Visa Inc. · NYSE:V
Visa — Investor Day (June 2013)
79 slides from Visa's investor day presentation, Jun 6, 2013
Slide 1: Visa Inc. Investor Day
Visa Inc. Investor Day June 6, 2013
Slide 2: Agenda
Agenda 8:00 a.m. Welcome Jack Carsky Strategic Overview Charlie Scharf Developed Markets Perspective Bill Sheedy Emerging Markets Perspective Elizabeth Buse Q & A Discussion 9:45 a.m. Break and Innovation Showcase 10:15 a.m. Driving Growth through Innovation Jim McCarthy Innovation Panel Discussion
Slide 3: Forward-Looking Statements Reminder
Forward-Looking Statements Reminder This presentation contains forward−looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terms such as "believe," "continue," “early thoughts,” “expect," “guiding principals,” “ove
Slide 4: Strategic Overview
Strategic Overview Charlie Scharf Chief Executive Officer
Slide 5: Key themes for today
Key themes for today Business is built on a strong foundation Macro trends are working in our favor Successful progress on our aspirations Investing intelligently for growth 5 | Visa Investor Day
Slide 6: The Visa business
The Visa business Historical Growth CAGR Key Metrics FY12 1 Year 5 Year2 Payments Volume $3,936B 7% 11% Merchant Acceptance ~36M + mPOS 8% 6% Locations1 ATMs 2M 3% 9% Cards Outstanding 2.1B 8% 6% Net Revenue $10.4B 13% 15% Adjusted Diluted EPS2 $6.20 24% 29% (4-year CAGR) 1) Includes locations in Eu
Slide 7: Our business is built around great partners of all sizes
Our business is built around great partners of all sizes • Leading share at 7 of top 10 US issuers • Long-term contracts with >600 Financial US Financial Institutions Institutions – US • Leading share with Credit Union and Community Bank associations • ~12,000 Visa clients in the US • ~3,000 non-US
Slide 8: Our business is built around great partners of all types
Our business is built around great partners of all types • 7 of top 10 US co-brands are Co-brand majority Visa Merchants • Many large, global co-brands are Visa partners • Over 3,000 government programs in 30+ countries Government • Working with governments on financial inclusion objectives • Active
Slide 9: The Visa story
The Visa story 1958 – 2007 2007 – 2011 2011+ Context • Financial Institution-owned • Global merger (ex. Europe) • Increased regulatory activity association structure • Integration of five associations • Rapid technological change • Six autonomous associations • Initial Public Offering • Migration to
Slide 10: Consistency of macro trends
Consistency of macro trends PCE for Visa Inc. Countries ($T) Visa Inc. Country PCE Penetration Emerging Market PCE PCE CAGR Visa PCE penetration in Visa Inc Emerging Markets Developed Market PCE Visa PCE penetration in Visa Inc Developed Markets 24 6% 23 22% 22% 21 20 20% 19% 8 9 10 10 10% 12 13 13
Slide 11: Our growth drivers
Our growth drivers Contribution to Revenue Growth 2012 2008-2011 PCE Growth 25% 28% Visa Penetration of 56% 43% PCE Pricing / Acquisitions / Other 19% 29% Net Revenue Growth 100% 100% • Macroeconomic growth is a consistent driver of Visa revenue growth • Strong global electronification trends furthe
Slide 12: Cash is the single biggest opportunity
Cash is the single biggest opportunity Visa Inc. Developed Markets (2012) Visa Inc. Emerging Markets (2012) Cash / Cash / PCE Check % PCE Check % of PCE of PCE ~$13T PCE ~$10T PCE 41% 62% PCE Cash / Check PCE Cash / Check ’13-16 Opportunity ’13-16 Opportunity CAGR CAGR 4% ~$5T 10% ~$6T Note: PCE def
Slide 13: Potential for electronification acceleration
Potential for electronification acceleration • With over 4M merchants, Square Mobile is now a top 35 merchant for Visa in the US1 acceptance • The number of mobile terminals globally grew from 4.5M in 2011 to 9.5M in 20122 Financial • 2.5 billion underbanked worldwide, 1.7 billion inclusion with of
