Visa (V) Q2 2021 Earnings Call Transcript

Visa (V -1.02%)
Q2 2021 Earnings Call
Apr 27, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Visa's fiscal second-quarter 2021 earnings conference call. [Operator instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your hosts from investor relations, Ms.

Jennifer Como and Mr. Mike Milotich. Ms. Como, you may now begin.

Jennifer Como -- Investor Relations

Thanks, Jordan. Good afternoon, everyone, and welcome to Visa's fiscal second-quarter 2021 earnings call. Joining us today are Al Kelly, Visa's chairman and chief executive officer; and Vasant Prabhu, Visa's vice chairman and chief financial officer. This call is being webcast on the Investor Relations section of our website at www.investor.visa.com.

A replay will be archived on our site for 30 days. A slide deck containing financial and statistical highlights has been posted on our IR website. Let me also remind you that this presentation includes forward-looking statements. These statements are not guarantees of future performance, and our actual results could differ materially as the result of many factors.

Additional information concerning those factors is available in our most recent reports on Forms 10-K and 10-Q, which you can find on the SEC's website and the Investor Relations section of our website. For non-GAAP financial information disclosed in this call, the related GAAP measures and reconciliation are available in today's earnings release. And with that, let me turn the call over to Al.

Al Kelly -- Chairman and Chief Executive Officer

Jennifer, thank you, and congratulations on your second anniversary with Visa. Good afternoon, everyone, and thanks for joining us today. I'm going to provide a few quick stats on the quarter and then share my thoughts on what's ahead as the world continues to recover. The recovery is going to take many different shapes, and the timing will differ around the world based on vaccination rollouts and the easing of restrictions.

But we believe we're at the beginning of the end of the pandemic and the recovery is well under way, at least in a number of markets. First, Q2 results, revenue declined 2% year over year but would be slightly positive at 20 basis points if service revenues were recognized on current-quarter payment volume. Non-GAAP EPS was $1.38, a decrease of 1%. When looking at volumes and transactions growth, keep in mind that we're now lapping the start of the pandemic.

As growth rates are now less indicative of performance in the business trajectory, we're going to also provide some metrics compared to 2019 on a constant-dollar basis. So payments volume grew 11%, improving 7 points from Q1 and reached 116% of 2019, which is up 3 points from Q1. Cross-border volume, excluding intra-Europe, declined 21%, but improved 12 points from Q1 and is 75% of 2019 levels, 3 points better than Q1. Process transactions growth of 8% improved 4 points from Q1 and represented 116% of 2019, which is consistent with the first quarter.

This quarter, we continued to make progress across our three growth levers. First, consumer payments. In Asia Pacific, we renewed our partnership with Rakuten Card, a subsidiary of Rakuten Group, the largest e-commerce marketplace in Japan. In Korea, Visa won the first hotel chain co-brand in the country with Marriott and Shinhan Card, Korea's largest issuer.

In China, we renewed our credit portfolios with CITIC Bank and Agricultural Bank of China, two of the top 10 largest banks in the country. Also, on the co-brand front in Brazil, Samsung, in partnership with Banco Itau, will issue their inaugural co-brand in Latin America with Visa targeting Samsung's 57 million Brazilian users. In Europe, Visa won incremental business with BNP Paribas Fortis in Belgium. This expands our relationship to include 4 million debit cards in addition to our existing credit relationship.

In Switzerland, we've gained significant traction in growing Visa Debit. Since January of 2019, we have signed 13 new debit deals, representing an incremental 2.6 million cards. In new flows, Visa Direct transactions grew almost 60% in the second quarter. We're pleased to have clients going live now with Visa Direct payouts, which offers a flexible set of APIs for Visa partners globally to use a single point of connection for push payments to cards and accounts.

MoneyGram, Goldman Sachs Transaction Banking, Standard Chartered Bank Hong Kong, and KyckGlobal are among the first to start utilizing Visa Direct payouts for B2C, cross-border P2P, and B2 small B payouts. A few additional highlights on specific Visa Direct use cases include that in the marketplace payouts -- in marketplace payouts, Airbnb, which now has 4 million homes globally, will offer host payouts using Visa Direct in select markets. In cross-border P2P, Remitly, a top digital remittance fintech, has renewed its Visa Direct relationship, building upon the past two years of partnership. And Monobank in Ukraine enabled cross-border P2P to their 1.7 million cardholders.

In the payroll category, the earned wage access use case continues to grow, with 25 earned wage access platforms now offering Visa Direct for fast and convenient access to employee earnings. G2C continues to grow as well. Global Blue, a leading tax-free shopping solutions company covering 52 countries and 35 million tax-free transactions in 2019, is utilizing Visa Direct to distribute tax refund payments across Europe. Separate from Visa Direct, we supported the U.S.

government's disbursements of economic impact payments to nearly 13 million Visa prepaid credentials in the U.S. so far this year. And now, to our third growth, our value-added services, we're continuing to see strong adoption. Let me highlight a couple of examples.

For CyberSource, Planet, a European acquirer and payment services provider that delivers payment processing and currency conversion solutions to over 600,000 merchants, will be partnering with CyberSource to simplify payments across the hospitality, food and beverage, and retail sectors. KeyBanc, a top U.S. acquirer, will begin to offer CyberSource to its merchant clients. And as e-commerce continues to grow, Decision Manager, a key risk offering of CyberSource, increased transactions over 30% fiscal year to date.

Our other risk fraud and authentication capabilities grew as well. For example, we've now crossed the 2 billion token milestone, up from 1.4 billion tokens just in September. One of our key authentication capabilities, CardinalCommerce, grew revenue almost 50% year over year this quarter by rapidly expanding beyond its U.S. origins.

In the next year, we plan to more than double our clients in Europe and Central Europe, Middle East, and Africa. So while the pandemic has disrupted the world, it has not changed our strategy. In fact, it has reinforced our belief that our three areas of focus will deliver robust growth for years to come. As we look ahead with COVID recovery under way, a few key important realities, namely the way consumers feel about e-commerce, cash and travel will particularly impact Visa.

