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: Visa wants to help move money overseas; ‘We’re getting into areas we never used to service before,’ says CFO

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A rebounding economy and the reopening of borders is driving new spending momentum for Visa Inc., and it could also help the company’s newer efforts to help facilitate payments between businesses.

While Visa
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had already been benefiting from a recovery in domestic spending, it’s now pointing to improving trends for its cross-border business as more travel corridors open up. Cross-border transactions, or those made by cardholders spending money in a different country than where their card credentials originate, are a critical piece of Visa’s business model, as the company can generate higher fees on these transactions due to their more complex nature.

The company is still being hampered by restrictions on international travel, which is a key component of cross-border spending, though Chief Financial Officer Vasant Prabhu sees upbeat signs in areas where movement between countries is occurring more freely. Spending from U.S. consumers in Mexico was up 70% in May relative to the same period in 2019, he said, with the two-year comparison meant to provide perspective on business performance relative to pre-pandemic times. Additionally, Greece opened its borders in mid-April and Visa saw cross-border spending double in the country over six weeks.

“Consumers are showing a real desire to get going,” he told MarketWatch. “Wherever borders are opening up, we are seeing significant bumps right away.”

Overall, Visa’s cross-border business was running at about 85% of 2019 levels during May, Prabhu said, excluding transactions between European countries. That marked a six-percentage-point increase relative to the April 2021 quarter.

The COVID-19 crisis has made it so Visa may not be as reliant on travel to drive cross-border spending going forward. Before the pandemic, travel accounted for two thirds of the cross-border business, with e-commerce spending making up the rest. Now, the balance is flipped, partly because cross-border travel is still stalled, but also because shoppers, especially outside the U.S., are becoming more comfortable making online purchases from international sellers, according to Prabhu.

In general, Visa is betting on being able to play more heavily in the movement of money between countries. The company is best known for powering consumer card payments, but it’s recently been making a bigger effort to participate in the flow of funds between businesses, which represents a lucrative but complex business, especially when serving companies that are conducting international commerce.

While businesses haven’t historically preferred to pay one another via traditional credit or debit cards, Visa has been expanding its business beyond cards in an attempt to capture new types of money movements. The company acquired Earthport two years back, which gave it the ability to connect to additional card-based networks and domestic automated clearing house (ACH) schemes, while Visa itself already brought 5 billion cards and accounts to the table. The goal is to help businesses or people pay each other through varied means, whether from a card to a bank account or a bank account to a bank account.

“We’re merging an extraordinary number of networks into a single network,” Prabhu said.

That broad exposure to different payment networks is why Visa believes it can serve as an attractive option for businesses looking to send money internationally, both to suppliers and to those conducting work for them in other parts of the world. The company sees a $10 trillion market opportunity in cross-border business-to-business (B2B) payments.

The process of sending money internationally has generally been complex, Prabhu said, because businesses looking to do so might have needed to use different platforms depending on where they were sending the funds, how large the transaction amounts were, or how frequently their payments would take place. Visa’s interactions with different types of networks mean that companies can use its B2B Connect platform for varied transaction types in a simplified way, and with more certainty about exchange rates and security protocols, he continued.

Visa announced Monday that it inked a new partnership with Goldman Sachs Transaction Banking that’s focused on sending money internationally. Goldman Sachs gets “a single connection for any kind of cross-border payments,” which it can then use to help clients get their money to wherever it needs to go.

Visa saw some negative impact to its cross-border B2B momentum during the pandemic, especially from smaller businesses that were affected by COVID-19, Prabhu said, but the company is now seeing this area come back. And in general, he sees a push from businesses to digitize more parts of their operations, including payments.

The company’s efforts to expand beyond card payments are also helping it tap into other areas of international money movement, including cross-border remittances. The remittance market is “as big as foreign direct investment,” Prabhu said, and Visa is “really for the first time in [its] history” enabling these kinds of flows, thanks to partnerships with major remittance providers.

“We’re getting into areas we never used to service before,” he said, “helping people move money cross-border in ways that go beyond paying merchants.”

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