Slide 14: Expanding Value of VisaNet
Expanding Value of VisaNet Historic Current Future • Basic POS and ATM • New segments (e.g. • Platform for merchants Access and Acceptance small ticket) and issuers to Acceptance • Clear rules and • New access channels customize experience Channels processes (mobile, mPOS, and grow commerce develope
Slide 15: Investing for the future
Investing for the future Incremental expense FY13E vs. FY11 • Sales Non-US ~$125M • Marketing • Acceptance • Investing Market Focus • Product incremental ~$700M for growth in 2013 vs. 2011 • V.me • CyberSource Product ~$300M • Mobile • Acquisitions of Innovation • Information Products CyberSource, P
Slide 16: Striving to be flexible and adapt to the evolving needs of our partners
Striving to be flexible and adapt to the evolving needs of our partners Principles to govern increased flexibility • Support the Visa brand and maintain the safety, soundness, and security standards associated with that brand • Maintain control over Intellectual Property • Enable clients of all size
Slide 17: Strategic Aspirations for 2015
Strategic Aspirations for 2015 As presented at 2010 Investor Day On Aspiration By 2015, Visa will… track? Evolution Accelerate electronification Reach X% payments volume share of global PCE Diversify Generate 50% of revenue from outside geographically U.S. Embed processing Ensure X% of all our t
Slide 18: Developed Markets
Developed Markets Bill Sheedy Global Executive, Corporate Strategy, M&A, and Government Relations
Slide 19: Common themes across developed and emerging markets
Common themes across developed and emerging markets Cash and Growth in Merchant Government Check Innovation Business Opportunity Engagement Opportunity 19 | Visa Investor Day
Slide 20: Over $5 trillion in paper-based payments in developed markets
Over $5 trillion in paper-based payments in developed markets $137 18% Canada $219 36% South $20 Korea United 14% States Hong Kong $3,108 Japan 39% $1,806 60% Singapore 2012 PCE ($B) $35 % of PCE on paper-based payments 42% $157 21% Cash & Check Australia/ N.Z. Electronic Payments Notes: PCE defined
Slide 21: Revenue growth translates into lower yield
Revenue growth translates into lower yield Transaction Domestic Value-Added Chile Example Mix Processing Services Payment Volume Mix International VisaNet Core-Only +11%* Total 6% Country Int’l 10% + Revenue - +80% Yield + -9% +23%* 94% Dom. 90% - - Value-Added Domestic Third-Party Services 2008 201
Slide 22: Affluent credit growing significantly faster in all developed markets
Affluent credit growing significantly faster in all developed markets 40% of Visa’s $1.4T Leading Partners in 2012 Consumer & Assets Credit Payment Volume Growth Affluent All Other Since 2008* Credit Credit US 21% -8% CANADA 15% 2% JAPAN 14% 6% AUSTRALIA / N.Z. 42% -6% SOUTH • Clients • Platforms KO
Slide 23: Debit is the largest cardable opportunity
Debit is the largest cardable opportunity • Over $5 trillion in cash and check • Debit presents the largest, long-term portion of cardable opportunity • Opportunity also includes enhanced offerings compared to lower functionality domestic debit networks Debit Share of Visa Consumer Payment Volume wi
Slide 24: U.S. debit is re-emerging as a driver of growth
U.S. debit is re-emerging as a driver of growth Y/Y Debit Growth Trajectory* • Strong commitment Pre-Regulation Post-Regulation 25% by cardholders 20% • Continues to be ~20% 15% Industry of Visa Inc. global revenue** 10% • Visa is on 75% of US Visa debit cards 5% Primarily Interlink PV loss • Routin
