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Please write 2 pages essay about this article "Consumers’ Move Away From Cash Purchases Boosts Visa...

Please write 2 pages essay about this article "Consumers’ Move Away From Cash Purchases Boosts Visa Profits ".

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Consumers’ Move Away From Cash Purchases Boosts Visa Profits

Visa Inc. reported strong earnings driven byongoing growth in payments volume as more consumers shift to cards from cash for making purchases—but warned that growing political uncertainties could impact consumer spending.

The largest U.S. card network reported adjusted net income of $2.98 billion for its fiscal first quarter, or $1.30 per share, up from $2.52 billion, or $1.07 per share, from a year ago.

Net revenue for the three-month period ended Dec. 31 totaled $5.5 billion, up 13% from a year earlier. Analysts expected earnings of $1.25 per share on $5.41 billion of revenue.

Despite an “uncertain geopolitical environment,” which chief executive Alfred Kelly noted in the company’s earnings statement, Visa experienced double-digit growth in payments volume and processed transactions. Visa processed 33.9 billion transactions during the quarter, up 11% from a year ago.

Spending during the holiday season in the U.S. was relatively strong and about the same as the prior year, Mr. Kelly said on a conference call to discuss the results. He said growth in debit-card spending was stronger than credit.

He flagged political risks to consumer spending, stating that the U.S. shutdown and Brexit, among other issues, “are starting to have some impact on” consumers. He said it is critical that a deal is reached in the U.S. government in the next few weeks to avert another government shutdown. Mr. Kelly also expressed fear that another shutdown will have further impact on consumer confidence and the economy.

Visa has been investing in ways to boost transaction volume on its network further. Mr. Kelly has been vocal about the company’s desire to increase contactless payments that encourage consumers to tap their card at checkout as opposed to inserting at the payment terminal. In November, JPMorgan Chase & Co., one of Visa’s largest issuers, said it would soon begin issuing cards with a contactless feature, which is meant to speed up the in-store checkout process. That could encourage consumers to switch more of their spending to cards over cash.

Mr. Kelly said that Wells Fargo & Co. and Bank of America Corp. will begin issuing tap to pay cards this year.

Visa’s operating expenses totaled $1.8 billion, up 17% from a year prior, mainly due to personnel and marketing costs. The company continues to invest in partnerships with banks and merchants, increasing the incentives it paid out to them to $1.46 billion in the quarter, up 10% from a year prior, for co-brand and issuing deals.

Mr. Kelly said that Visa executed credit-card deals with Air Canada, became the exclusive network on Costco’s Mexico credit-card program and won the co-brand partnership for Amazon cards in India.

One of the biggest risks on the horizon for the company is ongoing litigation from merchants that seek to remove some of the power that Visa and its main competitor Mastercard Inc. hold in the cards industry. Merchants, including Amazon.com Inc., Target Corp., and Home Depot Inc. are pushing for changes that would lead to lower credit-card interchange fees. Those fees are set by the networks, and merchants pay those costs to the banks that issue the cards. Some merchants also want to negotiate those fees directly with the banks.

Last month, European Union regulators said that Visa and Mastercard agreed to lower interchange fees that merchants pay when they accept debit or credit cards that are issued outside of the region.


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