The distribution of the third round of stimulus checks has produced a windfall for Visa Inc. As the U.S. government delivered direct payments to millions of struggling Americans, the credit card network saw their volume on U.S. debit cards soar 31% to $806 billion due to the boost in consumer spending.
Overall spending on the company’s debit cards reached $2.4 trillion during the quarter, exceeding estimates.
Vasant Prabhu, Visa’s vice chairman and chief financial officer, said in an interview:
“People are starting to use debit more often than they did before in terms of the point of sale, and in more categories than they did before and for smaller transactions than they did before. And as time goes on it becomes a habit.”
Visa Bounces Back
Visa shared that it also saw an increase of 1.3% to $232.80. In fact, its stock has grown 5.1% this year alone.
An increase in certain overseas travel has also contributed to Visa’s favorable results. Where before, during the beginning of the outbreak, governments restricted travel and advised consumers to stay inside, lowering credit card spending.
The company also experienced a surge in spending by U.S. consumers in both Mexico and the Caribbean, exceeding “pre-pandemic levels” during the same quarter.
This is especially true since these are the only destinations that U.S. citizens are able to travel to.
A Bloomberg survey initially predicted a 5.1% decline, however, Visa’s overall revenue only had a 2% dip to $5.7 billion.
The first three months of the year also saw positive growth for all credit card transactions.
In the March quarter, known as the second period of Visa’s fiscal year, the total payments volume just on debits in the U.S. market increased 34% year-over-year to the amount of $657 billion. Whereas the overall U.S. credit card volume only saw an increase of 1.5% to $500 billion.
Visa Direct transactions increased nearly 60% during the March quarter.
Committed To The Crypto Space
Not only is Visa exploring ways to settle transactions in cryptocurrency, but it is also working on enabling purchases using crypto with Visa cards. They also want to facilitate crypto cash-outs converted to fiat currency. Visa also wants to authorize fintech to provide a crypto option for their customers. The firm is working closely with central banks in order to accept central bank digital currencies.
Visa is gearing up to ride the “buy now, pay later trend”, where customers are able to access their purchases right away, but make payments over a few installments, interest-free.
Pandemic Fueled Surge Of eCommerce
The pandemic brought radical changes to consumer buying behavior that will likely remain post-Covid-19. This boost in online activity was mostly driven by debit purchases. According to the chief executive and chairman of Visa, Inc. Al Kelly, debit has ultimately become the “cash of the e-commerce world.”
Kelly also believes that the worst is now behind them and is convinced that we are now at “the beginning of the end of the pandemic”. As more economies are now in recovery, the vaccination rates are slowly rising, and Visa is showing results that are much stronger than anticipated, there is much hope for the future as everyday life and business can resume as usual as before the pandemic.