Visa Inc. (NYSE:V) Goldman Sachs 2022 Communacopia + Technology Conference September 12, 2022 12:15 PM ET
Company Participants
Vasant Prabhu – Vice Chair & Chief Financial Officer
Conference Call Participants
Will Nance – Goldman Sachs
Will Nance
All right, everyone. We’re going to get started. I’m Will Nance. I cover payments here at Goldman. And joining us today, we are delighted to have Vasant Prabhu, Vice Chairman, CFO of Visa, here in person to discuss some of the trends in the business.
Vasant really needs no introduction. But prior to joining Visa in 2015, Vasant built up quite the resume holding senior leadership positions at NBC, Starwood, Safeway, Pepsi just to name a few. So without further ado, please join me in welcoming Vasant to the stage today.
Vasant Prabhu
Thank you, Will. Nice to be here. Thanks for having me.
Question-and-Answer Session
Q – Will Nance
Thanks again for being here. So as you know, we recently launched coverage of the payment sector. And one of the pieces of feedback that we got after we launched was how can Visa continue to grow carded volumes at a double-digit rate? And is there really that much cash the card opportunity left?
And just as a personal anecdote, I was in Mexico recently with some friends. I think we, as a group, use more cash in about 4 days than I’d used in the past 10 years. So maybe we could just start off with the basics, the longer-term fundamental question on the business. How do you think about what inning we’re in, in terms of payment electronification? And maybe it’s also worth hitting on Latin America, in particular, where volumes were up very strongly, I think, roughly 40% in the most recent quarter.
Vasant Prabhu
The short answer to the huge opportunity still left a long runway in cash to card, the answer is an emphatic yes. Why is that? And you asked what inning? That depends on which region of the world you’re talking about to some degree.
So as you know, despite 60, almost 70 years of Visa digitizing cash in the context of consumer’s bank business C2B, as you say, there’s still a significant amount of cash that is used in personal consumption expenditure, PCE, which we sort of see as the feedstock. And even though we’ve had the pandemic and some might think there was an acceleration of cash digitization, it’s a notion of cash. And what really happened was in sort of taking a bucket of cash out here, maybe we took 1.5 or 2 buckets. So maybe it may have speeded up cash digitization by maybe 1.5 years, something along those lines.
So even as we have digitized cash, the amount of cash has continued to grow because economies are growing. The 3 vectors for doing that are more credentials, and our credential is growing faster than they have in a long time. To some degree, thanks to the pandemic. To some degree, thanks to new types of issuers, fintechs. We’ve had double-digit growth in credentials in regions like Latin America, Middle East, Africa and so on. Even in the U.S., debit credentials have grown faster than they’ve ever grown. We’ve seen great credential growth in Europe, and that’s partly — it is due to share gain on the continent.
On the acceptance side, just 10 years ago, we had about 25 million points of acceptance. Today, when you add in some of the aggregators like Square, we’re at 100 million points of acceptance. It has been — it’s never been easier in the history of Visa to issue a credential or to set up a merchant to accept. And today, we issue credentials in wallets. We issue credentials on forms. Setting yourselves up with a credential now can be instantaneous. You don’t have to wait for the card in the mail and so on.
In terms of acceptance, we’ve taken an extraordinary amount of the pain out of it. You don’t need landline. You don’t need expensive devices. All you need is a smartphone. Download an app and you’re up and running. Never been easier.
The infrastructure for payments has improved drastically, especially through the pandemic. So it’s never been easier to digitize cash than it has been in our history.
And then you add on to the fact that we’re taking the friction out of payments. So e-commerce, clearly, as well as at a physical point of sale, tap-to-pay is probably the most frictionless way we’ve come up with to help people pay, which means we go deeper and deeper into smaller and smaller transactions. So even in the developed markets like the U.S. and many parts of Europe, cash penetration levels are at points where there’s still a long way to go. We know that you can get into the 90s.
As you said, when you’re in the U.S., you live a cashless life. You’re almost close to 100%. As more and more people in the U.S. get there, that penetration level can still go up. And then you go to Latin America, Middle East or Africa or India or elsewhere, cash penetration levels are still extremely low.
