Notes on VISA FY Q4 2022 results: U.S. credit card holders drive payments volume up

VISA reported Fiscal Year Q4 2022 results (calendar Q3 2022) yesterday, posting a GAAP Net income of $3.9 billion, or $1.86 per share, for the quarter, and a GAAP Net income of $15.0 billion, or $7.00 per share for the full fiscal year 2022.

In addition to the financial statements, the company discloses “Operational performance data”, which includes the data on card payments and cash transaction volumes, split by geography and card program type (debit vs. credit). Given the scale of the company and the number of VISA cards out there (4.05 billion to be specific, of which 1.27 billion are in the U.S.), one can argue that these data can provide valuable insights into the state of the economies and the financial health of consumers around the globe. Let’s take a look at some of those data points!

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The company reported total Payments Volume, or the dollar value of card transactions excluding cash withdrawals and deposits, of $2.93 trillion for the quarter, representing a 5.2% growth compared to FY Q4 2021 (calendar Q3 2021). The chart below indicates that the growth in total payments volume has been rapidly decelerating and has fallen below the pre-pandemic growth rates (i.e. +9.4% YoY in Q3 2018 and +7.5% YoY in Q3 2019).

A look at the total payments volume with a split by geography (U.S. and International) illustrates that the growth was driven by the U.S. cardholders, while the payments volumes by the cardholders outside of the U.S. declined compared to a year ago. Thus, VISA reported a U.S. payments volume of $1.48 trillion, representing an 11.6% YoY growth, and an international payments volume of $1.45 trillion, representing a 0.7% YoY decline. It should be noted that this is nominal growth, and one should take into account the inflation rate (which stood at 8.2% YoY in September).

Payments volume by credit card holders stood at $1.49 trillion, which represents an 11.2% growth compared to the previous year. Payments volume by credit card holders represented 51% of the total payments volume reported by the company. Debit card payment volume was flat (more on that below), so the growth in VISA’s FY Q4 2022 payment volume came from credit card holders.

More specifically, I would argue that the growth came from spending by U.S. credit card holders. As the chart below illustrates, the payment volume by U.S. credit card holders grew by 16.7% compared to the previous year, while the payment volume by international credit card holders grew by 6.4%. In absolute terms, U.S. credit cards generated a payments volume of $0.73 trillion during the quarter, while international credit cards generated a payments volume of $0.78 trillion.

In FY Q4 2022, debit card payment volume stood at $1.44 trillion, which represents a minor decline of 0.4% compared to the previous year. As can be seen from the chart below, debit card payment volume got a boost during the pandemic, but has been pretty much flat in the last six quarters. Debit card payment volume represented 49% of the total network’s payment volume in FY Q4 2022.

Again, debit card payment volume would decline even more if not for U.S. cardholders. As the chart below illustrates, international debit card payment volume declined by 7.6% compared to the previous year. The decline in the international volume was primarily driven by the appreciation of the U.S. dollar against other currencies (in “constant dollars”, international debit card payment volume increased 1.5% YoY). At the same time, U.S. debit card payment volume increased by 7.1% compared to the previous year’s quarter, which was less than the inflation.

Cash volume, or the dollar value of cash withdrawals and deposits using VISA cards, continued the decline. Thus, in FY Q4 2022, cash volume was $0.61 trillion, which represents a 10% decline compared to a year ago. As the chart below illustrates, the cash volume never got back to the pre-pandemic levels, and, given the consistent decline during the last three quarters, it is not likely to.

Cash volume has been declining in both the United States and internationally. As can be seen from the chart below, cash volume in the United States “survived” the shock of the pandemic, but has been on a steady decline over the last three quarters. Consumers are not spending less, so the cash volume should have transformed into another form of payment (cards, wallets). I am pretty sure, at least a portion of this money is now counted toward VISA’s card payment volume discussed above.

In summary, VISA managed to report growth in payment volume, but the growth rate is on the decline and was fueled by inflation and the last consumer segment “standing”, U.S. credit card holders. Let’s see what the next quarter brings!

Disclosure & Disclaimer: despite rocky performance in 2021 and 2022, I own shares in most of the companies that I write about in this newsletter, as I am extremely bullish on the transformation in the financial services industry. However, none of the above is financial advice, and you should do your own research.