The pandemic has accelerated e-commerce. Global card-not-present credentials, excluding travel, grew over 20% in the quarter versus last year. Our growth in card-not-present payment volume, excluding travel, has averaged at least 30% in the United States, Canada, Brazil, United Kingdom, Italy, Germany, India, and Singapore over the last three quarters. And in global cross-border, excluding intra-Europe, it's averaged 20% growth.

We believe this shift is likely to persist as the convenience of e-commerce is indisputable, and its growth continues to be robust even as card-present begins to return. In March, in the United States, as some states loosened transactions, card-present as a percentage of 2019 spend improved 11 points versus February. While at the same time, card-not-present, excluding travel, still expanded 8 points. If you look at that in Japan, where restrictions were also lifted, card-present improved 6 points and card-not-present, excluding travel, still improved 4 points in that same comparison between March and February.

The pandemic has accelerated the digitization of cash, and we see the impact in debit and tap-to-pay. When we look at cash usage in the last 12 months, just on the Visa brand, such as with ATM withdrawals, we see that global debit cash volumes have decreased by 7%, while debit payments growth -- payment volume has grown 16%, both on a constant-dollar basis. This 20-point gap is more than double the historic gap in growth rates and relatively consistent globally, demonstrating cash digitization in both mature and emerging regions. Overall, Visa tap-to-pay transactions have grown over 30% year over year in March.

In Europe, less than a year since contactless limits increased across the region, Visa has seen 1 billion additional touch-free transactions. In the United States, one in 10 face-to-face Visa transactions are now done with a tap, more than a 2 times increase since the beginning of the pandemic. In New York City, the penetration is nearly 30%, demonstrating the potential of focused issuance and merchant enablement, along with transit. In the past three years alone, we've enabled nearly 250 transit systems globally, and we can see, based on our research, that enabling tap-to-pay on transit can bring more than a 15% lift in transactions for merchants in the surrounding neighborhoods.

The decline in travel is temporary, and we're starting to see some early signs of recovery. Cross-border travel-related spending, excluding intra-Europe, improved from Q1, driven by two factors. First, those who are abroad are spending more likely because of fewer restrictions. This quarter, essentially all of the cross-border travel spend improvement was driven by higher spend per card rather than more active cards.

Second, we continue to see strength from countries with open border. For example, U.S. to Mexico volume was almost 20% above 2019 levels for the quarter. We also saw several top corridors between the U.S.

and Latin America improve by more than 10 points through the quarter versus 2019. Travel will certainly take more time to recover than other sectors, but we believe personal travel, in particular, will come back, and that's good for Visa for two primary reasons. One, because the vast majority of the travel we capture on our credentials is consumer; and two, we are the global leader in travel co-brands. With the backdrop of travel cash digitization and e-commerce, let's briefly explore the future potential of our three growth levers.

In consumer payments, in the last two years, we've grown our credentials to 3.6 billion and physical merchant locations to over 70 million, up 7% and 34%, respectively. And remember that our merchant locations only count our partners like PayPal and Square each as one. That said, there's ample opportunity as we focus on specific regions and partners. Looking at regions, even with our leading position in both emerging and developed markets, our market-driven approach to growing credentials is succeeding.

And Europe is an excellent example. From 2018 to 2020, we grew active card credentials by 10%. And looking ahead, we have line of sight to more than 25 million additional credentials across 50 clients in the next few years. Let me cite a couple of recent partnerships that would show this rapid growth.

Since fintech Revolut signed a global agreement in September 2019 selecting Visa as their lead issuing partner, they've increased the number of cards and payments volume by more than 200% through December 2020. Crypto.com has launched Visa cards in 39 markets across their 10 million user base since 2018. And just this quarter, they signed a global growth agreement with us, covering 12 markets with plans to expand even more. There are so many more partners issuing credentials and building acceptance.

For example, wallet providers represent the potential for another 2 billion credentials and 70 billion acceptance locations over time, and the pace of growth here is fast. YooMoney in Russia recently signed on to issue Visa credentials and has achieved more than 1 million credentials in just five months. In fiscal Q2 last year, we announced that stc pay, Saudi Arabia's largest wireless operator with 25 million subscribers, plan to embed credentials in their stc pay wallet. To date, more than 1 million Visa credentials have been issued.

Our ongoing partnership with Paytm has enabled us to add more than the 250,000 contactless-enabled acceptance locations at new-to-card merchants. Well, the number of Visa credentials issued by Paytm has more than doubled since September of 2020, reaching a total of 3 million. Around the world, tap to phone has also been a significant acceptance effort. Today, more than 35 markets offer it, with 13 more being added this year.

Wallets and tap-to-phone are just a couple of next-gen partners and capabilities that we believe will help us bring the 1.7 billion unbanked into the financial mainstream, growing the pie for digital payments. The growth will come from a regional approach and open it to partnering with traditional and new players and by developing new ways to engage the ecosystem, all rooted in our strong brand and in technology. In new flows, our success in the United States is a real asset. While B2B has been impacted by the pandemic, our strategies against the $120 trillion opportunity represent near, medium, and longer-term growth for Visa.

In the near term, we're focused on supporting businesses small and large. To date, we've helped 12 million micro and small businesses to digitize and grow against our 50 million global goal. And we continue to focus on card-based solutions. Visa has about 20% more commercial issuers today than we did four years ago.

In the medium term, Visa B2B Connect addresses the major pain points with the current top-solution and cross-border B2B, and we are continuing to add banks to reach scale. In the longer term, we're working with key partners to solve the challenges of accounts payable and accounts receivable. For the other $65 trillion of new flows, Visa Direct has five clear competitive advantages that we believe will continue to drive growth. The first one is reach.

In Visa Direct, the endpoints are card credentials and bank accounts. And we can reach 5 billion endpoints globally. This is unrivaled by anyone else. Second, operating scale.

Visa Direct has built upon the operating scale of VisaNet and leverages its real-time authorization, clearing, and settlement capabilities. This means we can deliver industry-leading solutions with low marginal cost. Third is commitment to a network of network strategy. Visa Direct is truly multi-rail, which provides clients flexibility and efficiency.