Slide 25: Prepaid opportunity
Prepaid opportunity $3.8 Trillion Market Opportunity* United States: Strategic Growth Segments CONSUMER General Purpose • 79M Underserved alternative • 30M Mass banked extension • 24M Teen and young adults Emerging US $1.2T $2.2 T CORPORATE Payroll / Corporate Disbursement • 40M employees receiving
Slide 26: Domestic processing penetration
Domestic processing penetration Canada 100%* 100%* 2008 2013 2018 United States 100% 100% 2008 2013 2018 Source: Visa Inc. fiscal years *For Canada, authorization processing is 100% and settlement processing is 89% due to some on-us settlement activity 26 | Visa Investor Day
Slide 27: Domestic processing penetration
Domestic processing penetration Japan 25% 15% 2008 2013 2018 Singapore 63% 58% 2008 2013 2018 Australia / N.Z. 82% 76% Source: Visa Inc. fiscal years 2008 2013 2018 27 | Visa Investor Day
Slide 28: Domestic processing penetration
Domestic processing penetration Southeast Asia 83% 65% 2008 2013 2018 Brazil 81% 53% South Africa 2008 2013 2018 52% 21% 2008 2013 2018 Source: Visa Inc. fiscal years 28 | Visa Investor Day
Slide 29: Domestic processing penetration
Domestic processing penetration Russia Mexico Colombia 29 | Visa Investor Day
Slide 30: Merchant opportunity: Acceptance Growth
Merchant opportunity: Acceptance Growth Level of Acceptance • U.S. acceptance (Acceptance Locations/ 1,000 Urban Households) locations increased 109 70% in last decade • Many developed 88 75 countries less penetrated than 58 U.S. (2002) the U.S. was ten 46 years ago 29 • Estimated 38 million mobile
Slide 31: Merchant opportunity: Partnership
Merchant opportunity: Partnership Visibility into innovative and Relevant, unique data and comprehensive product suite insights improving performance Product functionality for Increased security and specific segment needs; reduced fraud easy to integrate Improved Co-development personalization on Vi
Slide 32: Innovation
Innovation Drive more transactions, deliver more value on each transaction to all stakeholders, and create differentiation for Visa and clients eCommerce & Mobile Processing Services Information Products Visa US Share Visa Revenue Lift with DPS Advance Authorization 47% 20% • Differentiate VisaNet e
Slide 33: Government engagement
Government engagement Shifting Improving Driving Economic Dialogue Efficiency Growth • Interchange • Social / benefits • Electronification programs of Commerce • Business practices • eGovernment • Formalizing economy • Support of domestic schemes • Travel & Tourism ($22B) Brazil US Processing $1.5 t
Slide 34: Growth opportunity summary
Growth opportunity summary 2012 – Developed Markets Economic Growth $400B annual PCE growth PCE ~ US $13T Payments Electronification Acceptance 5.6M more acceptance locations (+37% + mPOS) Merchant Enhanced Relationships 22% Visa Purchases 38% $1T in U.S. card volume; Visa Cash, Check Affluent Credi
Slide 35: Common themes across developed and emerging markets
Common themes across developed and emerging markets Cash and Growth in Merchant Government Check Innovation Business Opportunity Engagement Opportunity 35 | Visa Investor Day
Slide 36: Emerging Markets
Emerging Markets Elizabeth Buse Global Executive, Solutions
Slide 37: Common themes across developed and emerging markets
Common themes across developed and emerging markets Cash and Growth in Merchant Government Check Innovation Business Opportunity Engagement Opportunity 37 | Visa Investor Day
Slide 38: Over $6 trillion in paper-based payments in emerging markets
Over $6 trillion in paper-based payments in emerging markets $780 87% Russia $1,346 38% China $584 $69 83% 71% Mexico UAE India $6 $929 98% Rwanda 92% $723 Indonesia 2012 PCE ($B) 56% % of PCE on paper-based payments $386 Brazil 85% South Cash & Check Africa Electronic Payments $146 66% Notes: PCE d
