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Visa’s 2021 annual results show a significant increase in 2020 as revenues and payment volumes bounce back to above pre-COVID levels. Full-year net revenues increased 10 percent to $24.1bn, while payments volume (on a constant dollar basis) increased 16 percent to more than $10trn.
The card giant’s key metrics appear to have strongly rebounded to above pre-COVID levels, following an unprecedented drop in volumes and revenues in 2020.
“Our performance was driven by the continuation of the recovery in many global economies and the increased diversification of our revenue with new flows and value-added services,” said Visa CEO Alfred F Kelly Jr on the company's fourth-quarter release statement.
A core revenue driver for both Visa and Mastercard is cross-border flows. Both companies in particular make a significant margin on foreign currency exchange (FX). For example, in 2019, revenue from cross-border transactions represented more than a third of Visa’s total revenues, or $7.8bn. COVID-19 severely disrupted this significant flow of income as international travel was curtailed. As a result, the share of cross-border revenue fell to 29 percent share of total revenues in 2020, representing a decline of 19 percent to $6.3bn.
Although cross-border revenue increased in 2021, it is still well below pre-COVID levels. Visa reported that international transaction revenues had increased 4 percent in 2021 to $6.5bn, still 17 percent below 2019 levels.
According to Visa’s results, although cross-border payments volume increased by 9 percent in 2021, a significant contributing factor to this was usage across Europe. European Union harmonisation and the euro-area mean that card companies do not generate the same higher level revenues on these types of cross-border transactions, including FX. If we exclude Europe, Visa’s cross-border payments increased by just 1 percent.
Nevertheless, given the strong 2021 performance, supported by the global recovery, growing online card usage, as well as some business diversification and new revenues streams, the slow recovery in cross-border volumes appears to have been more than compensated for. It also suggests a significant future growth opportunity if international travel recovers over the next couple of years. Cross-border transactions, however, do not need to be made in person, so there is also an opportunity for growth from cross-border e-commerce.
According to Kelly: “Visa is even better positioned for the future as cross-border travel recovers and we continue to drive the rapid growth of digital payments and enable innovation in money movement globally.”
Visa Boasts BNPL Capabilities
Along with its annual financial results, Visa also made a new announcement regarding buy now, pay later (BNPL), releasing a list of issuers, acquirers and fintechs that are leveraging Visa’s technology — both the network-based Visa Installments Solution, as well as more long-standing fintech solutions — to bring BNPL options to their customers.
This week, for example, Visa announced that Sweden-headquartered Klarna has signed a global brand deal with the card scheme to accelerate its expansion and scale in several markets. Visa made a strategic investment in Klarna back in 2017.
It is not just Klarna that is working alongside Visa.
In North America, the company is collaborating with processor Moneris, as well as a host of financial service providers including CIBC, Commerce Bank, Desjardins Group, Equinox Payments, i2c, ScotiaBank and Versapay.
Meanwhile, in the Asia-Pacific region, following a recent launch with HSBC, Visa is rolling out instalment programmes with ANZ, GHL Systems Malaysia and Quest Payment Systems.
In Russia, Visa has partnered with Home Credit Bank and Russian Standard Bank.
“For years, Visa has been enthusiastically embracing BNPL for the same reason we pioneered revolving credit, debit and prepaid decades ago: because it expands choice and convenience for buyers and sellers alike,” said Mary Kay Bowman, Visa’s global head of payment and platform products.
If shoppers prefer a BNPL fintech solution, Visa wants to enable it, she added, continuing that if they want an option from their banks, they want to help offer that as well.
Visa’s September 2021 Growth From Knowledge survey discovered that nearly half of all global consumers, 42 percent, expressed an interest in instalment financing offered on their existing credit card or one they could apply for.
This is part of the reason that Visa Installments Solution is now being deployed globally to make issuer-offered BNPL options available in store and across e-commerce channels, the company has said.
Through this network-based solution, financial institutions can add BNPL as a customised feature for credit card holders on their already approved credit lines and likewise, acquirers on the network can activate the ability to enable instalments for any of their retailers that accept Visa.
Visa is not the only one offering this kind of solution. In September, the rival card scheme Mastercard announced a new platform for issuers to create regulator-friendly BNPL, which the company confirmed to VIXIO would fall within existing credit regulation, such as that applied in the UK by the Financial Conduct Authority.
VIXIO has approached Visa to ask whether the BNPL solution it is enabling for issuers and acquirers will be based on current consumer credit rules in the jurisdictions where it has gone live.