Just in the last year, it has utilized 16 card-based networks, 65 ACM schemes, seven RTP networks, and five payment gateways. That is more connections, coverage, and capability than we've seen from any other network offering. Fourth, investments in our capabilities. We have invested in leading technology stack for both payouts and account funding capabilities.

For example, our account funding capabilities include unique codes to help clients manage risk, compliance, and authorizations for money movement transactions with APIs to streamline implementation for apps, neobanks, and fintechs. To our knowledge, no one else has this capability. Fifth is commercialization. We've now enabled over 20 use cases with more than 450 new program launches, and we will continue to expand by one, growing existing use cases like marketplaces and cross-border P2P; two, bringing existing use cases like P2P, payroll, and earned wage access to other new markets; and three, developing new use cases such as tipping.

Visa Direct also brings a network effect in terms of benefits to Visa. For every dollar received on a debit card through Visa Direct, about half of it is then used for debit card purchases. Furthermore, cardholders who received payments through Visa Direct then spend up to 50% more than those who do not. So Visa Direct is actually not only helping new flows, but it is helping consumer payments.

Lastly, let's turn to value-added services, which are being utilized by our clients more and more. In fiscal-year 2020, more than 60% of our clients used at least five value-added services from Visa and more than 30% of our clients use 10 or more. Our toolbox is large with hands-on consulting, sophisticated and flexible technology platforms, valuable data and insight, and card benefits, all which will improve with the recovery. We also have three platform businesses that scale very profitably, CyberSource, issuer processing, and risk identity and authentication.

With the recovery and the continued strength in e-commerce and debit, these capabilities are well aligned with trends toward digitization. Let me just speak about CyberSource as an example. Our strategy to partner with acquirers creates a leveraged opportunity for future growth, both transaction growth and cross-selling value-added services. We mentioned last year that Japanese acquirer SMCC was going to start offering CyberSource capabilities to its merchant customers.

Starting with one nationwide convenience store chain and rapidly expanding to over 30,000 merchants, SMCC is now delivering next-generation acquiring solutions to Japanese merchants, and CyberSource is processing over 0.5 million e-commerce and in-person transactions per day. With all this opportunity across the three levers, we are investing heavily to drive future growth in several areas, including simple, compelling user experiences. Examples include tap-to-pay, tap-to-phone, and click-to-pay. Capabilities to scale new flows and value-added services.

Examples include new Visa Direct use cases and advancing fraud and identity solutions. Specific markets that can benefit from targeted resources such as Europe and Africa. Innovations in the payments ecosystem, such as crypto APIs for banks and digital currency settlement. So to close, Visa has weathered the COVID storm and is emerging from the pandemic even stronger.

There's significant opportunity ahead and Visa's existing present scale and capabilities position us well to capture more growth in the future. With that, now let me turn it over to Vasant for more colors on our financials and what we see ahead. Vasant, over to you.

Vasant Prabhu -- Vice Chairman and Chief Financial Officer

Thank you, Al. Good afternoon, everyone. Our fiscal second-quarter results were stronger than we expected, with net revenue down 2% largely due to improving cross-border volumes and lower-than-expected client incentives. GAAP EPS was flat to last year, and non-GAAP EPS declined 1%, helped by a lower tax rate.

Exchange rate shift increased net revenue by 0.5 point but lowered EPS by 0.5 point due to currency-related benefits in the second quarter last year. As Al mentioned, as we lap the most significant COVID-19 impact starting in March 2020, year-over-year growth rates are not the best indicator of the underlying trend. To help you better assess both the magnitude and the trajectory of the recovery so far, we have also provided growth rates for key performance metrics relative to fiscal-year '19. In constant dollars, global payments volume year-over-year growth was over 11%, fueled by continued strength in debit, as well as improving credit spending.

Compared to the corresponding quarter in 2019, global payments volume was 16% higher, a 3-point acceleration from the first quarter. Excluding China, total payments volume growth was 13% or 20% higher than 2019 as Chinese domestic volumes continue to be impacted by dual-branded card conversion, which have minimal revenue impact. U.S. payments volume growth was 18% and up 24% from 2019, benefiting from economic impact payments in early January and mid-March, as well as the relaxing of COVID-related restrictions in many states, partially offset by bad weather, lowering spending in mid-February.

Even after adjusting for economic impact payments, U.S. payments volumes have bounced back to the pre-COVID trend line. Debit growth accelerated 13 points to 34%, up 44% from 2019, boosted by the two economic impact payments in this quarter. Credit growth was 2%, up 6% from 2019.

The credit improvement was helped by increases in retail, travel, restaurant, and entertainment spending, mostly starting in early March, as restrictions were relaxed in many states. It is important to note that credit has improved without debit slowing, pointing to accelerated cash displacement. Card-not-present volume, excluding travel, continued to grow over 30% in the quarter and was 55% above 2019 levels, primarily driven by retail spend. The most notable sign of a domestic recovery was card presence spend growing 4%, which is up 3% over 2019, an 8-point acceleration from the first quarter, led by retail and restaurant spending.

Improving card-present spending does not slow e-commerce, indicating that e-commerce strength is likely to continue even as card-present spend recovers. International comps in dollar payments volume growth was 6%, up 9% from 2019. A few regional highlights. CEMEA remains our fastest-growing region, growing 26%, up 50% from 2019 levels.

The easing of COVID-related restrictions, particularly in the Middle East and Russia, as well as client wins, drove the robust growth. Latin America grew 23%, up 40% from 2019, with consistently strong performance across the region, mostly fueled by accelerating e-commerce adoption and usage, as well as client wins. Europe grew 2%, up 8% from 2019, but decelerated from the last quarter as many countries put significant COVID restrictions in place, particularly the U.K., France, Italy, and Germany. In Asia Pacific, excluding China, second-quarter spending grew 4%, up 8% from 2019.