Slide 39: Emerging markets have historically evolved along a largely predictable path
Emerging markets have historically evolved along a largely predictable path, requiring similar evolution of product mix Higher yield, lower frequency Lower yield, higher frequency International Household Smaller Ticketing Dining Travel Goods & Food Merchants & Bill Payments Affluent Credit Debit Pre
Slide 40: Penetrating cash & checks requires localization by market
In addition to evolving product mix, penetrating cash & checks requires localization by market and specialization by client OUTCOMES UAE South Africa Philippines Visa Advanced Authorization/ New deals: 12 Visa Risk Manager: 313m Prepaid card growth: Cross border growth: 21% annual txns, 54% YOY grow
Slide 41: Expanding merchant acceptance is critical to growth
Expanding merchant acceptance is critical to growth; requires new business models and technology BUSINESS MODEL Indonesia: Mexico: Brazil: Acceptance Grupo Bimbo-160k VisaNet do Brasil program POS terminals Cards: 218 million Cards: 25 million Cards: 100 million Merchants per 1,000 HH: Merchants per
Slide 42: eCommerce is outpacing physical POS
eCommerce is outpacing physical POS and is used to overcome infrastructure challenges Authentication Target Segment Security High-transaction Fraud and merchants risk tools + Ticketing and bill pay Growth in authorization India Russia • India Railways • Increase in cross border • 2.3m transactions p
Slide 43: Growth in emerging markets requires innovation across the payment eco-system
Growth in emerging markets requires innovation across the entire payment eco-system 43 | Visa Investor Day
Slide 44: Growth in emerging markets requires innovation across the payment eco-system
Growth in emerging markets requires innovation across the entire payment eco-system VisaNet Visa Mobile Visa Mobile Managed Prepaid (VMP) Fundamo Service (VMMS) 44 | Visa Investor Day
Slide 45: Partnerships with governments are critical to driving financial inclusion
Partnerships with governments are critical to driving financial inclusion, which captures previously inaccessible PCE 2011 Charter of Collaboration with the Government of Rwanda Household Ticketing and Payments International Travel Dining Smaller Merchants Goods & Food Bill Payments and P2P Transfer
Slide 46: Visa's mobile capabilities allow faster domestic penetration
Visa’s mobile capabilities allow faster domestic penetration than historic models Pakistan 32% 18% Nigeria 64% 11% Bangladesh 580% Ghana Uganda 17% YOY Growth 29% 28% Cards-in-Force 17% 6% YOY Growth Fundamo Registered Wallets Note: Cards-in-force are calculated based on four quarters ending March o
Slide 47: Growth opportunity summary
Growth opportunity summary 2012 – Emerging Markets Economic Growth $1T annual PCE growth PCE ~ US $10T ~1M new acceptance Merchant locations in past 12 months 9% Visa Purchases Affluent Credit, Debit, and $6T in cash and check Prepaid 20% 57% Competitor GPC Cash, Check 142% CAGR over next five & Oth
Slide 48: Common themes across developed and emerging markets
Common themes across developed and emerging markets Cash and Growth in Merchant Government Check Innovation Business Opportunity Engagement Opportunity 48 | Visa Investor Day
Slide 49: Questions and Answers Session
Questions and Answers Session
Slide 50: Break
VISA Break
Slide 51: Driving Growth Through Innovation
Driving Growth Through Innovation Jim McCarthy Global Head of Innovation & Strategic Partnerships
Slide 52: The Network Effect