I’ll just give you 2 last data points and then stop. As evidence of this, in the last 3 years, our volume — payments volumes doubled in Latin America, the Middle East and Africa. That tells you how much cash there is to digitize. Even as recently as pre-pandemic, over 50% of people in these markets used to go to ATMs and get cash. Now that number is coming down, so we’re digitizing cash. Places like India, volumes are up 80%. So there’s a long runway ahead of us, and the penetration levels will get into the 90s. I mean we’ve seen that in Sweden and the Nordics, which are well into the 90s.
Will Nance
Got it. And so you mentioned 1, 1.5 years of acceleration on cash to card. If we switch maybe over to cross-border, that was one area that took a step back during the pandemic. And obviously, over the past year, the recovery of cross-border has been a powerful driver of the top line. Cross-border e-comm proved incredibly resilient during the pandemic, whereas cross-border travel more recently has been very strong. So maybe you could talk about some of your near-term expectations around cross-border volumes, cross-border revenues. How you expect — how your expectations differ between cross-border e-com maybe relative to cross-border travel?
Vasant Prabhu
Sure. So the big change during the pandemic was the growth of cross-border e-commerce. So as people move more and more to buy online, people become less sensitive to where the product is coming from. So if you’re on Google search and you find a product and give you a list of all the people who are selling it, you may pick the best price. You’re not that sensitive to, is that coming from my home country? And because it’s Visa, you know that you’re protected. You’re protected from fraud. You have dispute resolution, et cetera. And the same with the merchant. So they’re happy selling to you because we stand behind the transaction. So that has really allowed cross-border e-commerce to grow at a very hefty clip.
And as you saw, if you index to 2016 — I mean 2019, cross-border e-commerce even now is indexing around 165 or so in the most recent quarter, which is a much faster growth rate over a 3- or 3-year period than we had going into it. So clearly, cross-border e-commerce has, in a way, become a critical element of the cross-border business. It used to be 1/3 of the business. It then became 2/3 of the business as travel was hit very hard as borders closed. Travel is clearly recovering. I believe now we’re somewhere in that 55%, 45% range, meaning you’re getting to the point where travel is now back being more than e-commerce. It may settle in higher than it was before. So cross-border e-commerce clearly is a bright spot. A lot of retailers around the world have discovered that cross-border is a source of business for them.
As it relates to travel, took a very big hit. And since about October of last year, you’ve seen a nice recovery. It became apparent to us in October that governments had given up on closing borders, and so we were becoming much more bullish on it, and that was reflected in the call we had in October. And we were right, governments effectively stopped closing borders, so we had a big ramp-up between October and December. Then we had Omicron. Then the long restrictions were lifted again in the April-May time frame, especially in Asia, and we had another big ramp up. So for the first time, last quarter, cross-border travel hit the pre-pandemic level. And as you saw, travel was indexing in that 115 range or so coming out of the quarter and has gone up a little bit in August, which we just indicated.
It depends on what corridors, but it’s clearly back. The next bogey is getting back to the pre-COVID trend line, and then we’ll see whether we go past the trend line. Clearly, Asia is still recovering, but recovering very well. Inbound travel to the U.S. is still not at 2019 levels. It’s also recovering. Most of the other corridors are above 2019 levels, some well above that.
Will Nance
Got it. And I think so as you mentioned over the past several quarters, there have been multiple step changes as kind of progressively released some of those closed borders. When you look out, I think you mentioned in the most recent earnings call, there’s still several corridors that are kind of large chunks that are remaining well below where they were pre-pandemic. Can you talk about what the hinge points are for further step-change improvements in cross-border travel? What geographies are we kind of dependent on? Is there anything other than — I think you talked about Asia. You talked about inbound to the U.S. Is there anywhere else where you’re looking at kind of areas of potential room for outperformance over the coming quarters?
Vasant Prabhu
Sure. So there’s some corridors that are clearly outperforming and have outperformed through the pandemic because they stayed open while others close. So for example, inbound into Latin America, you were in Mexico. Mexico pretty much and the Caribbean is pretty much stable through the pandemic. It’s indexing at extraordinary levels relative to pre-pandemic, so it’s much higher than any other corridor. And despite that, as more places opened up in Latin America, like Colombia and Costa Rica and so on, it climbed again last quarter, which was quite a surprise. So travel into Latin America is clearly booming.