Performance across the region varied based on the level of COVID restrictions, with markets like New Zealand and Singapore growing strongly, while markets like Hong Kong and Japan, which had restrictions for most of the quarter, the weaker. Global process transaction growth was 8%, up 15% from 2019, lagging volume growth due to higher ticket sizes, particularly in the U.S., and significant COVID restrictions in Europe. Visa Direct continues to perform well, with transactions growing almost 60% globally this quarter, consistent with the first quarter. The cross-border volume recovery continued, despite most borders remaining completely or partially closed.

Comping down of cross-border volume, excluding transactions within Europe, declined 21% in the second quarter and was at 75% of 2019 volumes. Looking at the trajectory versus 2019, this was a 3-point improvement from the first quarter. We're seeing a typical seasonal uptick in March and into April, which is a positive sign as we look ahead to the summer. Card-not-present, excluding travel volume, continued to be very strong, growing 28% year over year, up 44% from 2019, driven mostly by retail spending and some benefit from cryptocurrency purchases.

Cross-border travel-related spend declined 55% year over year and was at 39% of 2019 levels. Card-present spend as a percentage of 2019 expanded 3 points versus the first quarter. Some color on the state of cross-border travel as we approach the important summer travel season. Travel to and from the U.S.

and Latin America is the best-performing corridor, almost at 90% of 2019 levels by March. Helped by U.S. travel, travel into Latin America, in general, has recovered to over 80% of 2019. Travel between Russia and neighboring countries, as well as travel in and out of the Gulf states, has helped EMEA cross-border travel to recover two-thirds of its pre-COVID volume.

Cross-border travel in and out of Asian countries remains very depressed, down almost 75% versus 2019 and flatlining for the past six months. Travel into the U.S., an important corridor for us was also down 70% versus 2019 in March but has been recovering slowly. With significant U.S.-Canada border restrictions, travel is still down about 80% relative to 2019 in this corridor. As Europe has increased COVID restrictions, travel in and out of Europe remains hard hit, down over 60% versus 2019 in March.

Moving now to a quick review of second-quarter financial results. Net revenue declined 2%. Had we recognized service revenues on current quarter payments volume, net revenue growth would have been slightly positive. Service revenues grew 8%, helped by small pricing modifications.

Data processing grew 11% with strong value-added services growth, continuing to be partially offset by the mix shift away from higher-yielding cross-border transactions. International transaction revenue was down 19%, in line with nominal cross-border volumes, excluding intra-Europe. Other revenues were flat, negatively impacted by low usage of travel-related card benefits and client marketing projects pushed to later in the year, while advisory services continued to grow strongly. In total, value-added services revenue continued to perform well, growing 14%, with strong growth in CyberSource, security, and identity solutions.

This quarter, we reclassified some prior period travel-related card benefits as value-added services and as such, our previously reported first-quarter revenue growth would have been similar to the second quarter on a comparable basis. Client incentives were 25.8% of gross revenues, lower than expected due to better than cross border volume lifting gross revenue and lower Europe and Asia Pacific volumes benefiting client incentives. Non-GAAP operating expenses grew 3%, in line with expectations. We recorded gains from our equity investments of $156 million.

Excluding investment gains, non-GAAP non-operating expense was $109 million for the fiscal second quarter, below our expectations primarily due to two benefits, one of which is offset in personnel expenses, and the other is related to the completion of certain tax audits. These completed audits also benefited our GAAP and non-GAAP tax rates, with a non-GAAP tax rate lower than expected at 16.8%. GAAP and non-GAAP EPS was $0.0138 -- $1.38. We bought 8.3 million shares of class A common stock at an average price of $208.51 or $1.7 billion this quarter.

Including our quarterly dividend of $0.32 per share, we returned approximately $2.4 billion of capital to shareholders in the quarter. Turning from the past to the future, I'll start with key business driver trends through April 21. As you look at these weekly trends, keep in mind three key factors. One, year-over-year growth is lapping the 2020 lows in many cases.

Two, the timing of Easter is impactful. Three, in the U.S., there are peaks in debit spending when economic impact payments are deposited in people's bank accounts. Through April 21, U.S. payments volume growth was 64%, with U.S.

debit growing 67% and credit up 61%. Compared to 2019, U.S. payment volume, debit, and credit were up 29%, 51%, and 9%, respectively, all consistent with the March trend. Looking outside the U.S., trends versus 2019 are relatively stable.

Notable exceptions include the U.K. improving as restrictions relaxed, while India is slowing as restrictions increase. Process transaction growth was 58%, up 16% from 2019, which is consistent with the second quarter. Cross-border volume, excluding transactions within Europe on a constant-dollar basis grew 63% and was at 78% of 2019, which is 3 points above the second quarter and 1 point above March.

As we look ahead, there are several positive cross-border travel indicators to highlight. Travel bubbles are being created. Australia and New Zealand is already in place with an immediate and substantial uptick in bookings. Hong Kong, Singapore is starting in late May with more likely.

So far, all indications are that some popular tourist destinations in Southern Europe will be open for the summer, and bookings are trending well. Just this week, it was announced that Europe's borders will be open to vaccinated visitors from the U.S. this summer. As the U.S.

vaccination program moves along fast, it is possible that travel to and from the U.S. will gather momentum into the summer. Airlines are adding capacity in anticipation. The trajectory of the cross-border travel recovery remains the key metric to watch.

We will be monitoring all leading indicators, easing of border restrictions, forward bookings, as well as surveys of consumer intentions, and we'll update you as we learn more. As in previous quarters, accurate forecasting is difficult in this fast-changing environment. Assuming stable to improving trends relative to FY '19 continue, Q3 net revenue growth is expected to be in the high teens. The cross-border travel recovery trajectory will be the key factor to watch.

Client incentives as a percent of gross revenue are expected to increase 1 to 1.5 points above the second-quarter levels as client volumes grow significantly over last year's low and service fees are recognized with a quarter lag. We plan to increase operating expenses in the mid-teens in the third quarter as we step up investments on marketing and key initiatives to capture the significant growth opportunities Al described. We expect non-operating expense to be around $130 million consistent with the second quarter, excluding the nonrecurring impacts I mentioned earlier. Our tax rate expectations are 19% to 19.5%, again, consistent with last quarter's expectations before the tax audit completion in the second quarter I mentioned earlier.

