Visa Inc. (V) Earnings Call Transcript & Summary

So maybe let's talk about Pismo. That was the next topic I wanted to hit on. The -- I mean, the company has made significant strides since the acquisition. You've expanded into a bunch of new markets. I think probably the big headline this year was the win with Wells Fargo to power their consumer DDAs. So 2 kind of products, please, on issuer processing and then on core. On the processing side, you now have a full stack debit and credit processing platform. What do you see as the main benefits to the client experience of working with Visa now that you have that platform? And then on the core side, maybe just talk about the topic of core modernization in general, something that's been very slow to take place within a lot of the banks. How do you see that evolving over time? And where do you see the greatest demand for that?

Great. I think it's helpful to put in context and go back to what was our thesis, why did we buy Pismo. As I and others travel around the world and talk to clients, there were 2 challenges that they were running into. One is you had a lot of bank CEOs who, in fact, most bank CEOs were either had decided or were contemplating to move to the cloud. The second thing that we kept running into was as more and more, especially fintechs wanted to expand quickly to emerging markets and other geographies around the world, they couldn't find an issuer processing stack that was global enough, nimble enough, cloud native, which is how they built all of their businesses. And that was important for our growth, right, helping them ultimately scale. So those were the 2 thesis that led us to really scour the world for the best technology management team and platform. And ultimately, we found Pismo, which was based down in Brazil. So that's kind of how we got to this place. And then over the last couple of years, we've been working to scale that platform. On the 2 questions, Will, that you asked, on the first, as it relates to issuer processing, let me do U.S. and the non-U.S. Okay. In the U.S., we've had a debit processing, I would argue the leading debit processing, issuer processing stack for many, many years, it's called Visa DPS. We serve banks big and small with that stack. Now with the combination of Pismo, which has debit, credit, prepaid, commercial, full-stack issuer processing capabilities, we're able to selectively bring that full stack together where there's market opportunity. And what we found is there is some market opportunity at small and midsized banks that are looking to have an integrated credit debit issuer processing solution. It allows them to be more nimble. It simplifies how they run their stack. And with Pismo and DPS, we're able to combine the best of both worlds for small, midsized banks and fintechs who want to have one issuer processing stack for all of those products. So we announced recently that we were going to market with that capability. We expect that the largest and most sophisticated issuers will continue to run their highly customized credit and debit stack separately, and we continue to expect DPS to be a winner on the debit side of that space. If you go outside the U.S., we're starting to see some similar dynamics around people looking for integrated issuer processing stacks and those capabilities. And we've had a lot of good success using the Pismo asset to capture that. Okay. On core banking, core banking, like you, I think, were saying, there -- there have been a few big banks around the world that have actually made the move to the cloud. The big ones, you can probably count them on one hand, but there's a lot of them that are considering it. They're working on it. They know that they will be better and can be better at serving their clients if they can operate a core that's in the cloud. It's just a lot more agile, move more quickly, deploy products more quickly to market. And we're in all of those conversations. And I think Pismo is having -- has had a lot of success, and we expect we'll continue to have a lot of success with banks of all types around the world.

Yes. Makes sense. Okay. I want to pivot to agentic commerce. I think this has been one of the kind of most obvious connections with payments and the broader theme of AI and how that's kind of infecting the entire world. Visa has been really active in that space, Visa Intelligent Commerce, Trusted Agent Protocol, the recent collaboration with OpenAI. I think at the same time, like the conversation around autonomous consumer payments seems to have kind of subsided a bit. Many questions kind of remaining around how to verify agents, how to verify intent, who verifies identity. So what do you view as the key barriers to scaling agentic transactions from here? And what do you think the role of Visa and the broader payments ecosystem in agentic commerce will be?

We remain very optimistic about the agentic commerce opportunity, by the way, for us as a company, but also for you all as consumers. We're seeing a lot of adoption among consumers of using these tools for shopping, right, the top of the funnel for discovery. My guess is many of you in the room are similar to myself and other consumers, which is you're using your favorite LLM or platform to compare things, to shop for things, to identify things, but then you're still going to the seller website to complete the transaction. So seeing adoption for shopping, not yet for the autonomous payments. The barrier that you described, if I had to describe it in one word, it would be trust. Sellers need to trust that agents that are coming into their environment and their websites are actual real purpose-driven agents that users like Will have empowered to go make transactions at their website. That's why we've been building things. I think you mentioned the Trusted Agent Protocol, Trusted Agent directory. We think that Visa can play an important role in building trust on the seller side of the ecosystem. The second part of the trust equation is consumers, is all of us. We're going to announce tomorrow something we call the Visa Trust Index. We've done research with consumers asking them, do you trust these agentic platforms to go make payments on their own with your money and your financial information. And not surprisingly, most say no. Three out of four consumers say no. They don't trust that to happen. If you ask them, if Visa is involved, do you trust your agent to go make payments on your behalf, 61% of them say, yes, that I trust. So you go from 1 out 4 saying, I trust to 60%-plus. And if you ask the most engaged users, the ones that are using these LLMs at least once a week, that goes up to more than 70%. So I think we can play an incredibly important role using the capabilities that you mentioned to deliver trust to the buyer side of the ecosystem and the seller side of the ecosystem. And as we build out the capabilities that enable this agentic web, I think we'll play a very important role in all of that.