The other area that has been booming is, as Europe opened up, travel in out of Europe has been very strong. Clearly, the weak euro is, I’m sure, going to continue to help. And if you were in Europe this summer, it’s swarming, I’m told, with Americans. I wasn’t there, but everybody is in there as that you could be in Chicago and you look at how many Americans were walking around on the street. So in and out of Europe has been doing extremely well.
The corridors that are lagging in and out of Asia, and that is strictly a function of when Asia opened up and where Asia stands today. We saw a very smart recovery in and out of Asia starting in April and May, and we told you that they were approaching the high 60s indexing to 2019. And it, in fact, was a very strong recovery in the third quarter, and that’s continuing. The main holdback in Asia is China. We gave you some numbers on the last call. On the last call, China is indexing well below 50 in and out, remains essentially shut. So I think that’s holding back Asia for the time being. Japan is slowly opening up. But the rest of Asia is largely open, and that’s what’s driving a lot of the Asian recovery.
The other one that’s a laggard is inbound to the U.S. It’s not back to 2019 levels yet. You saw that in the last report we did a couple of weeks ago. Part of it is travel from Asia not coming back, holds it back. Maybe there’s some impact from the strong dollar. We’ll have to wait and see. It’s not clear yet. But it has been recovering, and I wouldn’t be surprised if it’s back to pre-COVID levels relatively soon. But those will be the remaining legs of the recovery.
I mean as we said before, there’s been step increases and then sort of a moderate recovery, then a step increase. I think the next — I think we’re in the moderate recovery mode now, and you saw that between July and August. The next step may be when China fully opens up. China is an important corridor, but no corridor is huge. I think we see steady recovery from this point on.
Will Nance
Got it. Understood. Maybe switching gears a bit. Zooming out, there’s a lot of focus on the health of the consumer. I think consumer credit balances recently have been increasing at a double-digit rate. Inflation, particularly gas prices, though a little bit less so recently, have been elevated. What have you seen in the data on the health of the consumer? Have there been any emergent trends under the surface in spending behavior with all the talk of inflation and recession and lower consumer confidence?
Vasant Prabhu
Yes, I mean there’s a lot to worry about, of course. Consumer confidence has been severely damaged in the U.S., and it seems in most parts of the world. There’s a lot of lack of clarity as to what’s going to happen with inflation. Inflation may come down. But will it go all the way down to 2%? And certainly, the Federal Reserve keeps raising rates, which has impact on housing markets and so on. There’s a wealth effect for sure, and spot markets are weak and if housing markets go down, and there’s also a geopolitical uncertainty, situation in Ukraine can change fast, and China has a whole range of issues.
Remarkably, despite all that, consumer spending has been remarkably stable. So remember, what we look at is consumer spending in nominal terms. And starting about February in the U.S., it’s indexed in the mid-140s. Pretty reliably, week after week, month after month, et cetera. That’s a pretty nice growth rate post-COVID. And the remarkable thing about it is its stability.
Now we’re not leading indicators. I don’t know, for example, if you’re not feeling good enough about things and you won’t go buy something 2 weeks from now. So things would change very fast. But remarkably, they have not despite all these uncertainties, and you saw that in our August numbers.
And a lot of what you see when you dig below the numbers, it’s quite intuitive. There’s no surprises there. If you look across categories, as you might expect, people have switched from, as they say, buying things to doing things. And sort of buying goods, people are into experiences. Travel is booming as you might know from having flown yesterday. Hotels, airlines, entertainment is doing well, restaurants are doing well. There’s no obvious difference between high-end consumers and lower-end consumers. They may be buying different things, but nominal levels of spending have stayed quite stable, and that’s largely true around the world.
So at this stage, all these factors have not shown up in consumer spending. Will they show up? We’re not economic prognosticators. I think we need to stay very vigilant. But the consumer has been — you saw that our debit trends, in fact, have gotten stronger because the comparisons are getting easier. Credit has been growing in the mid-teens. Card present spending has been coming back and is growing double digits. E-commerce is holding up pretty well and quite a high index relative to 2019.