In closing, we're stepping up our investments to drive accelerated growth in a post-COVID world. A few points to highlight. Our net revenue and profits are at fiscal-year '19 levels, even as a rebound in travel, especially cross-border travel, still remains ahead of us after the world is vaccinated and borders reopen. There is significant pent-up demand for travel, in particular, personal travel.

Large swaths of new consumers worldwide have been introduced to the ease, convenience, and security that digital payments can offer. This is evidenced by the significant global growth in debit as consumers abandon cash at an accelerated pace. These are habits, we believe, will not only stick but also continue to grow, helped by initiatives such as tap-to-pay. Consumers, merchants, and governments globally have recognized the value of e-commerce through the pandemic.

Governments are upgrading their digital infrastructures. Merchants are significantly enhancing their e-commerce capabilities and more consumers are turning to e-commerce across more categories and also cross-border. We expect these trends will only accelerate. Within our new flows business, Visa Direct has continued to grow at extraordinary rates.

The pandemic has expanded adoption of use cases in P2P, B2C, and G2C. Many use cases and markets are just starting to scale. B2B remains a huge opportunity, and we are committed to our three-pronged approach to drive growth, cost-based, cross-border, and large enterprise accounts receivables and payables, with many capabilities scaling or launching in the new future -- in the near future. Our value-added services have sustained high-growth despite lower usage of travel-related services.

Debit and e-commerce acceleration have driven growth in our debit processing, security and identity, and CyberSource businesses, and a recovery in travel-related services lies ahead. As a result, we see acceleration across all three vectors of growth, in consumer payments, new flows, and value-added services. As Al indicated, we're investing in the strategies and capabilities required to capture these growth opportunities. With that, I'll hand it back to Mike for the Q&A session.

Mike Milotich -- Investor Relations

Thank you, Vasant. Jordan, we're now ready to take questions.

Questions & Answers:

Operator

[Operator instructions] Our first question is from Timothy Chiodo from Credit Suisse. Your line is open.

Timothy Chiodo -- Credit Suisse -- Analyst

Thanks a lot for taking the question. I wanted to touch on the evolving mix of the cross-border business. So within cross-border, you called out a couple of use cases for Visa Direct earlier, you touched on remittances, you touched on marketplace payouts. But separately, we'd add to that list some of the new flows within cross-border B2B.

So maybe you could just comment a little bit on the prospects for those new areas of cross-border to come into the mix and maybe be a more meaningful portion over the next, call it, three or five years?

Al Kelly -- Chairman and Chief Executive Officer

Well, I think as we grow out our capabilities as we see the recovery in the pandemic, I think the Visa payout capability we just put in place, which basically brings together what was Earthport and Visa Direct and Visa's single point of connection is going to facilitate many more use cases and make it very, very easy for people to spend money cross-border. And that's kind of the high volume, lower value types of transactions. I think we are continuing to make progress in connecting more banks around the world to B2B Connect. And as we complete the grow out of that network over the next few years, I see us as having great capability to drive cross-border B2B, high-value, lower-volume types of transactions.

So I think the combination of our capabilities what has happened in terms of continued adoption of digitization and the capabilities that we have built and the use cases that we are working with today and anticipate adding to the mix over time, I think is going to become an increasingly important and growing part of our business.

Vasant Prabhu -- Vice Chairman and Chief Financial Officer

So a couple of things to add. When we -- before we got into the pandemic, two-thirds of our cross-border business was travel-related, one-third was e-commerce-related. Today, in the second quarter, two-thirds of our business was cross-border e-commerce, one-third was travel. It says two things.

One, how much our cross-border e-commerce business has grown, and the second, how much recovery is left in our cross-border travel business because as Al said, most of our cross-border travel is personal travel, and there's a substantial amount of personal travel that is going to come back once borders reopen. So the traditional cross-border e-commerce is an area of significant growth. We've seen that as people move online, they become somewhat less sensitive to where the product is shipped from and there's just a lot more cross-border e-commerce. The other use case that holds a lot of potential is to the extent that crypto-related transactions become significant, and we're enabling, as you know, a vast number of them, one use case that is particularly useful in either stablecoin or Bitcoin-type scenarios is cross-border.

And that is another new use case that could have a lot of potential in the long term.

Timothy Chiodo -- Credit Suisse -- Analyst

Thanks for that. Vasant, yes, that's exactly what I was trying to get at. The mix has certainly flipped more e-comm, and there are some new flows that are coming in to keep the travel portion lower than it was pre-COVID. So thank you so much for taking the question.

Operator

Our next question comes from Darrin Peller from Wolfe Research. Your line is open.

Darrin Peller -- Wolfe Research -- Analyst

Hey, thanks, guys, and nice job. When we look at the slide, the index to '19 was really helpful, showing 16% up from '19 levels. I mean, there's a lot of considerations we're getting at about including stimulus and higher savings rates, but clearly, also structural changes in the industry, some of which we just touched on e-comm, but just more going on to debit cards faster across the whole industry. How do you parse out what you see as structurally sustainable? E-comm is a part you mentioned, but even beyond that, just more on maybe small ticket versus what was maybe stimulus-driven or near term.

Al Kelly -- Chairman and Chief Executive Officer

I'll start, Darrin. First of all, I think we definitely see millions of new people coming into the e-comm, shoppers who weren't there before. And I don't think they're going to turn backward at all. So I think that certainly remains.

Obviously, as we get out of the pandemic, the stimulus types of money will dry up, and that will go away. I think the people being concerned about cash and much more comfortable shopping online, the combination of that will continue. I think that will also -- we'll also see structurally much more tap-to-pay as people find that to be a more helpful way to shop. I think we've seen governments during this pandemic become bigger clients, and they're increasingly interested in showing the way in terms of digitizing more of what they do as a government.

And I think we'll see more of that activity sticking as well. I think that in general, we had, before the pandemic, very little separation in growth rate between debit and credit. In any given month or quarter, they would kind of grow within a percentage point of each other. We saw an incredible separation during the pandemic as much as 40 points of differential in terms of growth.

