Welcome to Visa's Fiscal Second Quarter 2024 Earnings Conference Call. All participant lines are in a listen-only mode until the question-and-answer session. Today's conference is being recorded. If you object, you may disconnect at this time. I would now like to turn the call over to your host Ms. Jennifer Como, Senior Vice President and Global Head of Investor Relations. Ms. Como, you may begin.

Thanks, Holly. Good afternoon, everyone, and welcome to Visa's fiscal second quarter 2024 earnings call. Joining us today are Ryan McInerney, Visa's Chief Executive Officer; and Chris Suh, Visa's Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at 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 annual report on Form 10-K and any subsequent reports on Forms 10-Q and 8-K, which you can find on the SEC's website and the Investor Relations section of our website. For non-GAAP financial information disclosed on this call, the related GAAP measures and reconciliation are available in today's earnings release and related materials available on our IR website. And with that, let me turn the call over to Ryan.

Good afternoon, everyone. Thank you for joining us. We delivered strong second quarter results with $8.8 billion in net revenue, up 10%, GAAP EPS up 12%, and non-GAAP EPS up 20%. For our key business drivers, we saw relative stability. Overall payments volume grew 8% year-over-year in constant dollars, US payment volume grew 6% year-over-year, and international payments volume grew 11%. Cross-border volume excluding Intra-Europe rose 16% year-over-year, and processed transactions grew 11%. Visa's business performance demonstrates our strategy at work in consumer payments, new flows, and value-added services. Furthermore, across all of these growth levers, tremendous opportunity remains. I'll spend a few moments on each growth lever. Let's start with consumer payments. The opportunity in consumer payments is enormous. Based on the latest public data from calendar year 2022 and our analysis, we estimate that the total global purchase personal consumption expenditure or PPCE excluding Russia and China was approximately $40 trillion. Within that $40 trillion, our addressable opportunity is more than $20 trillion. This includes three components. One, cash and check, which is about half of the addressable opportunity. Tap-to-pay is a great example of how we are converting small ticket cash transactions to Visa credentials. Two, ACH and other electronic transactions. We have many examples in this space, including the work we are doing to extend Visa as a bill pay method in acceptance categories like rent, education, and loan repayments. And three, cards that run primarily on domestic networks. We have been focused on converting these domestic-based cards to Visa credentials in countries around the world, and I'll share a good example from Europe in a moment. There is a very long runway ahead, and I remain excited about Visa's future growth opportunity in consumer payments. We continue to capture that growth by delivering innovative and secure payment solutions for buyers and sellers, including new credentials and issuance, tap-to-pay, and e-commerce. I'll briefly talk about each. First, we're making great progress in expanding the number of Visa credentials. We have added over 100 million credentials from September to December for a year-over-year growth rate of 6%. One area of focus is in Europe, with the UK growing credentials at its fastest rate since 2016, driven in part by strong growth from fintech clients. In addition, from 2018 to 2023, we converted more than 20 million credentials in Europe that primarily ran on domestic networks to Visa debit credentials, with millions more in the process of being migrated. This is a great example of the opportunity I mentioned a moment ago. We're particularly excited as we prepare for the Paris Olympics, which are less than 100 days away. We have close to 300 clients across 85 countries globally working with Visa to activate our Olympic sponsorship for marketing campaigns and cardholder engagements such as credential issuance and onsite cardholder events. And in Europe alone, we expect our clients to have issued over 5 million Olympic and Paralympic branded Visa credentials before the start of the games. Also this quarter in Europe, we renewed our relationship with Caixa Geral de Depositos in Portugal across consumer credit, debit, and prepaid and commercial credit and debit, as well as a suite of value-added services, including risk solutions and analytics. Another area of strength is our co-brand issuance. Visa is the primary network partner for eight of the top 10 co-brand partnerships in the US today, and we are pleased that Visa has finalized a multi-year extension of our successful credit co-branded partnership with Alaska Airlines, a portfolio that benefits from a loyal customer base and high cross-border usage. We have also had significant co-brand momentum in CEMEA. First, we launched a new co-brand card in partnership with Qatar Airways, British Airways, and the National Bank of Kuwait. Second, we expanded our strong global Marriott relationship to launch Qatar's first hospitality co-branded card with Qatar Islamic Bank. Across the United Arab Emirates, we now have exclusive agreements with all the leading airlines marked by a recent agreement with Emirates Skywards. And we also signed an inaugural airline co-brand agreement in Morocco with Royal Air Maroc. Now newer digital issuers are equally important