Visa executives called out commercial payments and ancillary services as areas with expansion opportunities, as consumer card growth ebbs in some places, including the U.S.
Visa CEO Ryan McInerney presented the potential growth opportunities in his first investor day presentation since taking the company’s top post in 2023 and assembling his executive team.
Visa’s “deep bench was on display as was an evolution of its strategy toward unbundling solutions to enhance growth prospects, via Visa-as-a-Service, a product of its technological transformation begun a decade ago,” analysts for investment firm TD Cowen said of the investor day presentation in a Feb. 23 note to clients.
The TD Cowen analysts also noted Visa’s goal to increase revenue from that VAS effort, and other new payment flows, to half of its revenue, up from 30% last year, in an unspecified timeframe.
While McInerney pointed to sizable opportunities remaining in Visa’s flagship consumer card payments arena, he also emphasized extensive additional runway in the commercial card and value added services.
“We are now unbundling the Visa stack and taking these component solutions and offering them to a much broader array of customers,” McInerney said during the Feb. 20 investor day webcast.
About 70% of the company’s revenue is driven by its core payments business, but that is changing, analysts at the investment firm William Blair said in a Feb. 24 note. “We believe this transformation, strong internal execution, and technology investment will enable Visa to achieve its financial framework of 9%-12% revenue growth, driven by 5%-7% consumer payments expansion and 16%-18% Commercial and Money Movement (CMS) plus [Visa-as-a-service] growth,” they said in the note.
The San Francisco company, with 31,600 employees in 85 countries, is extending its services from its core card network clientele that has been the foundation of its business for 67 years. Beyond consumer payment credit, debit and prepaid card services, the company is adding account-to-account services, consulting services, fraud prevention options and cross-border payments worldwide, among other services.
Last year, Visa handled about $16 trillion in payments through about 300 billion transactions, according to its investor presentation deck.
Still, McInerney acknowledged growing competition from fintechs, including digital wallets, payment alternatives such as buy now, pay later tools, and cryptocurrency options, such as stablecoins. He noted the company is increasingly locking arms with some of those upstart rivals.
Visa’s ebbing dominance in the card market is evidenced to some extent by the slowing rate of growth in its home market. While Visa is the largest network in the U.S., followed by Mastercard, it is only the second-largest in the world, behind China’s UnionPay International.
Credit, debit and prepaid card activity worldwide will climb 43% to nearly 1.11 trillion transactions by 2029, relative to 2024, research firm Nilson Report predicted last month, with the biggest increase in the Asia-Pacific region (46.8%) and the smallest increase in the U.S. (27%), according to Nilson.
Visa estimated that last year it captured roughly one quarter of the $41 trillion worldwide consumer payments market, excluding China and Russia, which are dominated by domestic systems, according to the company’s presentation. That leaves about three-quarters of that commerce — currently transacted in card payments, paper checks, ACH payments, account-to-account payments and other instruments — as potentially ripe for the taking, Visa’s executives asserted.
With respect to commercial card payments, business-to-business transactions and other electronic money movement, Visa estimated that it snared only about $1.7 trillion of the $200-trillion market last year. The company also sees that as a major growth target, given opportunities in evolving peer-to-peer payments and virtual card payments as well as increasing digitization of accounts receivable and accounts payable segments.
McInerney emphasized the card network is opening more to allow developers to build off its systems, tapping into digital wallets and linking with other peers to build its VisaNet network-of-networks. Visa has also created its own stablecoin services.
Visa executives also contend that there’s room to expand in the value-added arena, where opportunities lie in a variety of software services, from issuing and acceptance to risk management and security. Visa’s $8.8 billion in revenue in that realm last year was minuscule relative to the $520 billion total addressable market, the presentation showed.
Aside from competition, the company also faces other regulatory obstacles that were less discussed during the presentation. Specifically, the Justice Department is suing the company over what the U.S. government alleges are antitrust violations in the U.S. debit card market. Federal prosecutors last year alleged the company illegally co-opted some fintech rivals as part of its monopolistic control of the industry.
In addition, some Congress members are intent on establishing more laws to rein in the industry. Specifically, Sen. Dick Durbin, an Illinois Democrat who serves as the whip for his party, plans to reintroduce a bill that would require banks that issue credit cards to ensure that alternatives to Visa and Mastercard are presented to merchants for routing transactions.
Also, the unlikely Senate duo of independent Sen. Bernie Saunders and Republican Sen. Josh Hawley have proposed to cap interest rates on credit cards at 10% for five years.