We're now seeing, in this quarter, credit come back a bit and start to drift into positive territory. But I think that at least for the foreseeable future and maybe for longer, that I think you're going to see debit continue to grow above credit. Although as travel comes back, that should certainly help bounce back credit volumes, particularly since most of the travel co-brand cards and many of the actual travelers tend to use credit cards.

Vasant Prabhu -- Vice Chairman and Chief Financial Officer

I mean, a couple of other things to add there is, as you know, debit has become the engine for cash digitization. And what we see in this pandemic, especially as it has gone on for quite a while is there's often a hurdle in getting people to change habits. So people are used to using cash, getting them to use digital forms of payment, that takes some time. This pandemic has caused a range of changes in behavior because there was no choice, whether it's in emerging markets where there was a greater propensity to use cash or certain cultures, you heard of Germany and Japan as having been very cash-based economies for a very long time or habits in terms of people using cash for certain categories like food and drug, that's changing.

Or people using more cash at the physical point of sale, as Al said, with the cash dirty risk, as well as tap-to-pay making payments easier at the physical point of sale, we're seeing a substantial shift toward cash utilization even at the physical point of sale. And then the point you said about smaller and smaller transactions that used to be cash moving digital, again, tap-to-pay is a big engine for that. And the trajectory of tap-to-pay remains very significant. And we are probably within a year of coming to the point where the U.S.

will be in take-off phase on tap-to-pay, too, which is a very big market.

Darrin Peller -- Wolfe Research -- Analyst

Appreciate it, guys. Thanks.

Operator

Our next question comes from David Togut from Evercore ISI. Your line is open.

David Togut -- Evercore ISI -- Analyst

Thank you very much. Just bridging to Darrin's question on structural changes, when you look at the heightened shift to e-commerce, which you've indicated will likely accelerate even post-COVID, can you talk about your funding mix of e-commerce transactions, debit fee, credit, specifically, how you expect that to evolve with economic reopening? Would you expect consumers to lean a little bit more heavily on their credit cards as the economy rebounds? Or should debit likely remain the primary funding of e-commerce transactions?

Al Kelly -- Chairman and Chief Executive Officer

Well, David, I think one of the incredible stories of the pandemic was that debit has become the cash of the e-commerce world. And people are doing much more everyday shopping post the pandemic than they did pre the pandemic. The amount of food orders that are placed and take-out orders that are placed, buying normal household staples that might have been -- many of them were in-person or the vast majority, and maybe even some of them were in cash. But we're just seeing the type of transaction that typically goes along with debit is everyday spend.

And so what we're seeing as a real structural change is everyday spend has moved from in-person to e-commerce in a big way. I do think, though, that credit will make a rebound, particularly as some of the larger discretionary spending comes back in, as the affluent gets back into making travel reservations, as the online travel agency business starts to grow, I think that there'll be a closing of the gap between credit -- debit growth and credit growth. But again, as I said to Darrin, I'm not sure that we get back to those two different card platforms growing at the same level going forward. I think we certainly closed the gap.

But I think at least as far out as odd-looking right now, debit will continue to outpace the growth of credit.

David Togut -- Evercore ISI -- Analyst

Thank you very much.

Operator

Our next question comes from Tien-Tsin Huang from JPMorgan. Your line is open.

Tien-Tsin Huang -- JPMorgan Chase & Co. -- Analyst

Hey, thanks so much. I know you gave a lot of volume growth. It's a good detail here. But I want to ask maybe differently about credential growth, building on the last couple of answers here.

It seems like everyone is trying to bank their users by giving them cards, and there's a lot of new use cases around virtual cards. So I'm wondering -- I don't know if it's odd or out, if you're thinking about credential growth and you compare that to 2019, are you thinking about potential for issuance or your pipeline for new cards, that might be coming out globally? How does that measure today? If you want to qualify that. Is it much larger than what you would have expected, let's say, pre-pandemic?

Al Kelly -- Chairman and Chief Executive Officer

Well, I think the -- Tien-Tsin, first off, good to hear from you. I think that the pandemic has interrupted a little bit a real bolstering of credentials that was driven by a combination of marketplace platforms, wallets, neobanks, etc. I cited a number of examples in my remarks about the fact that we think that there's upwards of 2 billion more credentials out there from a lot of those types of players. And we've seen, by building partnerships with numbers of fintechs over the course of the last year or two, a tremendous amount of opportunity to grow Visa credentials, either by having these players become issuers and acquirers for us, which is a very big and important trend, particularly in developing countries, but also just getting currencies and credentials into some of the existing wallets.

But we believe there's an enormous opportunity to grow the number of credentials, and it's something that we're certainly focused on, particularly, as we talk to the fintechs, the wallets, and the neobanks around the world.

Tien-Tsin Huang -- JPMorgan Chase & Co. -- Analyst

Appreciate that. Thanks, guys.

Operator

Our next question comes from Dan Dolev from Mizuho. Your line is open.

Dan Dolev -- Mizuho Securities -- Analyst

Hey, guys, great quarter. Thanks for taking my question. Can you talk a little bit -- you spoke a little bit about Bitcoin earlier and about the use case for crypto and Bitcoin on cross-border transactions. Can you talk a little bit about -- more about that and kind of the progress you're making on settlement in stablecoins and the steps you've taken on Ethereum? I think there's a lot of interest out there, and what you guys are doing there and how it's positioned.

Thank you.

Al Kelly -- Chairman and Chief Executive Officer

Well, thanks, Dan. This is an interesting subject. So let me give a little bit of background to talk about where we see the opportunities. So first of all, there's two market segments as we see it.

One is -- are the Bitcoin, the kind of -- which are primarily assets held by people. They're not used much in the former payments. We kind of think of them as the digital gold. And then there are digital currencies, including Central Bank digital currencies and stablecoins that are directly backed by existing fiat currencies.

