Visa’s CEO brushed off competitive threats, such as real-time payments systems and debit network rivals, on Tuesday as he discussed a rise in the company’s fiscal second-quarter earnings.

When asked about the risks or benefits of FedNow, the instant payment system the Federal Reserve plans to launch in July, Visa CEO Ryan McInerney spoke extensively during the call with analysts Tuesday about the potential impact. Visa operates the largest U.S. credit card network.

McInerney dismissed the idea that the new FedNow system, which will allow consumers to settle payments in real time through banks, will challenge Visa’s debit card network or Visa Direct cross-border services. 

McInerney, who began leading the company this year, explained how he sees such real-time payments systems, including the upcoming FedNow system and The Clearing House’s RTP network, as in their infancy and not widely accepted, while Visa already offers tested capabilities and services.

“FedNow, like (The Clearing House), it's going take some time, it'll eventually get traction, but it'll take some time to build adoption,” McInerney said during the call. “One of the most powerful capabilities in payments is ubiquity. RTP doesn't have that yet in the U.S. It'll happen, but it's gonna take time.”

He also painted the nascent real-time payments options as rudimentary and still evolving. “An RTP transaction is a relatively simple transaction type,” he said. “It's instant, it’s permanent, and it's irrevocable. I think over time, it'll get enhanced.”

By contrast, he argued that Visa debit is a “simple, secure payment option” with fraud protections and well-established rules for disputes and chargebacks. Visa Direct offers similar features and extends around the work, he noted.

To underscore his point, McInerney referenced the United Kingdom, where real-time payments have existed for 15 years. In that country, McInerney contended that Visa hasn’t felt a competitive effect.

“We haven't seen much, of any impact, on Visa Debit, and the U.K. is also a robust and growing market for Visa Direct,” McInerney said. 

That said, McInerney made clear that Visa wants to connect to FedNow, and to leverage any benefit it offers to enhance Visa’s services. “We want to connect to any real-time payment network on the planet,” McInerney said during the call. “Any force that’s introducing digital money movement is a catalyzing force for all,” he explained.

He also underscored the benefit of FedNow generally for Americans. It’s the biggest update to the U.S. payment system in about 40 years. “Modernizing the payments infrastructure in the United States is a smart thing to do,” he said. “It's a necessary thing to do, and it's good for Americans.”

Another analyst asked about the competition Visa’s debit network may face from another event happening in July, namely the revived requirement that all debit transactions, whether in-store or online, have at least two competing networks available for routing, including one network that isn’t offered by Visa or its chief rival Mastercard. 

That too is a threat that McInerney said doesn’t faze the company. He noted that most of the issuers that Visa works with were already in compliance with that Fed rule that was clarified last year. He also argued that Visa’s fraud protection features and dual messaging capability would allow his company to prevail over competitors.

“We've said, and continue to believe, that there'll be minimum impact,” in this fiscal year, McInerney said. “And beyond that, it's yet to be determined. We'll see how the marketplace plays out…The market is very competitive today. It's going to get more competitive, but we like our chances to continue to win.”

The CEO was also asked about how Visa’s business might be affected by advances in blockchain, cryptocurrency or artificial intelligence technology. McInerney contended Visa has been a pioneer in the area of AI and has expansive complimentary data sets. With respect to crypto and blockchain, he said it’s still “early days,” but the company is providing on- and off-ramps for crypto as well as related services.

“We’ve got teams of people that are exploring all those different types of innovations and, you know, we'll see how they play out in the market and if there are things that scale we, want to be part of that,” he said.

Visa demonstrated its growth strategy is working lately. For the second fiscal quarter that ended on March 30, the San Francisco-based company’s revenue jumped 11% to $8 billion and net income surged 17% to $4.3 billion, according to the Tuesday press release.

By Lynne Marek on April 26, 2023
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