The Business Times

Visa’s spending growth slows as consumers hit by inflation

Published Wed, Oct 26, 2022 · 06:15 AM

VISA saw spending growth slow the most since the depths of the pandemic as inflation weighs on consumers. Shares gained as profit exceeded analysts’ expectations.

Volume on the network rose 10.5 per cent to US$2.93 trillion in the fiscal fourth quarter, Visa said on Tuesday (Oct 25). That was shy of the 11 per cent increase analysts in a Bloomberg survey were expecting and a decrease from the 12 per cent growth the firm reported for the previous three months. It was the slowest growth since Visa posted less than 5 per cent for the first fiscal quarter of 2021.

“As we look ahead, while some short-term uncertainty exists, we remain confident in Visa’s long-term growth trajectory across consumer payments, new flows and value-added services,” chief executive officer Al Kelly said in a statement.

Visa and its rivals have seen spending increases cool with inflation soaring to once-in-a-generation levels. They’re also facing tough comparisons with a year earlier when spending jumped as economies opened back up as Covid-19 vaccines proliferated and the pandemic began to recede.

When planning for 2023, Visa “did not factor in a steep economic downturn or recession”, Kelly said on a conference call with analysts. If such a decline occurs, “it will have some impact”.

Cross-border volume, a key metric for San Francisco-based Visa since such transactions are typically more lucrative than domestic spending, climbed 36 per cent, matching analysts’ expectations.

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“Some economies around the world could face increased pressures so we will be monitoring things very closely,” Kelly said on the call.

Revenue for the three months through September jumped 23 per cent on a constant-dollar basis from a year earlier to US$7.8 billion, while earnings totalled US$4.1 billion, or US$1.93 a share. Analysts were expecting an adjusted profit of US$1.86 a share.

Visa has been shelling out more in rebates to persuade banks and retailers to route a greater number of transactions over its network. Such incentives jumped 20 per cent to US$2.86 billion.

The shares gained 1.3 per cent to US$196.99 at 5.26 pm in extended New York trading following the announcement. They ended regular trading at US$194.38, down about 10 per cent this year. BLOOMBERG

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