And they're definitely emerging as a payment option, and they're running a public blockchain, which is really, in essence, an additional network, much like an RTP or ACH might be. So our focus is on five different opportunities that we see in this space. And I would say that this is a space that we are leaning into in a very, very big way and I think are extremely well-positioned. The first opportunity is really at the core of what we do, which is enabling consumers to make a purchase of these currencies or Bitcoin and we're working hard with wallets and exchanges to just make sure we're facilitating acceptance in people's ability to use their Visa cards to buy.

And Vasant referenced that in his remarks that we saw some increase, some of the volume gain for people making these purchases on Visa cards. Secondly, the second opportunity is enabling digital-currency cash-outs to fiat. So converting a digital currency to a fiat on a Visa credential, which then makes that -- those funds available for shopping at any one of the 70 million Visa merchants and gives immediate utility to the digital currency. And we're the clear leader here.

We've got over 35 digital-currency platforms and wallets that have chosen to work with us. Coinbase, Crypto.com, BlockFi, Fold, Bitpanda are just some examples. And so that's certainly a second big opportunity. Thirdly, is enabling financial institutions and fintech partners to be able to have a crypto option for their customers.

So what we've done in this space is we've created APIs that enable financial institution customers to purchase, custody, or even trade digital currencies held by Anchorage, which is the first federally charted digital asset bank in the U.S. And we've done our first rollout with First Boulevard, which is a digital neobank focused on building generational wealth for the black community. So that's the third opportunity. Just helping FIs and fintechs have this crypto option for their customers.

Fourth one is settlement, which you started to reference. We've upgraded our infrastructure to allow a financial institution to settle with these in a digital currency with stablecoin, starting with USDC. As you know, today, we transact in 160 currencies every day, and we settle every evening in 25 currencies. So we're going to now be able to support digital currencies as an additional settlement currency on our network.

And on our end, we're going to -- settling in USDC is pretty similar to settling in U.S. dollars. But the mechanics of receiving these funds is a bit different and requires some integration work with several crypto custodian like -- players like Anchorage. And then the fifth area of opportunity is just working with central banks.

Central bank digital currency is being explored in many nations. And I think it could end up being -- prove to be quite valuable in countries where the infrastructure to distribute cash is either unavailable or limited. And it's one of the factors that hinders these 1.7 billion people I referred to in my remarks that are outside the financial mainstream for being in the financial mainstream. So we're talking to central banks about the criticality, though, of public-private partnerships, and in particular, the criticality of acceptance because for these central bank digital currencies, to have value, they're going to have to both be secure in the minds of consumers.

And that's something we have a long track record with and can help. And then secondly, obviously, they have to have some form of utility. So, Dan, that's a bit about how we're thinking about crypto with a real focus on digital currencies and those five opportunities.

Dan Dolev -- Mizuho Securities -- Analyst

Yes. Thank you. It definitely sounds like you guys are at the forefront of this. So a great job on that.

Al Kelly -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Lisa Ellis from MoffettNathanson. Your line is open.

Lisa Ellis -- MoffettNathanson -- Analyst

Hi. Good afternoon, guys. How are you? Al, I'll use your comments there that debit is becoming the cash of online transactions as an opening to ask about the online debit competitive environment. Can you just highlight or describe what, in your view, from Visa's perspective, are the advantages of Visa signature debit products over alternatives like account-to-account transfers or PIN-less debit for online transactions? Thank you.

Vasant Prabhu -- Vice Chairman and Chief Financial Officer

Al, I think you're on mute.

Al Kelly -- Chairman and Chief Executive Officer

Sorry, Vasant. I'm going to tread a little bit lightly there in light of the DOJ case, but we feel very good about our Visa Debit business. We think we've got very, very good capabilities. And we believe that the innovations that we have, the ability to stand behind customers in disputes and other cases, that makes our products something that both consumers, merchants, and issuers look to choose.

And we will continue to invest in debit for a product that we hope people use both online and in-person purchases around the world.

Lisa Ellis -- MoffettNathanson -- Analyst

Terrific. Thank you. Thanks for covering.

Operator

Our next question comes from Dan Perlin from RBC Capital Markets. Your line is open.

Dan Perlin -- RBC Capital Markets -- Analyst

Thanks, and good evening, everyone. I know -- in keeping with the kind of structural change being that we all seem to be on tonight, all of these new products, I'm just wondering how the long-term growth rates of the company are going to be sustainable, if not accelerating from this kind of levels? You're using these indexes back to '19, but I'm thinking back even a couple of years, it's a much larger organization, you seem to have outlined many potential avenues of growth. So I'm wondering, are you at a point now where there's just this pivot in the actual business itself where it can structurally grow faster than maybe over the next five to 10 years than maybe you did over the prior five to 10 years just given all of the new constituents that you're ultimately servicing these days?

Al Kelly -- Chairman and Chief Executive Officer

Well, Dan, we don't typically get into forecasting out that far. But obviously, you hopefully got a good sense in my remarks that we feel like we have three very strong growth levers. And we think each of them has tremendous gas left in the tank. And our consumer payments, which has been our staple for years, still has huge upside.

Back to Tien-Tsin's question about credential growth, we think there's a tremendous amount of growth in credentials. We think there's tremendous amount of growth in acceptance footprint. We think there's a tremendous amount of growth when we look at various geographies. And we look at the 1.7 billion people that are outside the financial mainstream.

When we look at new flows, there's the $185 trillion of opportunity there. So we think we've got two big efforts going in both B2B and Visa Direct to take advantage of those. And value-added services is relatively new as well, but we've got a -- in terms of how we talk about it, we've had many value-added services or capabilities or solutions for years. And they've always contributed well to our revenue, but we've increasingly been focused on in the last two years.

And we're driving a lot more revenue and higher revenue growth than we had in consumer payments through value-added services and so we think there's still a tremendous amount of upside there. I commented about the fact that we're getting high usage from a lot of our clients, but there's still a huge amount of room to grow with existing -- with clients that are already using value-added services, as well as clients that are not consuming as many of their value-added services. So I look ahead and say the future is very, very bright. And adding on top of that, a lot of what we've talked about in terms of digitization and the fact that we will come out of this pandemic, and we'll start to see travel recover, all of those are extremely good trends for us.

