Visa Inc. (V) CEO Al Kelly Presents at Wolfe Research Fintech Forum Conference (Transcript)

Visa Inc. (NYSE:V) Wolfe Research Fintech Forum Conference March 8, 2022 8:15 AM ET

Company Participants

Al Kelly – CEO

Conference Call Participants

Darrin Peller – Wolfe Research

Unidentified Company Representative

Good morning, and welcome to the Wolfe Research Fintech Forum hosted by Wolfe senior analyst on payments processors and IT services, Darrin Peller.

Darrin Peller

All right. Thanks, Dante. And good morning, everybody. Thank you very much for joining. I want to thank everyone, particularly my teammates, as well as the corporate access team, sales, everyone else here in the logistics at Wolfe for helping put this conference together.

We’re really proud to have more than 100 public and private companies participating in over 50 fireside chats and panels throughout the next 3 days. As you know, the conference is going to be held in really a virtual manner as well as some on-site meetings. So it’s — we’re trying to make it as hybrid as possible with the hopes that next year, we’ll be back to completely in person.

We expect to come away with incremental themes on a number of macro themes, including updated thoughts on some of the geopolitical implications as well as the pandemic-related impacts on the names. But I think more importantly, just longer-term thoughts on the latest industry themes. I think some of the read-throughs for the names in our coverage list.

We’re going to have a ton of key discussions on a lot of industry themes, including the likes of consumer behavior, post-pandemic. Obviously, you’re going to have important implications on names like Visa, Mastercard, PayPal, Global Payments and many, many others across the space.

We’re going to talk a lot about cross-border and payments there. We’re going to discuss buy now, pay later and have a whole panel discussion with PayPal as well as others on that.

Payback enablement, we have participants from the industry to talk about — talk us through those themes, as well as gateways, B2B payments, POS technology with Square, [ship four], Fiserv, Global, FIS and many others on that.

Domestic and international acquiring and just bank technology and the evolutions that have been happening have been pretty robust and pretty quick. We also have a great VC and private equity panel that’s going to be speaking throughout the conference. And I think we’ll have some great takes on whether the bid/ask spread on M&A might actually be coming back together again, given some of the valuation changes we’re seeing.

For our coverage, we’re going to also look for insight for a number of names in our coverage. We have the CEOs of names, including Visa and Mastercard. All the merchant acquirers, Global, FIS, Fiserv; and the new CEO of Western Union, along with CEOs and CFOs of many other names, zip four , PayPal, Block and others, that are going to be either meeting or presenting at the conference.

We’re looking for some incremental takes, especially given the magnitude of volatility in our coverage. Speaking of volatility, valuations across many of our names are hitting pretty low levels. Given these elements of uncertainty in the market, our coverage spread to the market multiple based on the next 12-month PE is at 118% of the S&P market multiple versus the typical, where our space will trade at about 42% premium to the market if you go back historically. Said another way, we’re at about a 3 multiple point turn premium to the market versus usually trading between 7 and 10 turns above the market multiple.

And you’re seeing that the compounders, the names that have free cash flow and you can rely on earnings growth versus just revenue and no EBITDA earnings at this point, those are the names trading at 1x their growth rate on a gross profit — EBITDA-gross profit basis versus the growth stocks that are only at 0.3 right now, guys, 0.3 relative to what used to be about 0.8 to 0.9x growth. So keep that in perspective when you look at the derating that’s happened.

And lastly, I’ll just mention fintech compounders historically traded 8 to 10 turns premium to the XLF are now actually treating in line with financial stocks. That’s typically been the inflection we’ve seen, is when our space reaches parity valuations with the financial services names, it tends to bounce off those levels. And that’s pretty much what we’re hoping for to happen again, given the volatility we’re seeing.

But before we kick it off with our fireside chat with Visa, I just want to remind you, there’s an opportunity for you to answer questions virtually below. We’re going to try to leave a few minutes of time at the end to read and address as many as we can.

So with that, let me start by welcoming Al Kelly, the CEO of Visa, to join us. Really, really appreciate them being here. We have Jen Como from internet — Investor Relations, also.

Al Kelly

Thanks.