Makes sense. Let's pivot to stablecoins. I think so Visa is part of the Open Standard joint venture and the launch of OpenUSD. You've also introduced the Visa Stablecoin platform. So can you talk about the strategic rationale behind supporting another stablecoin? How does OUSD differ from some of the existing stablecoins that are out there? And what are the primary focus areas for enabling stablecoin payments?

Yes. So we are big believers in the product market fit for stablecoins in a couple of different areas. One is there's probably 50 countries around the world where consumers and families and businesses have wanted to hold on to U.S. dollars essentially in a bank account for generations, but they haven't been able to, whether it was for cost reasons or availability reasons or others. And then the second is cross-border, whether that be remittances or B2B cross-border. And we view all of that as opportunities for Visa. And so that's why we're focused on the space. And we have -- we're spending a lot of time building products kind of across the stack for stablecoins, starting at the level of the blockchains, moving up to issuance, moving up to wallets and then the orchestration and infrastructure layer and then ultimately, the application layer. We have teams working against each level of that stack. You mentioned OUSD. OUSD has the potential to be a very relevant stablecoin, purpose-built for payments. I think what -- I think you asked what differentiates OUSD in the standard is shared economics and neutral governance. And we think it's quite possible that those 2 elements of design of OUSD could help OUSD become an extremely relevant stablecoin globally in the areas where I said that there's product market fit. If you go back down to the bottom of the stack, we've been active as a validator on several payments purpose-built blockchains with Tempo and Arc and Canton, we're a super validator. And because we're involved at the base level of those blockchains, we're involved in the protocols that got put out, the standards that get deployed and those types of things. If you go all the way up to the application layer, stablecoin issuance has been quite a successful business for us. We have more than 200 stablecoin issuance programs in 50 countries now around the world that are empowering users who have stablecoin balances in their favorite wallet to be able to go spend those balances without having to think about how do I convert it from USDC into whatever fiat currency, maybe Argentinian pesos or something like that. We abstract the user from all that complexity and say, just go use your Visa card, and we'll take care of all that for you. So those are just some of the areas where we're focused. You mentioned the Visa Stablecoin platform as well. That is a platform we deployed to largely our issuer partners to make it easier for them to participate in a lot of things that are going on in stablecoins, whether that's to participate with OUSD or to participate with settlement on the Visa network and things like that as well. So you'll see a lot more from us across all those different layers of the stablecoin stack, focused on those 2 opportunities, those 50 countries around the world and cross-border.

Great. Okay. I wanted to pivot to competitive dynamics. Obviously, always an evolving landscape. Payments industry has always been very competitive. I think Visa has had some pretty big wins this year. I think you've had some in the travel space in cross-border. You announced the NatWest win on the most recent earnings call. Can you talk about what the conversations have been like with issuers, maybe how they've changed over the last couple of years? And how you see some of those decisioning factors that they're indexing on impacting some of the negotiations?

Sure. Winning as an issuer around the world and serving your clients has become a lot more difficult. You big issuer, small issuer, fintech issuer, a traditional financial institution, keeping up with the pace of innovation and delivering products and services that are going to keep the most sophisticated users engaged and on their stack and on their platform, it's just become a lot harder. So issuers are looking for partners that can help them lead and win in that innovation arms race that they're all competing in right now. And if you go again back to the first question we were talking about, we've put a lot of work in over the last several years to deploying product and innovation and capabilities in service of our issuers and helping them win, and that's helping us become their preferred partner. The kind of the conversations that you asked about, they've also become much more complex and sophisticated, right? Issuers are not just looking for us as a partner in consumer payments. We're bringing them opportunities in commercial payments, in Visa Direct, in value-added services, which we've spoken about. They're looking for processing capabilities, not just issuer, but core and all those types of things. So it's become a lot more complicated, a lot more complex and a lot more important, honestly, to our partners than it ever has been. And I think when they're choosing Visa, the feedback that we get is they're choosing our people, we have outstanding people. And when you're a client of Visa day in and day out, there's the products and the tech and the brand, but you need world-class people to help you put those to work in service of them growing their business. So we feel like we have the best team on the planet, and they're helping us win. The Visa brand is a significant differentiator in 200 countries and territories around the world. Our tech stack, the modernized tech stack and Visa-as-a-Service stack that we're putting to work for our clients is a big differentiator. Our value-added services are a differentiator in terms of why consumers are choosing Visa. And all those things when we win are reasons clients tell us that they chose us.