I think one of the things that has helped us is to stay focused on pre-COVID trends in 2019, that allowed us to — I think a lot of people dropped wrong conclusions when they just compared to last year because last year was so distorted. I think comparing to 2019 gives you a pretty clear picture, and the general picture is one of stability.
Will Nance
Yes. No, that makes a lot of sense. All right. Switching gears, maybe we could spend a little bit of time on the regulatory environment. There’s been recently some draft legislation aimed at increasing competition for credit card routing, essentially trying to recreate some of the stipulations in the Durbin Amendment almost 10 years ago for credit transactions. Could you maybe talk through how this could impact Visa, the ramifications for the ecosystem and just some of the technical challenges that the implementation might entail?
Vasant Prabhu
So the idea that there needs to be more competition in credit is on the face of it, just not right. So if you look at most American consumers and look in their wallets, you will find more than one credit card. So by definition, most American consumers have multiple networks they’re using. I mean you may have a Visa card, a Mastercard or a Visa card and Amex card and many have more than 2 cards, as you know. So effectively, consumers are multi-network to begin with, so it’s not clear that there is no competition. And any credit card issuer would tell you, there’s a ton of competition in the sector. So on the face of it, the premise that there needs to be more competition in the credit card business is just not very valid.
The second issue here is that in debit, what happened was debit always had multiple networks on a card, and you as a consumer used to have choice. You could decide whether it would be a PIN or signature. What debit did was took the choice away from the consumer and gave it to the merchant. That is effectively what happened. They were always 2 networks. The whole debit infrastructure was set up to have multiple networks.
Credit should have never been set up that way. You as a consumer are the ones who decide multiple networks, and you have multiple credentials for each network, and then you go to the point of sale. And the device or the point of sale or the e-commerce merchant, the technology setup to route to different networks, it’s not that each credential has multiple networks like in debit. So the whole infrastructure is not set up for multiple network.
So there’s a big question around, how does one do that? And what’s the cost of doing that? And the cost is not trivial and nobody really knows what the cost is. So the one issue here is both feasibility and cost, and nobody really has gone to the bottom of that yet. How much is it going to cost to change the entire infrastructure, all the way from the physical point of sale to all the technology that’s in place today to route transaction? And more importantly, will there need to be — most likely, there will be Mastercard issuance, right? So if your card needs to have 2 networks on it, it may need 2 pans, 2 chips, Hard to know exactly how this goes. So there’s a whole cost of issuance, et cetera.
So there’s a whole range of questions around network — I mean, technology and cost. Then you get to the more significant issues. The big loser here is most likely the U.S. consumer on a whole bunch of fronts, right? So you go — you are deciding today what card you want to use. If you go to Costco, you’ll use the Costco card. If you go elsewhere, you might use a different card, for example. And let’s say, you used a United card and it’s because you liked what you’ve got with it, the whole package, the rewards plus all the other benefits, but the merchant routed away from United. What happens to your rewards?
In general, if interchange comes down, rewards will go away, and the consumer would be a net loser. In addition, if it changes the economics of the credit card business and reduces the availability of credit, that has a massive impact on consumers. I mean more than 50% of small businesses, for example, fund themselves based on credit card balances.
So there’s a range of issues around the consumer that you haven’t — you really haven’t thought through. You get past that and there are co-brands, for example. Industries like airlines, industries like hotels. This is an important source of revenue. In many cases, a big source of profits, for example, for the airlines. And there’s a big impact on that, too.
So there’s a variety of ramifications, and even merchants have co-brand cards. So there’s a variety of implications here that are quite significant that will need to be thought through. Now having said that, I mean we’re doing the best we can to make sure all constituencies understand what the implications of this are. We want to make sure that all the decision makers, i.e., the members of Congress, are aware of the impact on various constituencies.
For example, small issuers, community banks, credit unions. Issuing credit cards is an important source of revenue for them. And if the revenue declines, will they be able to be viable anymore? So there’s a lot to be worked through here.
Will Nance
Got it. Makes sense. Switching gears to more upbeat conversation. The — I want to talk about some of the kind of the longer-term growth drivers in the business, particularly around new flows, Visa Direct. The growth rates here have been very impressive. I think 35% recently, excluding the impacts of the exit of Russia. Where are you seeing some of the most success in driving the adoption of push payments? And looking out, maybe what are some of the biggest opportunities on the road map for this product going forward?