Question-and-Answer Session

Q – Darrin Peller

Al, thanks for joining us. It’s great to have you back in person again.

Look, just I think as an introduction, given how many opportunities that you have ahead of Visa, if you can just start by explaining really what you and the rest of the senior management team are prioritizing your time with. Just where you’re focusing most of your attention right now.

Al Kelly

Again, Darrin, in person, so thank you for having me. I think about my time and that of the senior team trying to think about how much time we spend externally versus internally. And I kind of have an objective for it to be about 50-50. We are predominantly — externally, I spent a lot of time with clients, talking to them about all kinds of things, ranging from payments-related matters to things like return to office. It’s hard to have a conversation with a fellow CEO these days without talking about that topic.

But also talking to government officials and talking to investors and talking to the media in many ways. I carry a title that allows you me get access. A big part of my job is to help our country presidents or account executives throughout the world, wherever I can to try to do business development. I think, a big part of my role.

And then obviously, internally, we spend a lot of time on strategy and key strategic initiatives. I am a believer that one of the most important jobs a CEO has is talent. So I spend an exorbitant amount of time on that subject. It’s everything from coaching, to actually doing some training, to succession planning, lots of interviews. And a lot of times, people ask me to interview, to help break a tie, to actually sell us in terms of a candidate that we really want to get with the company.

I spend a lot of time on — with Vasant and Ryan and others on investments, where we have a great list of opportunities. And the question is, we never want to spread it like peanut butter and we have to replace our debts in any given course of the year. And then we have a pretty good cadence of business reviews now and that we do, both in terms of key initiatives and financials.

And then there’s the kind of transactional firefighting that goes on. We, being a global company doing business in the number of — I think it’s 240 countries and territories around the world, something seems to go wrong every day. And certainly, I’ve spent the better part of last past 10 days on the situation, for instance, in Ukraine and Russia.

Darrin Peller

And on that note, I mean, I guess, before we get into further discussion on strategy, you provided some disclosure on the exposure to Russia and Ukraine. If you could just revisit that and what’s included in that? And maybe higher-level thoughts on the impact of the invasion in Ukraine to your business, be it maybe cross-border or macro overall, or any other thoughts.

Al Kelly

Well first, maybe back up and talk about kind of our decision-making process. We — over the last number of days, it’s become very obvious that it’s becoming more and more challenging to actually operate in-country in Russia.

Secondly, obviously, we’re concerned about the actions taken by the Russian government. And wanted to make sure that we were being very cognizant of the fact that it was not something that we, in any way, would think was anything but abhorrent.

And thirdly, we looked at where this is going and the writing on the wall and concluded that we were much better off maybe going through an orderly wind-down of our business in Russia than being forced to do a next round of sanctions, where we have to, in a haphazard, fast manner, unwind business perhaps in 24 hours or less. And I think our strategy is panning out well. Our settlement, for example, is going smoothly and frankly, it’s business as usual. So I think that this idea of a orderly wind-down is very smart on our part.

In terms of the impact, what we said is that Russia, domestically as well as inbound and outbound, cross-border, represents about 4% of our revenue. And Ukraine in the same dimension is a little less than 1% of our revenue. And obviously, over time, there will be offsets to that expense of course. We’re going to have some incremental expenses in the short term. We’re extremely focused on employee safety. We have 155 employees in Ukraine, a little over 200 in Russia. And our North Star on this from the beginning as an executive team is to make sure that we do everything and anything that we can to help our colleagues. And that has included hiring a number of security people to help us migrate out of Ukraine as many of our employees and their families that want to do it.

And it’s been gut-wrenching, Darrin, to witness this. Because as you probably know, men, and about half — we’re about 50-50 between — half, men; half, women. Men between 18 and 60 can’t leave the country. And even now, we can’t even get on the car. So we want to take a family out of Ukraine — I’m sorry, out of Kiev, just to take them to the Western part of Ukraine, the fact of the matter is that leave the men to save time because there are so many checkpoints now. At a checkpoint, if there’s a man who’s eligible to be — to actually be drafted, the entire car or van will turned around and be sent back.

So we — I think we’re doing all the right things in what is, I believe, a different challenging situation.