The Network Effect ~15 thousand 2.1 billion financial institutions cards in force* >36 million 82 billion merchant locations total transactions** Figures are rounded, exclude Visa Europe and are as of March 31, 2013 unless otherwise noted. Figures from fiscal Q2 2013 operational performance data exc
Slide 53: When Networks Connect…
When Networks Connect… 2.1 billion ~15 thousand cards in force* financial institutions ~7.0 billion mobile subscriptions1 2.4 billion internet connections3 82 billion total transactions** >36 million merchant locations 3.2 billion social networking accounts2 1 Source:International Telecommunications
Slide 54: The Connected Consumer
The Connected Consumer MULTI-CHANNEL SHOPPING AUGMENTED COMMERCE FRICTIONLESS CHECKOUT CUSTOMIZABLE SECURITY AND SHOPPING RELIABILITY PREFERENCES FLEXIBLE, OPEN TARGETED, PLATFORM RELEVANT OFFERS • Always on • Tightly integrated • Always connected • Frictionless commerce • Highly personalized 54 | V
Slide 55: The Connected Consumer & Merchant
The Connected Consumer & Merchant MULTI-CHANNEL SHOPPING AUGMENTED COMMERCE FRICTIONLESS CHECKOUT CUSTOMIZABLE SECURITY AND SHOPPING RELIABILITY PREFERENCES FLEXIBLE, OPEN TARGETED, PLATFORM RELEVANT OFFERS • Always on • Tightly integrated • Always connected • Frictionless commerce • Highly personal
Slide 56: The Connected Consumer & Merchant
The Connected Consumer & Merchant AUGMENTED MULTI-CHANNEL COMMERCE SHOPPING FRICTIONLESS CUSTOMIZABLE CHECKOUT SHOPPING PREFERENCES TARGETED, RELEVANT OFFERS SECURITY AND RELIABILITY FLEXIBLE, OPEN PLATFORM 56 | Visa Investor Day
Slide 57: Visa Capabilities
Visa Capabilities DEVELOPED EMERGING Online Open Loop Prepaid Mobile Person to Person Point-of-Sale Mobile Point-of-Sale (Remote/NFC) 2010 2012 2013 MOBILE PREPAID DEVELOPERS PERSONAL PAYMENTS 2011 VMPS 57 | Visa Investor Day
Slide 58: Visa Capabilities
Visa Capabilities PROCESSING PLATFORMS INFORMATION PRODUCTS Universal Payment Business Intelligence Acceptance Risk Products Risk Management Loyalty & Offers Payment Analytics ADVANCED AUTHORIZATION OFFERS 2010 VCAS 2012 2013 DPS MOBILE VMMS POS PREPAID REDEMPTION DEVELOPERS PERSONAL PAYMENTS 2011 V
Slide 59: The Next Five Years…
The Next Five Years… CONNECTED COMMERCE MORE ACCESS Convenient & Flexible frictionless Open Personalized & relevant Standards MORE TRANSACTIONS BETTER DISTRIBUTION INTELLIGENT CAPABILITIES Global Customized Localized Deepen relationships Scalable Differentiation Reliable 59 | Visa Investor Day
Slide 60: Innovation Panel Discussion
Innovation Panel Discussion Sam Shrauger Global Head of Commercialization Bill Gajda Global Head of Mobile Mike Walsh CEO CyberSource and Visa Group Executive, Acquirers & Merchants Silvio Tavares Global Head of Information Products
Slide 61: Financial Review
Financial Review Byron Pollitt Chief Financial Officer
Slide 62: Today's topics
Today’s topics Client incentives Capital allocation May metrics Early thoughts on FY 2014 62 | Visa Investor Day
Slide 63: Client incentives
Client incentives Customized price discounts used to • Secure multi-year contracts • Promote payment volume (PV) growth Classified as contra revenue • Various accounting treatments • Not as relevant with direct pricing Expected to grow over time • As portfolios grow • More volume comes under contrac
Slide 64: Client volume under contract
Client volume under contract Multi-year contracts are now the norm… resulting in higher incentive levels over time Issuer PV Under Multi-Year Contract – Q2 FY 2013 MULTI-YEAR % OF % RENEWING $ BILLIONS PV TOTAL PV FY 2014 US $466 88% 3% ROW $436 88% 12% Total $902 88% 7% 64 | Visa Investor Day
Slide 65: Global incentive trend