Vasant Prabhu
So we’ve talked about how we think our growth rates can stay high and even accelerate post pandemic, and that’s because the way we look at it is sort of the flywheel of the business is consumer payments. And this is a core business, a historical business, business that allows people — consumers to pay businesses, C2B. As we talked earlier, there’s still a lot of runway left in that.
And then we have sort of the way we look at it, 2 vectors of growth. One vector is more volumes from new use cases, right? And that’s going beyond C2B into P2P, into B2C businesses paying consumers, all versions of B2B, and then governments paying consumers. So there’s a whole range of new cases that we’ve been enabling in the last 5 years or more through Visa Direct.
And the other vector of growth is to add more value to any transaction that is already on our network, and that’s our value-added services. So one drives new volumes, the other drives higher yield on those volumes, both the new volumes as well as our existing volumes, and those are all the value-added services.
So speaking of Visa Direct. Visa Direct is not a product, Visa Direct is a capability. And what we’ve been doing for the past 5 years is to allow our network to serve all these new use cases, which it couldn’t do if you go back 5 or 6 years. Money can now move both ways in the network. Money can move from any node to node, any other node, which is why we can do all these new use cases.
So what Visa Direct has done is not only opened up all these use cases, but it’s also the enabler of what we call our network of networks, meaning we’re network-agnostic. We’ll get your money where it needs to go. It doesn’t have to always be on our network. Now our network is a very good network, probably the best around. It has the most nodes. It’s global in scope. It has extraordinary security, reliability, the ability to dispute and get your money back, et cetera. But we will incorporate RTP networks, ACH networks, other networks that are proprietary like ours. Visa Direct now connects to, I believe, 66 ACH networks, probably a dozen RTP networks, several gateways, 15 or so other networks, proprietary networks. So the infrastructure is in place.
The Visa payout service is what allows you to send your money wherever it needs to go, whether it’s our network or some other network, whether it be card to card, card to account, account to account, et cetera — account to card. And Earthport, we acquired a few years ago, gave us a tremendous amount of access to bank accounts. Tink that we just acquired last year gives us tremendous access to bank accounts, which we can layer on to the AISP or the account information services they now have, we can add on payment initiation services.
So what this has allowed us to do is power 30 new use cases already. We’re expanding Visa Direct around the world. Latin America, for example, volumes have quadrupled. Often, P2P is the first use case. It is a popular use case just about everywhere. We’re very excited about B2C, which is businesses paying consumers. That’s things like earned wage access. We have partnerships with a variety of people that are trying to revolutionize payroll. There are use cases like paying gig economy workers, which is a version of B2B, but you could also say it looks like B2C, where it started with Uber drivers. Now we do it for a whole range of DoorDash, et cetera. We can do tipping through Visa Direct, where the money is pushed to you. All your tips are pushed to you on your debit credential.
So the opportunity set is very vast, and this is still early days. Russia — the thing with the new things is that sometimes they click in some markets very quickly, and P2P clicked in Russia very fast and became quite a sizable business. It’s unfortunate we lost it. But as you saw, despite that, we’ve continued to grow at about 35%.
So we are right now focused on 3 kind of ways to grow the Visa Direct business. One is to go deeper into the existing use cases that are already enabled, to go global on all the use cases and then to keep adding use cases. And that’s the way we’re growing. It’s a decent-sized business today. This is going to be one of the engines of growth for Visa for a very, very long time.
Will Nance
Got it. So P2P was something you mentioned several times. And historically, that’s been heavily reliant on cash, which I know is near and dear to Visa’s heart. It’s an opportunity to disrupt. You’ve talked about growing the cross-border remittance space, leveraging your network of financial institutions in different markets, leveraging Visa Direct in particular. So maybe if we can double click on the remittance market. How do you see that evolving over time? And are there other ways to serve that market than it’s been traditionally done?
Vasant Prabhu
Yes, you hit one of the markets that we think can be an extraordinarily big opportunity for us. We never participated in remittances for a whole host of reasons. It was a Cash business. There were AML, KYC issues. The business has lots of — it’s inefficient, it’s expensive, it’s low. There are a variety of other concerns governments had about it. It was unsafe for the people when they went to collect their money in some of these locations. We can solve all those problems. We already have solutions in place that can solve all those problems.