Okay. Got a couple of minutes left here. I wanted to go through a couple of more specific topics, starting with cross-border, which has always been a big driver of growth in the business, growing you mentioned earlier in the update. This quarter, still growing faster than the core business. As you look across the cross-border money movement capabilities that Visa has, whether it's on the consumer side and push payments, disbursements, where do you see the biggest opportunity to sustain or even accelerate some of the cross-border flows on the network?

We see big opportunities in consumer payments. We see big opportunities in our Visa Direct platform. We see big opportunities in our commercial and B2B. I mean, significant, significant opportunities. Like in the consumer payments business, I mean, there's still -- $2 trillion of TAM, a lot of which is still spent in cash and check as hard as that is to believe sitting in a conference room in San Francisco, very true in many markets around the world. And so we're investing to expand our acceptance in those markets. We're investing in marketing, targeting users, making sure they know they can use their Visa credential when they're traveling. We're investing in programs to create benefits. We have something called the Visa Destinations program that allows Visa users to get special curated benefits when they travel to these marquee markets. So consumer payments continues to be a tremendous opportunity. And by the way, one of the biggest assets and differentiated assets that we have around the world, the ability for a user to wake up in almost any country around the world and travel to almost any other country around the world and not have to worry about how they're going to pay for things. Anybody in the audience who might have traveled to San Francisco here from outside the country, I'm guessing you focus on what to pack in your suitcase, but you didn't worry about how you were going to pay for things because you can use your Visa credential anywhere around the hotel here. So that's one. The second is Visa Direct. Our Visa Direct platform now has 18 billion endpoints on it, all around the world, accounts, cards, wallets, and we're putting that network to use in service of lots of different partners, whether that's P2P use cases or B2C use cases or C2B use cases and cross-border is an area where that I think is a very differentiated asset. And then the B2B space as well. We talked a little bit about it with stablecoins, but I think B2B represents a meaningful set of opportunities, especially for higher-value cross-border transactions where we can put our products to work.

Makes sense. Okay. I wanted to talk on the regulatory environment, particularly in Europe. I think there's this broader theme around payments nationalism and the push for sovereign payment infrastructure. How is Visa engaging with European regulators and governments to kind of navigate some of the sovereignty concerns? And then specifically, how are you evaluating some of the recent developments in Europe around Wero and the latest pan-European payment schemes?

So sovereignty concerns and those types of things are not a new issue in Europe or anywhere else in the world. We've been engaging for many, many years with both our partners and also elected officials and regulators on this topic for many, many years. In Europe specifically, it's also been a topic for many years, but it's become an even elevated topic in recent years. And we're doing what we've always continued to do, which is engage locally, build locally, have great local teams locally. In Europe, we recently announced a EUR 500 million incremental investment in Europe, data center in Europe, more offices in Europe, a headquarters in Frankfurt, an innovation center in Poland, a lot more people on the ground in our 20 or so offices that span from Iceland down to Turkey. So we're doing what we do is invest more locally. Now Europe, you asked about Wero. I mean Europe has had and has been building out domestic alternatives for many, many years. They've got domestic card networks, Carbon Care, Redsys, TROY, others. They have a thriving digital wallet ecosystem before you even get to Wero, whether it's Swish or Vipps or Bizum in Spain and many, many others. And they're all having good success. So it's a very, very competitive market with domestic alternatives and has been for many years. And Wero will be another domestic wallet. They're off to a good start, and I expect that they'll make progress and provide even more competition to the European market, which is thriving today. So the market is competitive. It will get more competitive. There'll be even more domestic alternatives, and we'll continue to do what we do, which is invest locally, hopefully win locally and serve our clients and partners and help them thrive.

Got it. Okay. Last question here. I wanted to ask about the investment philosophy, particularly with the company continuing to operate at industry-leading margins. You recently announced a workforce reduction. But how are you balancing maintaining those healthy margins while also continuing investing in the business. You've announced some specific investments, for instance, in the European market just now. Where are you directing incremental investments today?

Yes. So the reduction in workforce that you referenced is really a step on a journey for us. we've been on a journey for the last 3-plus years of trying to run the company more efficiently, more effectively, more accurately in service of our clients and through that, free up incremental resources to then be able to invest more in marketing and products and salespeople and offices and data centers and all those types of things that hopefully drive this flywheel of continued growth. And we're just continuing to work our way through it. We're very blessed in that we have significant investment, significant ROI investment opportunities ahead of us in consumer payments, in value-added services and CMS. And the more we can free up resources to invest in those opportunities, hopefully, the more effective we can be serving our clients and driving growth.

Great. Well, I think that's all the time we had. Ryan, thank you for joining us. Really appreciate it.

Thanks for having me. Great to be here, Will. Thanks.