Darrin Peller

All right. Maybe we could shift gears and just talk about some of the recent trends that we saw that came out of February. Look, there was obviously some notable points that we saw. Credit continued to outpace debit. We saw international start to show some traction in markets like India, Canada and Brazil. And obviously, we saw a cross-quarter looking in the right direction. I think it was at 81% of ’19 levels again, reaching back to peak levels we saw in December.

I guess just to start off with what you’d expect. Is that in line with what you would have expected to see when you guys started off the year coming out of the pandemic, hopefully? And just think about what we should expect going forward as much as you can say.

Al Kelly

Well, I think that, really, last summer, we started to see the beginnings of a pretty robust recovery. And everything was going quite smoothly until the Omicron variant in — that showed up kind of right after the U.S. Thanksgiving. And what you really did see was about a 4- or 5-week hiccup impact from the Omicron variant kind of mid-December to mid-January.

But in the same 8-K that you referred to that we issued last Wednesday, in addition to providing some insight on the Russian-Ukraine situation, we also talked about our updated numbers. And if you look at February, we’re in the U.S. running at about 145% of ’19, which was up 5 points from January. In the case of credit, it’s really coming back, it’s at 135% of ’19, up 7 points. And card — I’m sorry, debit continued to be very strong, 154% of 2019. Card present was up 5 points, card not present was up 3 points.

If you look across industry categories, 3 of the categories that have been quite impacted to the negative disproportionately to the negative during the pandemic, fuel, entertainment and travel, all were up 8 points in February, 1st of January, which is a very good sign that this recovery has kind of now gotten back on track after the Omicron, 4 or 5 weeks.

We looked at goods versus services, it’s very interesting. Prior to the pandemic, we would run kind of probably 55% of our volume, 56% of our volume being services and the balance being goods, except for the holidays, for 6 weeks or so, holidays we see goods would always beat essential services. But what we saw during the pandemic was it flipped, and that goods were a higher percentage of our volume than services. And in the last, I’d say, 3 to 4 months, again, absent the holidays, we’ve started to see — it started to about normalize, but not fully yet. I’d say our volume in the U.S. in particular is running at about 50% services, 50% goods.

International has been quite broad-based in its recovery. Asia is still further behind. You mentioned Brazil and Canada. I’d add Italy, Germany and India as countries that performed very well. The only negative in all 3 of these countries in Asia Pacific, New Zealand, Hong Kong and somebody else, were down because of COVID cases up, right? So that obviously continues to be a little bit of a challenge in Asia Pacific.

We’re seeing borders open up, which is great. The U.K., France, Spain, Portugal, Thailand, Singapore, all examples of markets that, in the last month to 2 months, the open borders are one of the things that we know for sure is, once borders open, people, particularly for personal travel, stock to their habits of visiting relatives, knocking things off their bucket lists and those kinds of things.

So when we look at cross-border in general, February was 112% of ’19. I would say that would have been higher than I would’ve predicted 3 or 4 months ago. Card not present continues to be incredible, it’s up another 4 points at 169% of 2019. And travel, card present travel or not present travel, was at 81% of ’19. So it’s still behind, but it’s [16] points from, let’s say, in that 1-month period to January…

Darrin Peller

Gone back to that — it’s amazing, yes.

Al Kelly

Exactly. And then a couple of interesting examples. Europe. If you look at Europe in the fourth week of Feb, it was up 30% over January. So through the course of February, inbound travel to U.K. got stronger and stronger and stronger. Similarly happened in the U.S. and by the fourth week of February, in the U.S., we saw about a 10% rise versus all of January. So I think that, in my opinion, putting this new event, the war in Ukraine to the side for a second, early February has any broad-based impact [Audio Gap] good in terms of our business. And I think the recovery is going to remain quite robust.

Darrin Peller

That’s really helpful. I think it’s good to see, and it’s something we’re all been waiting for a little too long. Let’s shift gears a little bit to the longer term now. I mean, on your recent earnings call, I know that management basically suggested that we should be able to see an accelerated growth rate post-pandemic. When you think about 10% to 12% being the rate of growth that you guys have talked about being in for revenues over the next 3 to 5 years, I think because of things like value-added services becoming more robust for you and new flows, some of the other growth opportunities you’ve seen that maybe have been accelerated by the pandemic, there could be an opportunity for that to be at the higher end. Is that still the case, in your mind? Maybe you can go into some details, some of the examples of either value-added services or new flows you’re most excited about.

