively along all 3 of these issues.

Has the Fed provided an updated time line, which they're taking a commentary industry participants?

Yes. I think -- and I'm not -- I don't know if I have the precise -- I know they extended it by a period of time, and I don't have the exact time line off the top of my head, but I think it was a 30-day extension or maybe it was a 3-month extension. I have a 3 in my mind, and we can certainly look at that up.

Great. Thank you so much for that. Visa recently acquired Brazil-based issuer processor and Bancorp processor Pismo, which expands your swim lanes quite nicely. Can you dimension your planned investment in Pismo's capabilities, both inside Brazil and outside to globalize its reach?

Sure. We were excited. We announced that we closed the acquisition of Pismo this last quarter. We're excited to have them be part of the Visa family now, and it's early days, but we'll be working on an integration plan. Let me spend a minute talking a little bit about Pismo, and how that complements our business. Again, this is a case where we listen to clients and what clients told us in terms of their needs around modern stack and around capabilities that expand beyond our current. So today, we have an issuer processor. So Pismo is a cloud-native issuer processor and core banking platform. They're global, and they have a broad set of services. Today, we have an issuer processor, it's DPS, an issuing process service. It is a debit card, primarily debit and prepaid and in the U.S. And so the complementary nature of a Pismo, which is not only debit, but it's credit, it's commercial, it's not -- it's global. They're a Brazilian company, as you pointed out, but they have large engagements with large and sophisticated clients globally. And so -- and they're cloud native. And so they -- as customers continue to -- on their cloud transformation journey, they want cloud native APIs, and Pismo provides us that capability. So excited to continue to now integrate Pismo. Like I said, it complements our business -- existing business very well. It's early days, and we'll continue to invest in that business to scale it globally and across the product set. And you'll hear us talk more about it, I'm sure, in the quarters to come.

Great. Thank you so much for that, Chris. More broadly on capital allocation priorities, has Pismo represented intentional longer-term inflection in Visa's acquisition strategy to broaden your services to card issuing banks into new adjacencies?

Well, it kind of goes back to what I was talking about, sort of the genesis of Pismo, like how did the Pismo -- the Pismo deal come to -- how was it born and how did it happen? We've listened to clients, we listened to their client needs, they tell us what their needs were, in that case, using cloud-native modern stack, filling the set of services that expand beyond debit. So if you think about that strategic rationale, it's actually not that different than how we've applied to other acquisitions in the past. CyberSource as an example of that, a little bit more than a decade ago when you saw e-commerce really starting to grow and accelerate. We recognize the need for a market-leading payments gateway solution and hence led to the acquisition of CyberSource. Today, fast forward, X number of years forward, today, CyberSource is a really important business for us, really an omni-channel payment solution that offers a breadth of services. And so that's been a terrific example. But again, it was born from us listening to clients, understanding the needs, our ability to invest in adjacent markets that satisfy our clients' needs. And so I think that's very, very strategically consistent with how we think about the Pismo acquisition as well. Your broader question was really around capital allocation. And I think within the context of everything I just said, we're going to continue to be thoughtful about how we invest, how we allocate our capital, whether it's inorganically through an M&A transaction or whether it's investing in own our capabilities, we'll go through that in a disciplined way. And as we've done, I think, over the decade plus that we've been a public company, I think we've shown that we're pretty disciplined about how we go about these things, and you should expect that we'll continue to be so.

Very clear. Thanks for that, Chris. One of the most topical questions right now in payments is just gauging the impact of Capital One's plan to move its volume with Visa and your primary competitor clearly to newly reissued Discover cards of Capital One's acquisition of Discover does receive regulatory approval and it's completed. So over what time line would you expect this to occur?

Yes. The first place I'd start with is it is very early days. It appears that it's going to be a bit of a long process. And so we'll have to see how all the pieces play out. Capital One has been a valuable and important long-term partner for Visa. Primarily, we work with them on the credit side. They represent a relatively small percent of our total credit volume and revenue in the low single digits. Right now, we're focused on continuing to partner with them in service of our customers, our cardholders, our business clients. But ultimately, we're -- we welcome the competition. We've invested in our network capabilities for a long, long time. We feel great about our market position, and we feel good about the outlook there.

Understood. Can you talk about how Visa would flex operating expenses to the extent global macroeconomic environments coming weaker than contemplated by your FY '24 guidance, which really looks at sort of a stable macro picture?

