Q3 2021 Earnings Call
Jul 27, 2021, 5:00 p.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Welcome to Visa’s fiscal third-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 host from investor relations, Ms.
Jennifer Como and Mr. Mike Milotich. Ms. Como, you may now begin.
Jennifer Como — Investor Relations
Thanks, Michelle. Fiscal third-quarter 2021 earnings call. Before we begin, we want to acknowledge the filing was a little later than usual due to an issue, but hopefully, you’ve had opportunity to review prior to the 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 a 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
Thanks, Jennifer. Good afternoon. Thank you for joining us. We had a really strong fiscal third quarter as payments volume, process transactions and cross-border volume all improved globally.
In our time today, I will first cover our results and then, discuss our performance to date across our three growth levers: consumer payments, new flows and value-added services. The first Q3 results. Net revenue rose 27% or 39% if service revenues were recognized on the current quarter’s payment volume. This growth far exceeded our expectations due to the strength in the U.S., improving cross-border volumes and lower-than-expected client incentives, largely due to deal timing.
Non-GAAP EPS was $1.49, up 41%. As we look at volumes and transactions, keep in mind that year-over-year growth rates are less indicative of performance and the business trajectory due to the COVID-19 impact. So once again, we provide metrics compared to 2019 on a constant-dollar basis, as well as year-over-year growth rates. Payments volume was 121% of 2019, which is up 5 points from the second quarter and represents a 34% year-over-year growth rate.
Cross-border volume, excluding intra-Europe, was 82% of 2019, 7 points better than the second quarter and up 53% year over year. Process transactions were 120% of 2019, up 4 points from Q2 and up 39% year over year. Vasant will provide more color on our results. So now let me transition to progress relative to our business strategy.
Efforts across our three growth levers helped to fuel strong results while positioning us to capture future opportunities. In consumer payments this quarter, we saw a favorable secular trend and had a number of wins with large issuers, co-brands and fintechs. Cash displacement trends continued this quarter. Globally, cash volume on Visa debit credentials, the dollar amount of cash taken out of ATMs, was 98% of 2019 levels, flat [Inaudible] on Visa debit credentials was 140% of 2019 levels, up 5 points from Q2.
While debit remained strong and has accelerated since Q2, credit spending is now also improving. Global credit payment volume was 104% of 2019, up 4 points from the second quarter. At the same time, face-to-face payments volume trends are stable to improving, while e-commerce or card-not-present remains elevated. When we average across our top markets where we process versus 2019, we see card-present improve 10 points, while card-not-present, excluding travel, improved 1 point in Q3 over Q2.
Travel is starting to recover both domestically and in cross-border. Again, averaging across our top markets where we process versus 2019, domestic travel spending improved more than 20 points in Q3 over Q2. Globally, cross-border travel, excluding intra-Europe, versus 2019 improved 6 points in Q3 over Q2 and exited the quarter with June at 50% of 2019. Simply looking at the absolute levels, it was a record quarter for Visa with $2.7 trillion in payments volume and payment transactions per day globally, which is up 16 million per day from the last quarter and nearly 160 million transactions per day from a year ago.
And we expect much more recovery to come, especially in the areas of credit and cross-border travel. Tap to pay is a key accelerator for many of these trends, including face-to-face spending in both credit and debit. We continue to see countries increase in tap to pay limits. For example, in Brazil, the limit was doubled five months ago and the face-to-face tap to pay penetration has already more than doubled from 6% to 14% in that short period.
In the United States this quarter, we surpassed 370 million tap to pay-enabled cards. And we now have three cities above 25% face-to-face tap to pay penetration: New York, San Francisco and San Jose. Merchant progress continued as well. Target has doubled its tap to pay penetration in the last year to two out of every five face-to-face transactions.
And Costco’s U.S. gas stations have reached 40% penetration in tap to pay payments since enabling this feature approximately six months ago. Now shifting to clients. We continue to win with large issuers globally.
Let me share a few examples from the quarter. In the United States, we are pleased to have renewed our long-standing partnership with Navy Federal Credit Union, the largest U.S. credit union with over 10.5 million members for a multiyear credit, debit and processing agreement. Also in the U.S., Google Pay introduced a Visa virtual card that links to U.S.
Android users’ Google Pay balances, enabling these users to spend their balances at stores. In Italy, we extended our agreement with Banca Sella, part of the Sella Group, the largest private and independent banking group in Italy, for the consumer credit and commercial portfolios with plans to launch a new innovative digital credit small business solution. In Singapore, we are expanding our strong partnership with DBS, the largest bank in Southeast Asia. We have renewed and we will continue to grow in the DBS debit portfolio.
In Latin America, we renewed the HSBC debit portfolio, one of the top five portfolios in Mexico. In our CEMEA region, we won the consumer credit portfolio of Qatar National Bank, the largest financial institution in the Middle East and Africa. And we renewed the credit portfolio of Saudi British Bank, one of the largest Saudi banks. We’re also building momentum as a global leader in co-brands.
In the U.S. alone, we have seven of the top 10 co-brands. And this quarter, we’re pleased to renew Hyatt in the U.S. and renew and grow the Williams-Sonoma co-brand, which will be relaunched with an expanded scope across the Williams-Sonoma brand, including Pottery Barn and West Elm.
We secured a new co-brand relationship with PayPal in Australia and MercadoLibre, the largest e-commerce retailer in Latin America. In partnership with Banco Itaú, we also won the co-brand business of Magalu, a major retailer with one of the largest co-brand portfolios in Brazil. Finally, in the Asia Pacific region, we have secured a significant part of LINE Pay’s business with a partnership renewal in Taiwan, the largest co-brand program in the country. Fintechs are also core to our consumer payments growth.
In this quarter, we forged new partnerships and deepened relationships with onetime clients. I just mentioned LINE Pay in Taiwan, and we also continue to see strong momentum in our partnership with LINE Pay in Japan and with LINE BK in Thailand. Over the last year, they have added more than 2 million Visa credentials across those markets. Likewise, in India, longtime partner, Paytm has issued…
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