Al Kelly

I think absolutely, nothing has changed. I feel very bullish about our ability to drive very good, sustained high-level revenue growth over the coming years.

Look, I think the summary is, when we look at our 3 growth levers, consumer payments is benefiting from growth in credentials, growth in acceptance sites, and it has a lot of gas up in the tank. As businesses look to digitize, there’s a lot of real draw on our value-added services and the types of benefits that we can bring.

And people are increasingly looking for more capabilities to either in leaps or protect their transaction, and therefore — or they’re looking for advice. And all those things give us an opportunity to sell value-added services. So maybe we can unpack that and talk about all 3 of them a little bit in depth.

So first, in consume payments, I’d remind everybody it’s still about $18 trillion spent in cash and check all around the world.

If you look at credentials, the last 3 quarters have been super strong versus the last 5 years. We grew credentials in this past quarter 10% year-over-year. And that prepares to kind of an average over the 4 or 5 years before that of low to mid-single digits. So I think that’s a sign of more players entering the ecosystem, fintechs, wallets, et cetera.

I think that we’re also seeing growth in acceptance. And we’ve seen that, for instance, 20% growth acceptance in — or 30%, I should say, in Latin America. Latin America at 20% increase in financials. We’ve seen a 30% increase in acceptance in the last 2 years in India.

We’re also looking at new technologies to try to enable acceptance. One of the things we’ve been talking about recently is our Visa Acceptance Cloud, which allows us to put all the intelligence of terminal into the cloud, which has so many advantages, including easier certification, easier ability to bring updates, easier for me to integrate value-add services. And by the way, a at very low cost offset at the actual point of sale.

And what’s interesting about that is obviously, the first place, I think somebody’s mind would go is to emerge markets and say, “Wow, this is great for emerging markets.” And it is. But there’s a couple of other places where I think it’s got some real benefits. If you look — think about flea markets or food vendors on a corner, it enables them much more easily to accept digital payments instead of cash as an option. And I think it’s going to play a critical role in Internet sense. We will be able to much more easily to facilitate transactions in an IoT world through the Visa Acceptance Cloud.

So I feel really, really good about that technology. It’s obviously in its very, very early days. E-commerce, obviously, it’s a critical enabler of growth in consumer payments. In the United States, as an example, we see 20% or so increase during the pandemic in terms of credentials that are used for the [first 5] in e-commerce.

Darrin Peller

Over the last couple of years?

Al Kelly

Yes. And then similarly, we see growth in the average ticket size on those. So I’m a huge believer that we’ve got tremendous upside.

And by the way, even geographically, I think the last — obviously, it’s a lot since we’ve opened around the world there [indiscernible]. I think that’s the confidence that, from I don’t know, 2025 to 2045, ’50, beyond that, it’s going to help us in terms of growth.

I’ll maybe segue to new flows. In the past quarter, B2B, the volume was up 28% over the prior year. Commercial card volume, it’s 26% higher than 2019. We’re benefiting from a couple of things. One is — over the last 3 years, we’ve grown by 20% the number of commercial card covers that are issuing Visa cards. And many of them have really broad-based portfolios that are not really dependent on travel. So we benefited from that. I think when we look at the commercial card space, is that still a lot of opportunity to grow both with traditional players as well as fintechs as well as other types of players that will emerge over time. So we feel very, very good about, for instance, virtual card opportunities as we look ahead.

If we segue to cross-border B2B, we think we have a terrific action in B2B to that. It has tremendous amount of advantages. It moves into dependence on the correspondent banking in our world. It is efficient, reaches enormous amount of endpoints, very secure, very transparent, has a rich information pack in terms of the data that we send and it’s very cost effective.

We’re now set to go in 100 markets. So we’re out there looking at this, continually add banks. A couple of recent joiners are Goldman Sachs, CIBanco in Mexico, which is an interesting case. CIBanco in Mexico, last 3 or 4 quarters, has doubled the number of transactions in B2B Connect, and is now processing thousands of transactions for its of dollars. So we think there’s great opportunity there.