You can now sit at home and you can use your bank account or your debit credential or your credit credential to initiate a payment. You can do it on a mobile device or at your computer. You can send it to the recipient, let’s say, someone in Mexico. That person can receive it either on a debit credential or a reloadable credential or a prepaid credential. They can — they don’t have to go to an agent to collect the cash. They can use it right away at merchants. It’s instantaneous. It’s reliable, it’s secure. It’s got the ability to get your money back if you made a mistake. It complies with AML, KYC. You have more certainty around exchange rates. It’s an extraordinary solution, and it is dramatically cheaper than the way it was being done.
So we have a much, much, much better mousetrap. The major players in the space are realizing that. So we have deals with Western Union, MoneyGram, Remitly and a variety of some of the newer participants. Western Union has rolled it out in Europe.
Now this is not something that happens overnight because every corridor has some unique requirements. So it takes some time for these companies to set themselves up to do it with our network corridor by corridor. So Western Union has opened up several corridors from the U.S. I believe Remitly is doing — from Canada, you can send money anywhere in the world. So it sort of opens up corridor by corridor or country by country. We recently had an arrangement with — signed with Paysend, which has 6 million customers and probably 20,000 small businesses, and a lot of it is cross-border.
Remittances, I believe there’s $800 billion almost in remittances that we never participated in. It’s an extraordinary amount of money. It’s all cross-border. I think 800 million people depend on remittances around the world. The 2 big originators of that are the U.S. and the Gulf — the GCC, so the UAE and Saudi Arabia. We have a lot of partnerships in that region, too. We’re very excited about this business. The capabilities are all in place. The early corridors are ramping. This will grow for a long time.
Will Nance
Thinking on the topic of new flows, B2B payments of largest new flows opportunity, you guys have outlined, I believe. When you look at that $100 trillion plus TAM for B2B payments, how do you think about how much of that volume will ultimately be carded either on an expense management type of card product or maybe in an APAR setting with virtual cards? And then for those non-carded volumes, what are some of the ways that you can use Visa’s network of network strategy to help support these payments in the B2B space?
Vasant Prabhu
So it’s important when you talk about B2B to be very specific, right? And people often look at the $120 trillion, and that’s not the right way to look at it. So as you saw at our Investor Day, we tried to sort of at least break it down into 3 buckets because they’re all very different.
The $120 trillion roughly breaks down into $20 trillion, is what we consider cardable B2B payments. We love that $20 trillion. It’s almost as big as our traditional consumer payments business. We love it because the value we can add there is very similar to what we can do in our consumer payments business because the transaction looks a lot like what it looks like in our consumer payments business. These could be fee cards, corporate cards, virtual cards and so on. And that’s $20 trillion, and these are quite similar. It’s a business that has been growing faster than our consumer payments business, and we believe it can continue to grow faster.
So think about a business of equal size to our consumer payments business, that’s cardable B2B payments, $20 trillion with comparable yields with a clear advantage that we have in serving the business. We are the largest, $1 trillion in volume, $1 trillion versus more than $7 trillion in consumer payments. So a long way to go. We’re twice as big, if not more, than the other 2 guys who play in this. We are in the process of continuing to go deeper in the markets we’re in like the U.S. to grow globally because this is not as well developed outside the U.S., and we think this is an extraordinary opportunity for a long time.
So I wouldn’t — there’s been a lot of focus in sort of the large ARAP space. But I want to make sure people don’t forget that there is an incredible opportunity that we are very well positioned to serve in cardable B2B payments, where we are clearly the leader today.
Then you get to the next segment, which is about $10 trillion, which is cross-border B2B payments. The reason we like it is because there’s a tremendous amount of dissatisfaction there. Most commonly used is SWIFT. There are concerns about speed, reliability. There are concerns about what exchange rate I’m going to get, et cetera, et cetera. We have a solution today in B2B Connect that can solve all that. Like any network creation, there’s a chicken and egg problem, so you have to get enough nodes before people can really use it. We’re building that up little by little, month after month. We’re now in 100 countries. We’re signing up people. Making a lot of progress in Latin America, for example. B2B Connect will offer a solution that is real-time, incredibly secure with tremendous information transfer capabilities, gives you much more certainty on exchange rates and so on. And it’s a cross-border business, so the yields are attractive.
