Ryan McInerney
Chief Executive Officer at Visa
Good afternoon, and thank you for joining us. Our financial performance in the third quarter of 2023 was strong, with net revenues up 12% year-over-year. Non-GAAP earnings per share was $2.16, up 9%. Overall, our global quarterly payments volume was up 9% year-over-year. In the U.S., quarterly payments volume was up 6%, as expected, primarily due to moderating inflation. Outside the U.S., International payments volume was up 12%. Excluding intra-Europe, total cross-border volume remained strong, up 22%, with cross-border travel volume at 136% of 2019. Processed transactions grew 10% year-over-year.
As I mentioned on our previous earnings call, my priorities are focused on doing everything that we can to accelerate our growth by executing our strategy, including supporting our go-to-market teams, delivering for our clients, shipping innovative products even faster and selling our solutions even more effectively. With those priorities in mind, I would like to review our progress across our three growth levers: consumer payments, new flows and value-added services. We continue to make great strides growing and expanding our consumer payments business, winning with new and existing clients and shifting volume to Visa from a wide array of local, regional and global competitors around the world.
Our clients tell us they're choosing to deepen and expand their partnerships with us for a number of reasons, including our people, our products, our value-added services, our new flows and our brand. I'll share a few examples.
First, our people. We consistently hear from our clients that they deeply value the advice, local support and partnership they receive day-in and day-out from our outstanding team members around the world. They also appreciate our thoughtful industry leadership on important and complicated issues across the ecosystem. In fact, in our latest global Net Promoter Score survey, our clients rated us at 73.
In the U.S., we retained our position of serving eight of the top 10 credit unions by recently renewing one of the largest players in the space, Pentagon Federal Credit Union. While there are many reasons for our success with PenFed, our people and our local market relationship model made the difference, just like it has for over 350 U.S. community bank and credit union renewals this year to-date. Payments is a local business, and our priority to invest locally with great talent has paid off. For example, across Eastern Europe, Intesa Sanpaolo will issue Visa Debit in Croatia, Hungary, Romania, Slovakia and Slovenia representing over 3 million Visa credentials.
Second, our payment products and innovations consistently help us win. Our clients tell us they choose Visa because our innovative products help ensure they are delivering leading-edge payment solutions to their customers. For example, in Korea, we've recently renewed our partnership with Hyundai Card. As part of our new partnership, Hyundai will be taking advantage of our digital payment solutions like data and analytics services to launch a series of new innovations. Hyundai will grow their share of Visa Cards in credit and debit for consumer and business. Our innovation also comes from targeted value propositions in traditional products, and we are very pleased to have signed a new long-term partnership with the NatWest Group for consumer debit and credit.
The third, our value-added services are helping us win in consumer payments. Our value-added services, such as Consulting and Analytics, AI-driven data solutions, risk solutions and processing, are a critical differentiator that helps our clients innovate and grow, often without having to use their most scarce resources: technology and engineering. For example, Rakuten Card, a subsidiary of Rakuten Group, which operates the largest e-commerce marketplace in Japan has signed a new credit deal with Visa to further their strategy to become a top global player. As part of our partnership, Rakuten Card will utilize Visa's processing capabilities and dedicated Visa consulting, data science and analytics teams to support them on strategic initiatives.
Fourth, our new flows capabilities. Increasingly, our new flows capabilities such as Visa Direct are an important differentiator to our clients when they're making consumer payments decisions. A great example is Cash App. With 53 million monthly transacting actives, Cash App has renewed and expanded agreement globally, encompassing card issuance, Visa Direct and value-added services.
And last, but certainly not least, our brand. In many cases, our clients ask their customers, "Which brand do you prefer?" "Would you spend more if we issued this brand or that brand?" And our clients consistently tell us that consumers overwhelmingly prefer Visa. We see this particularly play out with co-brands. For example, for many of the largest airline co-brands in the world, we remain a partner of choice, and we recently renewed with Korean Air and signed a new agreement with Breeze Airways. We also won the co-brand portfolio with Allegiant Travel Company, the parent company of Allegiant Air.
In addition, in Latin America, we expanded our relationship with LifeMiles, Avianca's frequent flyer program from our existing portfolios in nine countries with 18 issuing banks to an additional four countries in the Caribbean region. And finally, we signed a co-brand agreement with Indian conglomerate, Adani, serving 400 million customers through retail, airports and online travel services, among others.
Let me now turn to new flows. Again, with a focus on how effectively we are delivering on our priorities. Total new flows revenue was up 20% in constant dollars. Commercial volumes increased 9% in constant dollars to total $405 billion. In terms of how we go to market, we are focused on adding commercial products to our existing consumer relationships. KBank, a leading bank in Thailand, has renewed its relationship across debit and co-brand as well as signing a new deal to launch a new business debit card to serve SMEs and micro businesses.
PagSeguro, a key Brazilian fintech client, already leveraging our consumer credit and prepaid and commercial prepaid products. We'll expand in the commercial space with the launch of Visa Business Credit for their base of 28 million clients.