We’re continuing — again, our emphasis is, is to — at this point, isn’t on how many transactions we’ve got flowing through it, although we’re watching that, obviously. But it’s really to build the robustness of the network by getting more banks on there more outlets.

If I segue within new flows to Visa Direct, as I think you know, we tied billing transactions of last year. Visa Direct, since it runs on VisaNet, it’s very, very efficient transaction for us. That just involves all the aspects of VisaNet. We now have about 20 robust use cases and growing. We have about over 500 partners around the world.

And I’d say our emphasis as we look ahead is we’ve been pretty U.S.-centric in our biggest use case. To date, it’s the B2B — P2P, I’m sorry. P2P. So our emphasis, Darrin, when we look ahead, is to grow our international footprint with Visa Direct and looking at building the robustness of use cases beyond V PAY.

And that brings me to our third growth lever, value-added services, where we’ve made really good progress with $5 billion of revenue in fiscal ’21. And our offerings have gotten to be very broad-based. About 30% of our clients around the world consume 10 or more value-added services, which is great from a revenue perspective. It’s great from the perspective we’re obviously delivering value to clients. And I think it gains stickiness. For new clients, 30% are consuming 10% or more.

Maybe I’ll highlight 3 of them now. One is CyberSource, where acquirers are becoming increasing. The interest white-labeling, our capability, and we’re having to do it. We’ve brought on 28 acquirers in the last year. And we’ve on-boarded 25,000 more merchants in cyber sales. So we’re having a very good momentum in the business. And CyberSource has a risk product, a decision manager, that actually had 30% increase in the number of transactions that it interrogated during 2021. So good progress in our Gateway product.

Maybe our second categories is our risk and identity products. There, we have Visa Advanced Authorization, plus Visa Risk Managers, are probably 2 most robust products in the risk area. They both leverage artificial intelligence and machine language. And last year, again, they experienced about 30% increase in the number of transactions that — for which they provided a score versus the prior year.

The third example I would give is issuer processing. We’ve got a very robust network in our DPS, our debit processing system. And there, we are doing a couple of things. One, we’re trying to grow beyond the U.S. And we recently signed DKB, the #1 issuer in Germany, to the client utilizing DPS for their debit business.

And we’ve created an offshoot of DPS called DPS Forward, which is in a cloud, an API-based alternative to DPS that we make available to more digital banks, digital issuers of debit cards. And we recently signed a fintech with 3 million members to be a user of DPS Forward.

The last point I would say is that I think the pivot we made a couple of years ago to not depend solely on VisaNet and adopt the network, the network — internal networks, and I mentioned 2 of them. DPS is an internal network, B2B Connect is separate internal network. Again, these — I’m sorry, B2B Connect and DPS are separate network, Visa Direct leverages VisaNet. But we’re also leveraging parts in ACH systems around the world, and that’s what allows us to reach what we think is a differentiating number of endpoints around the world in terms of counter transactions of about $5 billion.

Darrin Peller

Yes. There’s an enormous number of things that you guys are working on to help with that acceleration, and it clearly seems to be strong.

I guess when we look at the value-added services, just one quick follow-up would be, some of these value — some of these services obviously got a boost during the pandemic, whether it’s because of e-comm use or security needs because of e-comm use. Are there enough tools in the arsenal to keep that growth up pretty high even post-pandemic, in your mind?

Al Kelly

I think so for sure. But we’re constantly on the look. We’re doing — we have a couple of thousand people who work on and support our value-added services, and they’re constantly looking to innovate. And clearly, it’s a focus for us as well, Darrin, when we look at the M&A space.

So I think that we will continue to clearly sell and educate our clients on our existing set of tools. But we’re going to continue to innovate and grow both organically and inorganically in terms of the toolbox.

Darrin Peller

Yes. And just one quick follow-up on Visa Direct. The question we get a lot is that it clearly has done well with P2P in certain categories. And it’s, I think, boosted your — we’ve estimated it’s boosted your debit volume growth rate by a couple of hundred basis points or so.

