This week, VISA announced its third-quarter earnings results after the market closed on Friday, October 18th. The company reported adjusted net income of $5 billion, up nearly 30% from the same period last year. Revenue was also up slightly, at $8.2 billion compared to $7.9 billion in the previous quarter and $8.4 billion a year earlier.

Net income per share rose more than 40%, to $1.97 per share from $1.21 per share a year ago. Diluted EPS came in at $2.88, up 42%. Both numbers beat analyst expectations by wide margins.

Visa’s strong performance can be attributed to several factors, including lower operating costs, efficiency gains, improved revenue mix, and growth across most geographies. All five of these areas were significant contributors to the firm’s success this past quarter.

The low cost structure allowed for solid profitability expansion as spending remained relatively level throughout the quarter. Efficiency improvements have been a staple of CEO Charles Giancarlo’s tenure here, helping VISA become one of the lowest cost service providers in the world while still delivering top quality products and experiences.

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Improved revenue mix shifted away from higher recurring spend (think monthly dues) and towards faster growing categories like mobile payments and eCommerce which are less dependent on frequent activity. Finally, the company achieved double digit global GDP growth once again.

Huge increase in international spending

visa q3 earnings

In its third quarter earnings report, released last week, Visa revealed that global online shopping activity had reached an all-time high! This is insane to realize as we move closer towards the one year anniversary of when this trend began to take off.

In fact, according to figures from Barclay’s, total worldwide digital transactions surpassed $1 trillion for the first time ever in the three months ending September 30th. That’s more than 5% growth over the same period last year!

This is incredible to note because back in early 2016, experts were predicting that overall ecommerce sales would decline by up to 6%. And while some predictions have been revised down (some say it will be around 3%-4%), no one was quite sure what to expect.

It seems clear now though that many people are choosing to give online shopping a try, which can only mean good things for the industry!

And with almost half (46%) of all credit card holders owning at least one smartphone, there are easier ways to do your business than before.

Strong dollar hurts

visa q3 earnings

In its third-quarter earnings report released today, credit card giant Visa reported strong revenue growth but lower profit margins due to the currency effects of the strong U.S. dollar.

Visa’s net income fell 6 percent to $2.8 billion, while sales grew 4 percent to $7.6 billion. Both figures were up slightly from last year’s same quarter, however.

The company said that higher spending by consumers in foreign markets was one reason for the increase in revenues, along with rising online shopping activity and more business travelers using cards.

But the stronger greenback hurt profitability as it makes importing goods costlier for companies that export products and get paid in dollars.

Revenues outside America rose 5 percent to $5.9 billion, helped by an 8 percent rise in transactions made abroad. But profits off those sales dropped 9 percent to $1.4 billion, because of the weaker currencies.

Overall, then, the company earned 97 cents per share, down 7 cents per share from a year ago.

Analysts had expected much better numbers — average forecasts called for a 24 cent per share profit margin and $7.89 billion in quarterly revenues.

But they also projected that Visa would lose market share this quarter, something it has not done since 2011. Shares have been climbing steadily since early September, when investors began anticipating good news about the company’s future.

Smaller declines in spending

visa q3 earnings

In its third-quarter earnings report, credit card giant Visa revealed that total revenue fell 1% from a year ago. This is the second consecutive quarter of decline for total revenue; it dropped 2% in the company’s most recent quarterly results.

However, what is important to note about this number is the context in which it was measured. Total revenue includes various fees related to VISA cards, as well as interchange (swipe) transactions at other banks. The former make up around two thirds of overall revenue, while the latter one third.

So although total revenue declined slightly, the proportion coming directly from lower rewards and reward points purchases decreased substantially. These include VISA gift cards and direct debit transactions using the VISA payWave service.

In fact, total revenues were down only 0.5% compared to last year’s same period due to an 8% drop in the average purchase amount per customer.

This suggests that even though some individuals are keeping their spending in check, more people are actively avoiding debt by not buying large things or paying with plastic.

Furthermore, VISA noted that net income rose 14% over last year’s same three month period. This means that Visa made more money every dollar spent, despite the slight decrease in total sales.

Overall, these numbers show that Credit Card Companies like Visa can still reap substantial benefits even during times when consumers hesitate to spend.