Global incentive trend Client incentives as % of gross revenues have risen as portfolios have grown FY 2009 2010 2011 FY 2012 Client incentives as % of gross revenues 15.1% 16.2% 17.0% 17.1% Growth in average 0% 18% 20% 9% PV portfolio 65 | Visa Investor Day
Slide 66: Large portfolio incentive trend
Large portfolio incentive trend As expected, clients with largest portfolios benefit from highest incentive discounts Top 20 Global Clients $ BILLIONS FY 2008 FY 2012 GROWTH Average size of $82 $112 36% PV portfolio Client incentives as % 20.3% 26.2% 6 ppts of gross revenues 66 | Visa Investor Day
Slide 67: Capital allocation – uses of cash: Guiding principles
Capital allocation – uses of cash Guiding principles First call on cash is to reinvest in attractive growth: organic, JVs, M&A Preserve strong balance sheet, with sufficient liquidity to backstop settlement risk and fund Visa Europe put Return excess cash to shareholders through dividends and share
Slide 68: Capital structure snapshot
Capital structure snapshot $ BILLIONS Q2 FY 2013 After set asides for litigation escrow Beginning Cash $5.3 and domestic working capital Cash & equivalents held by foreign subsidiaries Offshore (3.9) (10-Q, p. 31). If repatriated, subject to US tax Credit Line +3.0 Excludes $3B commercial paper faci
Slide 69: Return of excess cash to shareholders
Return of excess cash to shareholders FY 2008 – 2011 – Q1 / Q2 CUMULATIVE $ BILLIONS 2010 2012 2013 TOTAL Excess cash $5.8 $6.3 $2.4 $14.5 (net of offshore) Share repurchases / (3.3) (5.6) (3.1) (12.0) Escrow deposits Dividends (0.8) (1.0) (0.4) (2.2) Remainder 1.7 (0.3) (1.1) 0.3 Cumulative 1.7 1.4
Slide 70: Capital allocation ‒ dividends
Capital allocation ‒ dividends Plan for annual increases with dividend levels attractively positioned relative to S&P 500 companies with EPS growth above 15%…vs. targeting any predetermined payout ratio Dividend Yield Dividend Payout Ratio Current Dividend / LTM EPS 2.7% 42.0% 28.0% 1.5% 19.0% 0.7%
Slide 71: May metrics: US payment volume growth
May metrics US payment volume growth % GROWTH TOTAL CREDIT DEBIT Q2 FY 2013 4% 9% 1% April 12% 10% 14% May 12% 11% 12% 71 | Visa Investor Day
Slide 72: Cross border volume growth ‒ constant
May metrics Cross border volume growth ‒ constant % GROWTH TOTAL US ROW Q2 FY 2013 10% 9% 11% April 12% 9% 13% May 11% 10% 12% 72 | Visa Investor Day
Slide 73: Processed transactions growth
May metrics Processed transactions growth % GROWTH TOTAL US ROW Q2 FY 2013 6% 3% 21% April 15% 12% 24% May 14% 12% 22% 73 | Visa Investor Day
Slide 74: Guidance FY 2013
Guidance FY 2013 Net revenue Low double Tax rate 30 - 32% growth digits Client incentives as % Adjusted 16 – 17% About 20% of gross revenues EPS growth Capital Marketing expenses <$1B $425 – 475M expenditures Free Operating margin About 60% ~$6B cash flow 74 | Visa Investor Day
Slide 75: Early thoughts on FY 2014
Early thoughts on FY 2014 Revenue growth • Assume slow, sustained global economic recovery • Low double digit revenue growth Marketing expenses • Modest increases given Winter Olympics and Summer World Cup Adjusted EPS growth • Mid to high teens • Supported by share repurchases Free cash flow • ~$5B
Slide 76: Bringing it all Together
Bringing it all Together Charlie Scharf Chief Executive Officer
Slide 77: Our opportunity
Our opportunity Economic Growth Payments Electronification Macroeconomic (incl. Mobile and eCommerce) Financial Inclusion Merchant Relationships Non-US Growth Affluent Credit, Debit, and Prepaid Data Driven Solutions for Merchants, Issuers, and Acquirers 77 | Visa Investor Day
Slide 78: Questions and Answers Session
Questions and Answers Session
Slide 79: Visa Inc. Investor Day
Visa Inc. Investor Day June 6, 2013