When we think of use cases extending into things like insurance accounts or other even larger opportunities from a TAM standpoint, what kind of progress do you see there? Is it still on track? Is it still going well?

Al Kelly

Yes. I think that, if I’m honest, it’s been concentrated in too few markets. But I think what our strategy has been is to build the case and learn how to scale it and kind of test and learn in a few markets and then be able to take it — take that game plan, if you will, and move it to other markets.

So I actually think that we’re still, despite the fact we did $5 billion in transactions last year, I would still say to use a baseball analogy, since they might not play baseball this year, is that we’re in the very, very early innings of Visa Direct. And I think that when I look at penetration of current use cases, geographic expansion, the ability to generate new use cases, I’m very, very bullish that there’s a tremendous amount of upside at Visa Direct.

Darrin Peller

All right. Let’s just shift gears on to another question we get a lot, which is around incentives. Al, maybe you could just touch on your strategy around incentives when you’re renewing a new business. There’s a lot of thought or questions whether there’s been any structural changes to how you manage these levels of incentives and rebates. Do you see levels as a percentage of gross revenue stabilizing as cross-border comes back? Like we — like I think a lot of us had hoped we could see over time.

Al Kelly

Well, to answer your first question, incentives do a couple of things for us. One is they’re meant to align between us and the client what is important and what we’re trying to get done in a deal. And secondly, we use them to encourage adoption of key technologies that we think are important to the ecosystem, important to us and important to the client.

Now let me touch on this, the question of what we’re seeing in terms of incentives. So in the past couple of years during the pandemic, we are seeing cross-border travel, which generates higher gross revenue, but not necessarily higher incentives, actually obviously, be challenged. And as a result, we’ve had this unusual situation where the percentage of incentives as a percentage of gross revenue go up abnormally.

I think as cross-border travel comes back, which is it’s starting to, I think we’re going to see this correct itself. And we’ll get back to the idea of 0.5 point to 1 point increase per year. And that 0.5 point to 1 point increase is generally, Darrin, a result of an increasingly competitive environment as well as the fact that, over time, thankfully, the volume that our clients are doing with us goes up, and that’s really what the driver is about.

Darrin Peller

Volume based.

Al Kelly

Yes. So net-net, very important for people to understand that there is nothing structurally different about how we’re approaching incentives in any given — in any way at all. It really is a matter of the relationship of cross-border relative to gross incentives — I’m sorry, gross revenue and incentives that’s caused this kind of oddity during the pandemic. But I think it will correct itself over the coming quarters.

Darrin Peller

Can we touch on now investments. And then maybe we’ll circle back and tie in M&A to that as well, where you want to focus your capital going forward. But thinking about investments for a minute. I know you talked about the high end of the mid-teens expense growth this year. Maybe just help us understand where you’re prioritizing spending money on the business. Obviously, you’re also trying to be efficient given the geopolitical and macro environment. But I think there’s a lot — as you went through, there’s a lot to do.

Al Kelly

Yes. I think, look, our — it’s important for people to understand, our business is a real long tail business. So we’re now almost halfway through our year. There’s almost nothing we can do to impact this year. This isn’t a business where we can go change price on the shelves tomorrow.

So many of the investments that we’re making now are going to benefit the business in fiscal ’23, ’24, ’25. And what we try to make sure we’re doing is making investments that are completely consistent with our 3 growth strategies, of consumer payments, new flows and value-added services.

And so we go through a very rigorous exercises where people bring business cases to us. We have committees that analyze these things. And then a small group of the executive team gets together and we decide where we want to invest.

Some of the things that you and I have talked about over the last half hour, growth in use cases, in Visa Direct, driving more credentials, driving more acceptance, looking at driving more use of some of our value-added services. There’s a tremendous call on our consulting business, which continues to grow. And for us to grow that, we have to hire more people to satisfy the needs of our clients.

So I would say our investments are a combination of making sure that it’s tied to strategy, that it’s very client-centric, and that it is places where we think we’re going to get the best return for the dollar.

Darrin Peller

I imagine M&A is in a similar boat. In other words, where you’re focusing your time and attention.