That's right. A couple of things I'll say before answering your question direct, let me just a little perspective. A, as we've consistently said, we don't predict macro. There are other people that are -- that do that. We tell you what we see in our data and therefore, base our guidance and our estimates based on what we see in the data. The second thing I'd say is we're a quarter, 1.5 quarters now into the fiscal year. And as I said earlier in my comments, we see a stable environment. We see a resilient consumer. We see payment volumes being consistently growing from Q4 to Q1 and now halfway into Q2. And so that all said with context. In the event of unforeseen, we do have levers. I think, we've shown that over the course of time, our cost structure. We operate with the healthy margins. We operate at great scale. We invest in people and in marketing. And in the event -- and we're always trying to balance, of course, short-term and long-term needs. But we've also shown an ability to flex those. We could obviously tune our hiring practices. The most significant cost on our P&L is around people, both permanent and contingent staff. On the marketing side of the house, about half of our marketing is variable. The other half is tied up into some of these longer-term sponsorships that we've talked about that are a little bit more permanent or at least less flexible, but the other half is certainly very well. So we do have levers. And again, we try not to be short-term minded in any of this. And so we'd have to assess the situation as each of them come up, and we try to be disciplined and thoughtful about making good decisions around long-term growth.

What business risks facing Visa do you spend the most time on and you're most focused on mitigating?

Well, I will answer it in maybe a slightly different way, which is, at the end of the day, the thing I started with, and I said, I view my priorities -- my #1 priority at Visa is to really set the company up for sustained long-term growth. And so while you're asking sort of the other side of that, like what do I spend my time worry about? And as a CFO, you do have to worry about many things. I'd say consistent with that first statement around driving long-term growth. I think the -- where I spend a lot of time in what is effectively in some sense of risk, as you called it, is we have many growth opportunities in front of us. We are investing in new flows, we're investing in value-added services and our consumer payments business. And our ability -- our capability to prioritize that spend to pick our bets, if you will, is one of the most strategic things that we could do as a management company to really be disciplined, making investments in things that have the best ROI over the long term strategically, financially and also on the other end of that, continuing to be disciplined about spending less on things that don't have the same runway. As you know, our business -- long lead time investment. It takes a year sometimes for us to see the financial returns on investments made. And so that muscle of continuing to prioritize and pick bets and reprioritize is probably the most important piece of work that I'll do during my time in Visa.

Understood. So we talked earlier about regulation. So I'm gathering that regulation from your perspective is pretty manageable as a business risk.

It's -- I don't want to certainly deemphasize it. It's important. It's time that the management team in total spends. We have a government engagement team that's a full-time job. It is to educate and engage with regulators and legislatures I spend time. Ryan certainly spends time, the rest of our management team spends time on it. It is important. But as I said also, from the get-go, we've been operating in regulatory environments for a considerable amount of time, and we've unfortunately had to become good at it. And so I do think that I have great confidence that we'll continue to navigate these fluid environment that we operate in.

Great. Perhaps in closing, what investor or analyst questions are you not receiving on Visa that you think we ought to be spending more time on either in terms of understanding Visa's underappreciated strengths or on the other side, maybe longer-term risks that you're monitoring as a management team?

Well, we've covered a lot of ground today. And so maybe since you've given me the floor to close a little bit, I'll just sort of summarize for you a little bit of my world view as to the opportunity of Visa and how many people in this room, of course, have been long-term shareholders, and we certainly appreciate the trust that you put in to us. When I look at the top line, our growth opportunities across consumer payments, across new flows, across VAS, we have an enduring business and consumer payments. We have great runway in new flows and value-added services. We've navigated successfully. We talked about regulatory things a lot. We've navigated through an ever-evolving regulatory competitive landscape around the world, and we've done so successfully, and I'm optimistic about our ability to do so. We continue to remain very disciplined in terms of how we think about investing, both CapEx, both OpEx, and we'll continue to again -- continue to do so. And then the third one is we've been a strong generator and returner of cash as well within all of that. And so again, thank you for your trust in us. I think Visa remains an incredible business, and we're going to continue to focus to deliver for all of our stakeholders.

Thanks so much for being here today. Chris, great. We appreciate it. Thanks again. Thanks, Jennifer.

Thank you, David. Appreciate it very much. Thanks very much. Thanks all.