Visa revenue exceeds expectations as consumers return to binge travels

(Representational image) The touch, the smell and the overall feel of the passport is so tied to nostalgia. It keeps our foot anchored in our country while we explore the world. (Image: Agus Dietrich/Unsplash)

Visa Inc said on July 27 that its fiscal third quarter profits rose 32 percent from a year earlier, helped by yet another double-digit rise in the amount of money processed on its credit and debit card network.

Pandemic-weary people are splurging on travel and other leisure-related activities after being cooped up at home, assisting the economy to maintain momentum despite an onslaught from inflation.

The payment processing company said it earned a profit of $3.4 billion, or $1.60 a share, compared to a profit of $2.57 billion, or $1.18 a share, in the same period a year earlier. Excluding one-time costs, Visa earned $1.98 per share this quarter, which was much better than the $1.75 a share that analysts had been expecting, according to FactSet.

In recent weeks, major US banks like JPMorgan Chase & Co and Citigroup Inc have emphasised how consumer spending has held up in the face of an uncertain economic outlook, which is encouraging for the card companies.

The third quarter saw a 12 percent increase in payment volume for the largest payments processor in the world, which was aided by a 40 percent increase in cross-border business. Cross-border volumes associated with travel were 16% higher than in 2019.

San Francisco-based Visa has been benefiting from a worldwide migration from cash to digital forms of payments, either through online shopping or through the increased use of contactless payments. The company processed $2.939 trillion on its network last quarter, up 12 percent from a year earlier. Visa earns a small fee from every transaction that crosses its network, depending on the type of transaction and the merchant who used it.

Most notably cross-border payments were up 40 percent from a year earlier, a signal that consumers are returning to their pre-pandemic traveling habits.

Consumers are back on the road, visiting various corners of the world, resulting in cross-border travel volume surpassing 2019 levels for the first time since the pandemic began in early 2020, said Al Kelly, chairman and CEO of Visa, in a statement.

Hospitality Industry

Furthermore, in the first half of 2022, hotel investments in the Asia-Pacific region recovered from pandemic lows, in part because wealthy investors bought hotels from struggling owners, according to a report released by global real estate consultancy JLL, reported Forbes. A decline in China hotel investment held back even bigger gains.

Overall, first-half investment in the area increased by 11.9 percent from 2019 to $6.8 billion, up 33 percent over the previous year, “demonstrating a return to pre-pandemic levels of capital deployment into the Asia Pacific hotels sector,” JLL said.

What It Means for India

As the July-August vacation period draws near, statistics reveals that the average number of visa applications in India each day is over 20,000. According to the Henley Passport Index, travellers possessing Indian passports tend to favour Canada, Europe, and the United Kingdom as their destination.

However, despite the unparalleled global access granted to the citizens of Japan, Singapore and South Korea, data from IATA, reported Forbes India, reveals that the demand for international passengers in the Asia-Pacific area has only increased by 17 percent from pre-Covid levels.

Russians, Indians, Americans, and Britons are the top four nations now driving demand, and for the first time ever, Ukrainians are in the top 10 globally.

Besides, in the first six months of 2022 there has been a surge in visitors travelling to Singapore with Indians being the second highest nationality to arrive in the island nation after Indonesia.

From an estimated $75 billion in FY20, the travel market in India is expected to reach $125 billion by FY27, and the number of global visitors is predicted to touch 30.5 billion by 2028, according to a recent report by FICCI.

With inputs from AP and Reuters