Al Kelly

Yes. I think, look, M&A, I would say it’s safe to say that what we tend to probably focus on the most are our network-enabling capabilities. So Tink would be an example of that. And we’re looking at — and so Earthport, been an example of that. And then we look at things that are driving additions, as you alluded to earlier, to our value-added services. So case and certainly Verifi and Currencycloud would fall into those categories.

Look, we’d rather always do it ourselves. That’s our bias. But if we think that time-to-market, cost and the talent we can get are superior to what we could do ourselves, then we will — and obviously, the asset is priced at a reasonable level, then we want to — then we’ll actually go and make a purchase.

Darrin Peller

Makes sense. Last one for me, and then I’ll take a few from the audience, is just, there’s been a ton of questions about around disruptive risks to the ecosystem; whether it’s RTP; or buy now, pay later; or crypto. What are your thoughts just broadly on those? And if there are risks or opportunities.

Al Kelly

So I’m going to make it very broad. And then anybody wants to dig in, we can dig in. Most of this just “disruption” is happening in different ways to pay. I look at Visa as the enabler for all ways to pay. And therefore, whether it’s buy now, pay later or it’s crypto or it’s wallets or whatever it is, I see us as somebody that isn’t picking in winners and losers, and we’re happy to have everybody ride on our network and take advantage of our value-added services.

And ultimately, the consumer will decide what is working or not working. The consumer will pick winners and losers, but we at Visa won’t. So I see these things as much more opportunities than “disruptors.” And I think that the reality is that, over time, we see there’s a track record of kind of closed loop types of solutions ultimately opening up. And I think that will be true of things like buy now, pay later, for example.

Darrin Peller

Okay. Let me take a couple of quick ones just because we only have a little bit of time left. But there’s obviously a couple about the geopolitical issues going on. So I don’t know if there’s any comment you can give around your — any greater level of exposure comments on Eastern Europe.

Someone was asking also if you’d expect travel that would have gone to Russia to go elsewhere, and cross-border impacts?

Al Kelly

I think in general, people are so sick of being cramped up, they’re going to travel. And the great thing is that the world is wide and has many, many exciting places to go. And Russia might be off the list, but there’s another 197 countries people can go visit, and a whole bunch of great Islands and et cetera.

And then this whole idea of other risks. I mean, we’ve been dealing for years and years with local schemes. And the reality is that, as long as the playing field is even, we’ve done just fine. We bring incredible skill and innovation to these markets, which is good for these countries. And I think the governments and the regulators appreciate that and understand that. So I see no change in that situation at all.

Darrin Peller

Okay. That’s actually — so you already covered the next question, which was whether there’s other governments that are going to start thinking about changes.

But last one I would just ask is a couple of questions around interchange. And one of them is just the rate increases, and The Wall Street Journal talking about. Is it just solely interchange? Or do they also impact any assessments or dues?

Al Kelly

The pricing that was announced, a while ago, by the way. So there’s nothing new, The Wall Street Journal is a little late to the party here, is interchange-related. There are basically, in the case of Visa, 3 changes.

One is for kind of downgrades, where behavior or the type of transaction is isn’t clean and that adds cost to the ecosystem. And so people don’t produce clean transactions, they’re going to pay a little bit more.

We’ve — we’re going to increase the rate in card not present for people who aren’t adopting tokenization. I think, again, great for the ecosystem. Tokenization is fantastic for security. And if somebody doesn’t want to do it, they’re going to pay more. But we’re happy to have the incentive work the other way and be the carrot, not the stick, and have people tokenize.

And then the other change with The Wall Street Journal buries down in Paragraph 7 is the fact that, for businesses with greater than — $250,000 of revenue or less, on Visa credit cards, that were actually putting in place a 10% reduction in interchange. And that is solely based on the fact that small businesses have been killed, Darrin, during this pandemic. And we just think it’s — they need a boost, and we wanted to try to help them do just that. So that’s what’s happening.

Darrin Peller

I want to thank you very much for joining us. Again, thank you for participating. This next panel, our next session is with Jeff Sloan, CEO of Global Payments. Al, thanks again.

Al Kelly

Thanks, Darrin. Thank you.

Darrin Peller

Real good to have you. Appreciate it.