As we do in the consumer space, we are also constantly working with commercial clients as a strategic partner to develop and deploy unique and innovative solutions. A recent example is with SAP, the global market leader in enterprise application software, which has signed a deal with us across multiple countries in Asia Pacific. We will integrate Visa's Virtual Card and business solution payment provider capabilities into SAP's business technology platform. SAP serves more than 46,000 customers across Asia Pacific. This deal will create an embedded finance solution for their customers to make B2B payments, helping to improve their working capital positions and enhance their supply chains.
For Visa Direct, third quarter transactions grew 20% and were $1.8 billion. In Latin America, we had a bank client transition its onus domestic P2P transactions to an internal ledger system. And while it could be impactful to our transactions over the next several quarters, the impact to revenue is expected to be minimal. At the same time, for the other transactions, this client will continue to utilize our interoperability capabilities provided by YellowPepper.
I am very excited about Visa Direct, particularly as we enter new markets and increase our cross-border presence. Recently, we have expanded or entered several key markets, including in France, with Lydia, the leading P2P provider with over 7 million users. We renewed our issuance relationship, and we have signed a Visa Direct deal to enable their users to top up their wallets using an eligible card.
In Bolivia, with fintech Libelula's new app called Lula, Visa Direct will be enabling domestic P2P transactions within the app, and YellowPepper will be providing alias directory services.
In Mexico, with fintech Alchemy [Phonetic] Pay, Visa Direct will enable B2B cross-border supplier payments for thousands of SME clients and industries including; textiles, software, hardware and electronics across multiple corridors. And we've also continued to expand corridors with important cross-border partners. For example, Revolut, with over 30 million users, has expanded its remittance service with Visa Direct to 89 markets after just launching in July of 2022.
Similarly, TransferGo, a cross-border provider in the U.K., serving 6 million customers, have expanded its Visa Direct-enabled corridors from 32 in 2020 to over 160. New flows continue to be an important part of Visa's growth story and our teams are effectively selling and activating our solutions.
Now I will touch on value-added services. Our go-to-market approach remains focused on three growth areas: deepening client penetration of existing products; expanding geographically; and building and launching new solutions. Unlike our core business, our growth in value-added services is often driven by selling a larger number of smaller solutions. This quarter, we succeeded in selling more than 300 new issuing services, 600 new acceptance services and almost 500 new risk and identity services; in some cases, even within the same client. Our sales teams continue to work day in and day out with our clients to understand and resolve their pain points and realize new growth opportunities. Altogether, in the third quarter, we generated $1.8 billion in value-added services revenue, up 19% in constant dollars.
A couple of examples of new value-added services to highlight this quarter. First, our partnership with Pay.UK, the account-to-account payments operator in the U.K. was recently announced. We will be piloting our new fraud capability, RTP Prevent, which is uniquely built for instant payments with deep learning AI models. Using RTP Prevent, we can provide a risk score in real time so banks can decide whether to approve or reject the transaction on an RTP network. This is a great example of building and deploying entirely new solutions and our network of network strategy.
Second, our recent announcement of our definitive agreement to acquire cloud-native issuer processing and core banking platform, Pismo. We believe that Pismo will allow us to strategically serve our clients through additional capabilities, with core banking ledger and issuer processing through cloud-native APIs; additional geographies, with operations in Latin America, Asia-Pacific and Europe; and additional products with credit, debit, prepaid and commercial cards, as well as connections to local networks, including PICs [Phonetic] in Brazil.
From a network perspective, issuer processing and core banking have become important elements to support issuers, activate card credentials and distribute value-added services. The transaction is subject to customary closing conditions, including applicable regulatory reviews and approvals and is expected to close by the end of 2023.
To wrap up, over the last few months, I have traveled across the globe meeting with clients, partners and regulators, and I continue to see enormous opportunity and momentum. Our brand, capabilities, innovation and partnership approach continue to position us well for Visa's future growth, but the most important aspect is our people.
And with that in mind, I would like to welcome the newest member of our executive team, Chris Suh, who will become Visa's Chief Financial Officer on August 1st. Chris brings to Visa more than 25 years of finance leadership experience from global high-growth companies. His deep experience in finance and technology, plus his leadership in growing and scaling businesses, will be extraordinarily valuable to us as we continue to drive growth and better serve our clients and customers around the world. Plus, as I'm sure you will soon learn, Chris is a real hands-on business builder with a passion for technology and an intense focus on people who will fit in well with the culture of Visa. I've asked Chris to join the Q&A portion of our call today, but please remember, he isn't our CFO for a few more days.
Before the Q&A, let me hand it over to Vasant to provide financial highlights for the quarter and our thoughts on the rest of the year. But first, Vasant, I know I speak on behalf of all of Visa and our investors that we are deeply grateful to you for your outstanding strategic and financial leadership. I have worked shoulder-to-shoulder with Vasant for the past eight years, and I continue to be in awe of him. He is a world-class CFO; and if there is a CFO Hall of Fame, I am confident, he will be a first ballot inductee.
Vasant, we wish you all the best. So for likely the last time on an earnings call in your career, over to you, Vasant.