Huge rise in credit card spending

visa q3 earnings

Just how much did Visa earn in its most recent quarter? A whopping $5 billion! That’s right, one-tenth of one percent of the company’s net income came from increased spending on credit cards and related services.

This is actually a decrease compared to last year’s same period when Visa earned just under $6 billion. So why the drop?

It all has to do with where this increase comes from. Let us look at some numbers.

Last year, around the time of the US presidential election, many people were worried about whether or not Donald Trump would be America’s next leader. Many feared that he might enact policies that would negatively impact international trade and business.

One such policy was his repeated calls for protectionism. This is when countries adopt laws that make it more expensive to import goods than export them. For example, if you made your country’s cars less efficient so they are harder to sell, then you could put tariffs on importing foreign cars.

Huge rise in debit card spending

visa q3 earnings

In its most recent quarterly earnings report, credit card company Visa revealed that monthly active users (MAUs) for their VISA Credit Cards had increased by over 5 million since just last quarter! This is an incredible feat given that it took them two years to reach this new high.

This means that there are now nearly 70 million people using VISA cards around the world every month! Not only does this show how popular these products have become, but also how much money Visa makes with each individual user as well.

By almost any measure, VISA has never been more efficient at making money off of their customers. The next step for the company will be to keep up this success by developing newer and better ways to market and advertise their product.

Visa already employs many strategies to promote usage of their cards, such as offering rewards for buying goods with your card or giving away free merchandise if you spend enough with your card. But what about letting other companies use VISA’s name to draw in additional business?

That’s exactly what happened earlier this year when Starbucks offered a discount to anyone who used the VISA logo while shopping. Many people noticed the advertisement and flocked to buy coffee with their VISA Card!

Interchange fees are the costs that banks charge merchants for processing transactions on their behalf. These can add up quickly for small businesses, so most major bank corporations negotiate lower rates for vendors to use.

Small declines in spending on other cards

In its third quarter earnings report, credit card giant Visa revealed that monthly spending across all of their products declined slightly from the same period last year. This includes things like VISA prepaid gift cards, private label (or branded) credit cards, and direct bank accounts.

Visa attributed this to lower average purchases per account, as well as some customers choosing to spend less due to the recent COVID-19 pandemic. They also mentioned that several of their most popular brands are still drawing lots of interest, which is why they’re staying strong.

However, overall revenue was up 5% compared to the same three month period one year ago. This means that while total spending may be down, it’s not enough to fully offset the drop in sales due to people being conscious about money spent.

Greater adoption of chip cards

visa q3 earnings

Chip technology has become the norm for credit card use. While not every major bank offers both chip-enabled debit and credit cards, most do at this point!

Most recently, in November 2017, JPMorgan Chase & Co announced that it would begin offering its Signature Visa Infinite Cards in chip only form with no signature required. The company also stated that they will be doing so to promote safer banking by reducing opportunities for fraudulent activity.

Chip technology was first introduced in 1997 when Bank of America began using them as an optional security feature for certain credit and debit cards. Since then, almost all high-end cards have had chips integrated into them. These cards can still be used without a signature, but thieves must physically take the card away from you to make fraudulent purchases.

Greater adoption of chip cards is one of the reasons why fraud dropped significantly over the past two years. According to Javelin Strategy & Research, average daily fraud fell from $1.2 million in September 2013 to just under $400,000 in December 2016. This drop is even more impressive because during that time frame there were around 10x more active accounts than there are now.

While some people may feel uncomfortable having a computer monitor nearby while you sleep, research shows that these sensors actually help protect your account by limiting access to information stored online.

It’s important to note that not everyone experiences these benefits due to genetics or personal preferences.

Greater adoption of contactless cards

visa q3 earnings

In its most recent financial year, which ended in March 2018, Visa spent $6 billion on card processing technology. That’s nearly six times what it did just two years earlier!

This growth has been fuelled by increased demand for contactless (or ‘payWave’) payments as well as chip-based payment technologies such as EMV.

Contactless is now widely used around the world. It allows you to pay without taking out your wallet or even touching the money you have with you. This cuts down on risk of theft and loss, while also reducing energy consumption due to no need to power up an external device before use.

Many major merchants already accept these new types of cards, but there are still some that don’t. The good news is that more do every month.

In fact, between January and June this year, average monthly transaction volumes using contactless tech grew by over 10% when compared to the same period last year.