Visa’s fiscal Q2 shows stable consumer spending and a spike in tokenization

Article by Grace Broadbent | Apr 27, 2023

By the numbers: Visa’s payments volume grew 10% year over year (YoY) globally in its fiscal Q2 2023 (ended March 31, 2023), per its earnings release—down from a 17% YoY jump a year ago amid the post-lockdown recovery.

Credit card volume led with 13% YoY growth, followed by debit at 7%. Both slowed from the year prior, at 22% YoY and 12% YoY, respectively.
Cross-border volume was a large growth contributor, increasing 24% YoY. Newly instated CEO Ryan McInerney said during Visa’s conference call that cross-border volume is at 130% of pre-pandemic levels.

Digging deeper: McInerney highlighted two areas that will be key payments growth opportunities.

Tokenized credentials.

Visa has 6 billion tokenized credentials in use, up 90% YoY. Tokenization is a security technology that replaces sensitive account information with a unique digital identifier that can then be pushed to digital wallets or stored with merchants for online payments.
The rise of Tap to Pay contributed to this growth. Almost three-quarters (74%) of all in-person transactions outside the US use Tap to Pay.
And the US—while a smaller share—is booming: Tap to Pay accounted for 34% of all in-person transactions, up 10% YoY and 700% from three years ago. We expect total proximity mobile payment transaction value to reach $552.41 billion in 2023, up 26.9% YoY, per our forecast.

B2B digitization.

B2B transactions are “the largest component of new flows,” according to McInerney. He noted that traditional issuance is the core of B2B, representing the majority of the $760 billion in commercial payments volume in the first half of fiscal year 2023. We expect card B2B payment transaction value will reach $1.955 trillion in the US this year, according to our forecast.
And on the noncard side, Visa’s bank-based cross-border network—Visa B2B Connect—is also gaining momentum: Visa signed approximately 30 new banks across 20 countries during the first half of fiscal 2023. The network now connects 90 countries globally, targeting a $10 trillion cross-border opportunity.

Looking forward: In discussing inflation and the state of the economy, McInerney argued “the consumer is still in good shape.” He noted payment volumes should remain stable over the next quarter.

Payments volume ticked down over the first three weeks of April as moderating inflation contributed to lower ticket sizes.
And nondiscretionary spending is holding up, with strong growth in services, especially travel and entertainment. McInerney expects Visa’s volume will keep relying on the strength of cross-border travel.