Dive Brief:

• Visa blamed a slowdown in U.S. payment flow growth late last year and into January partly on the impact of an updated Federal Reserve regulation calling for more competition in online debit processing. The biggest U.S. card network also flagged other causes, including bad weather in the U.S.
• Debit transaction growth declined to 5% for the quarter that ended Dec. 31, which is Visa’s fiscal first quarter, compared to 7% growth in the year-earlier quarter, according to a company presentation Thursday. That dragged down overall U.S. payments volume to 5% growth for the quarter, from 6%, as credit remained steady at 6%.
• On a Thursday webcast with analysts to discuss the earnings results, Visa Chief Financial Officer Chris Suh pointed to the impact from the Federal Reserve’s clarification of Regulation II, which made clear merchants must have access to multiple networks for routing debit card transactions. There was a “modest impact from Reg II,” Suh said.

Dive Insight:

To be sure, Visa still reported a rise in fiscal first-quarter net income and revenue relative to the same period in 2022. Net income for the quarter jumped 17% to $4.9 billion and revenue rose 9% to $8.6 billion as overall payments volume growth remained steady at 9%, according to Visa’s report.

The company’s executives had previously painted the impact following the Fed’s clarification of required competition as negligible.

Visa’s ongoing U.S. payments volume drag drew attention from analysts who follow the San Francisco-based company.

“Notably, total U.S. payment volume growth decelerated ~100 bp to ~4% in January compared to December and F1Q results,” Raymond James analysts said in a Jan. 25 note to their clients. “Processed transactions increased 8% throughout the first three weeks of the year, also showing a ~200 bp moderation vs. December (~100 bp vs. F1Q). However, poor weather conditions across the U.S. to start the year is likely the main culprit of the decel in volumes.”

Generally, analysts kept a positive outlook for the company. Visa CEO Ryan McInerney reiterated his company’s confidence that the U.S. still presents growth opportunities. That’s despite the advance of digital payments competition.

“We're six months in now since Reg II in the U.S., and we've had a chance to really engage with our clients and partners on the merchant side,” McInerney told analysts on the webcast, saying the change has provided an opportunity to reconnect with clients about those services. “The U.S. remains a significant opportunity for us in consumer payments. There's still a lot of cash, a lot of checks, a lot of ACH.”