And then finally, you have large AR and AP. The thing about large AR and AP is that it’s 2 people paying each other who know each other. These transactions are very large. And therefore, the way you add value has to be different than what we do in our traditional business. The movement of money itself, our estimate was people pay 1 basis point today because they’re using a variety of other networks. For that to be a viable business, you really have to find ways to add value that go beyond the movement of money, and that’s where there’s a whole bunch of new businesses that we are partnering with that are trying to find ways to make the AR/AP payment more efficient, and as a result, create some value, whether it’s in the reconciliation part of it or the invoicing part of it, the data part of it. And we have partnerships with many of them, whether it’s Bill.com or a whole range of other players.
We’ll have to wait and see how that sorts out over time. It’s clearly a long-term opportunity, but it’s not in the 3- to 5-year time frame. So we’ve tried to be very clear about that, that we are deeply engaged in it. We’re partnering with lots of people, but there’s extraordinarily opportunity in these other 2 spaces, and that’s really where we see the opportunity in the next 3 to 5 years.
Will Nance
Makes sense. We’ve got a couple of minutes left. I think that’s a good segue into the topic of A2A payments. I think you fast forward or rewind a year ago, local card schemes, open banking, RTP networks, Buy Now Pay Later, a litany of risk that I think you guys did a good job of addressing at the time, and I think that conversation has died down a bit, but maybe now we could spend a little bit of time talking about network-to-network capabilities that you guys have. How can you facilitate payments across various A2A rails? And then second, what are some of the biggest opportunities you’re focused on around value-added services pace?
Vasant Prabhu
Sure. So I mean clearly, we don’t see A2A payments as competition as much as other networks that we can partner with because in the end, anything that allows us to digitize payments or improve money movement is a good thing. It’s good for us, it’s good for everybody. So we’ve been actively engaged for years now in partnering with. As I said earlier, ACH networks, 66 of them on Visa Direct, RTP networks and a dozen or so, and so we will continue to do that.
The important thing to do is that having a pipe is not enough, right? The pipe has to be adapted to a use case, and that’s what we do. What we try to do is, in a particular use case, what is the functionality required? Certain kind of functionality required to enable merchant payments. It’s a different kind of functionality you may need to enable payroll. It’s another kind of functionality you might need to enable remittances, for example.
So the important thing is to take pipes and adapt them to the use case. Because if you don’t adapt them to the use case, just having a pipe isn’t going to create traffic. So that’s really what we’re trying to do. And we bought Earthport several years ago because it gave us the connectivity to bank accounts, almost well over 90% of bank accounts around the world in the top 80 countries. And it’s now up and running, and part of our ability to use account-to-account. Now we have Tink in Europe. It’s connected to, I believe, it’s 3,400 banks, 200 million accounts. Mostly right now an information business, which we like. It’s an extension of our business, where there’s the opportunity to — you do payment initiation bank to bank.
So our objective is to get your money where it needs to go, and it doesn’t matter what network it’s on, and we are already up and running on that. And as time goes by, it will become an important extension of our business.
Will Nance
I guess we have about 30 seconds left, so I’ll go lightning round here. There’s been a lot of articles recently about issues of fraud and some of the newer A2A payments. Could you maybe dive in a little more on what Visa is doing in the fraud and identity verification arena?
Vasant Prabhu
Yes. I mean the quick answer is we do an extraordinary amount on fraud using all the modern cutting-edge technologies. They’re moving beyond the transaction fraud into authentication and then beyond authentication into identity. CardinalCommerce is our authentication service. We’re looking hard at what we can do in identity, critical.
In addition to all this, by putting the chip on the card, fraud has gone close to 0 on face-to-face transactions. So clearly, a big opportunity for us as a value-added service, very important. Everybody wants better fraud protection. Fraud levels are definitely coming down, and we’re getting better and better at it every day.
Will Nance
I think that’s all the time we had, everyone. Please join me in thanking Vasant for being with us here today.
Vasant Prabhu
Thank you.
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