Dan Perlin -- RBC Capital Markets -- Analyst

Excellent. Thank you so much. I appreciate it.

Operator

Our next question comes from Harshita Rawat from Bernstein. Your line is open.

Harshita Rawat -- Sanford C. Bernstein -- Analyst

Hi. Good afternoon, and thank you for taking my question. My question is on the growth in buy now, pay later. In a very long-term time horizon, how do you see BNPL co-existing with credit and debit? And I know globally, it's very small right now, but the growth rates are very impressive.

And given your partnerships with BNPL providers, your installment solutions, as it grows here, is there an opportunity from your perspective? Thank you.

Al Kelly -- Chairman and Chief Executive Officer

I don't know where installment is going to end up, but we are attacking that like we attack crypto and other things and assuming that it's going to be successful and that we want to lean in heavily and be in the middle of it and be a driver of what's going to potentially happen. As you alluded to, we have both a strategy of working with third-party providers, as well as offering our own Visa proprietary platform that would allow issuers to offer their own buy now, pay later capability. And we see it as potentially having a very, very good effect for us. I mean, we could see -- we could work with all bunch of options, virtual cards from Visa could be used for repayment.

A Visa card on file could be used for repayment. We could explore Visa Direct as a way for installments to be paid off. And in many of those cases, if that's the case, what ends up happening is a single purchase turns into a number of installments so that one transaction can end up being three to four or five payment transactions, which is certainly very, very good for us. We also think that this is a space where we can sell value-added services, data, and analytics, the broadband of providers, underwriting, for example, or risk products to help some of the third-party providers.

So we're doing a lot in this space. We're committed to it. There are countries where it has taken off. There's other countries where it's nascent.

I, again, can't predict exactly where it's going to land, but we are going to -- to the degree that it takes off, we're going to be there and be part of it.

Harshita Rawat -- Sanford C. Bernstein -- Analyst

Great. Thank you.

Operator

Our next question comes from Jamie Friedman from Susquehanna. Your line is open.

Jamie Friedman -- Susquehanna International Group -- Analyst

Al, in your prepared remarks, you talked about the trajectory in the spend per card. I was hoping you could elaborate on that. How you see that evolving. I would think with the recovery of travel, there'd be more gas in the tank there as well.

But anything you have on spend per card, I would appreciate it. Thank you.

Al Kelly -- Chairman and Chief Executive Officer

Well, in my remarks, what I believe I referenced was that in travel, we were seeing higher spend per card versus seeing more people active. And while we haven't been able to study that, what we think is happening is that with -- in places that people can travel, there tend to be also just less restrictions. And that's just opening up more options for people to actually spend. And for instance, instead of doing takeout, go to a restaurant and eat a more expensive meal, order a nice bottle of wine, etc.

So I think that right now, what we're seeing is simply higher spend per card in terms of travel. We haven't commented on spend per card beyond that.

Jamie Friedman -- Susquehanna International Group -- Analyst

Got it. Thank you.

Mike Milotich -- Investor Relations

One last question, Jordan.

Operator

Our last question comes from Jason Kupferberg from Bank of America. Your line is open.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Thank you. I was just curious if you could share with us some of your underlying assumptions for the different gross revenue lines. If we look at the high-teens revenue growth outlook for the June quarter, I know there's a lot of moving parts in the macro environment, it just seems like high teens could maybe be conservative based on what you've seen in April so far, even though I know the comps won't be as easy in May and June.

So would just love to hear more about how you're thinking about the different pieces of gross revenue because you outlined the rebate piece pretty clearly.

Vasant Prabhu -- Vice Chairman and Chief Financial Officer

Just to -- yeah, on revenues, yeah, high teens is our best estimate. Service revenues, as you know, we're recognizing with a quarter lag. So the service revenues you see in the third quarter, remember, will not reflect the revenues related to the volumes in the third quarter. So the third quarter will have a big ramp in volumes, as you're seeing, because we are lapping.

But the revenues in service fees will reflect the revenues from the volumes in the second quarter. It's important to remind people of that. In terms of the cross-border business, I think you see what the trends are. In terms of transactions, I think the trends are fairly stable at this point quarter over quarter.

A point to make on incentives, it's important for you to note that last year, third quarter was when our incentives were really hit because volumes declined, even though we recognize service fees in the lag, our incentives are recognized in the quarter based on quarter volume. So this quarter, we'll see a big ramp in volumes relative to last year, which is going to cause incentives to go up a lot and be compared to a quarter last year where they went down. The second thing is we have these incentives tied to certain thresholds being achieved. Last year, because of all the drops, thresholds were not achieved.

This year, we're assuming there will be. So you get an additional amount of incentives because clients are going to hit certain thresholds. So you have to factor in the fact that year-over-year incentives growth is going to be quite high in the third quarter and factor in the fact that we won't have the benefit of the volumes in our service fees because of the lag. So you should make sure you have all that as you think about our third-quarter revenue growth.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

OK. Thank you.

Mike Milotich -- Investor Relations

And with that, I'd like to thank everyone for joining us today. If you have additional questions, you can always reach out to myself or Jennifer, and we're happy to help you. So thanks so much, and have a great day.

Operator

[Operator signoff]

Duration: 70 minutes

Call participants:

Jennifer Como -- Investor Relations

Al Kelly -- Chairman and Chief Executive Officer

Vasant Prabhu -- Vice Chairman and Chief Financial Officer

Mike Milotich -- Investor Relations

Timothy Chiodo -- Credit Suisse -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

David Togut -- Evercore ISI -- Analyst

Tien-Tsin Huang -- JPMorgan Chase & Co. -- Analyst

Dan Dolev -- Mizuho Securities -- Analyst

Lisa Ellis -- MoffettNathanson -- Analyst

Dan Perlin -- RBC Capital Markets -- Analyst

Harshita Rawat -- Sanford C. Bernstein -- Analyst

Jamie Friedman -- Susquehanna International Group -- Analyst

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

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