to our future growth in consumer payments. And in Saudi Arabia, fintech stc pay, which has over 12 million customers, is transitioning from a digital wallet to a full digital bank and expanding its Visa prepay business into Visa debit and credit. Digital Bank Maya in the Philippines has chosen Visa to offer its millions of mobile wallet users and bank depositors access to consumer credit cards with new issuance of affluent products. In the US, we signed a newly expanded credit deal with brokerage platform Robinhood, including the launch of a new Robinhood Gold Card, which offers 3% cashback for all purchases. In Europe, broker and savings platform Trade Republic has launched a new Visa card that combines spending and savings for their 4 million customers across 17 markets. Over 1 million people joined the waitlist for the card in just a few weeks. As I've mentioned in the past, we feel great about our products, our value-added services, our new flows capabilities, our brand, and our people, all coming together to deepen and expand our partnerships with our clients around the world. As we think about Visa's growth, tap-to-pay and e-commerce are key drivers in the digitization of payments. This quarter, tap-to-pay grew five percentage points from last year to 79% of face-to-face transactions globally, excluding the US. Of note, Japan nearly doubled its penetration since last year to almost 30%. In the US, in the second quarter, we're nearing 50% penetration, with New York City at over 75%. The first US city to reach this milestone, up from 50% two years ago, demonstrating the impact that transit and our focused issuance and acceptance have on accelerating growth. On the e-commerce front, we continued to see Visa's US e-commerce payments volume grow several points faster year-over-year than face-to-face spend. And the same is true in many key countries around the world, including Canada, Brazil, Australia, and India. And this matters to Visa's growth because in the e-commerce space, cash is not usually an option. And although e-commerce payments are a highly competitive environment, we believe our capabilities and our focus on safety, security, reliability, and user experience position us very well. Adding to the potential for growth is tokenization, which brings several benefits to the ecosystem, especially in e-commerce, including reducing fraud, improving authorization rates, and therefore making it easier for a customer to purchase a good or service. As of the second quarter, we have over 9.5 billion tokens globally and have surpassed a milestone of 1 billion tokens in Asia-Pacific, joining the ranks of the US and Europe. We continue to be focused across all of these efforts in addition to seeking new areas of acceptance and spending. Now moving to new flows. We mentioned last quarter that we see $200 trillion of opportunity excluding Russia and China, and we are delivering Visa's commercial and money movement solutions to help digitize these flows. This quarter, new flows revenue growth improved to 14% year-over-year on a constant dollar basis, with Visa Direct overall transactions growing 31% for the quarter to $2.3 billion, and commercial volumes up 8% year-over-year in constant dollars. Throughout the quarter, we remain focused on our Visa Direct strategy across several areas of growth, including through new use cases, expansion to new geographies, and enablers. One recent example is our expanded agreement with Thunes, which increased the number of countries in which Visa Direct can enable push-to-wallet from 78 to 108. In addition, Thunes is implementing Visa Direct's push-to-card capability to enable payouts made to eligible Visa cards and accounts. We have also expanded earned wage access in Canada through an agreement with Payfare and have brought our first Visa Direct cross-border capability into Taiwan with Taishin Bank. On the enabler front, we are pleased that our long-time partner JPMorgan Payments will be seamlessly integrating Visa Direct into their acquiring operations to offer their business clients faster push payments capabilities. In addition, we continued to deepen our relationship with Chase in the small business market with investment and enhancements in products and services. And in accounts receivable and payable, we renewed and expanded our multi-year agreement with Bill on their accounts payable, spend, and expense management platforms. We have also reached a global partnership with Taulia, an SAP company and a leading provider of working capital management solutions. The collaboration will incorporate Visa's digital payments technology into Taulia's virtual cards, a solution that integrates with SAP ERP solutions and business applications to make embedded finance accessible for businesses through a seamless and streamlined payments experience for buyers and suppliers. One vertical in new flows that has immense potential is government payments, representing over $15 trillion in annual payments volume opportunity, where we are in a strong position to combine many of our new flows offerings. A recent example is in Kenya, where we signed an agreement with Pesaflow, a technology partner for the government of Kenya, to expand card payments on eCitizen, the government's electronic platform with over 12 million users. We achieved this by bringing together Visa Virtual credentials and Visa Direct into the platform. Now let me move on to value-added services, where revenue was up 23% in the second quarter in constant dollars. The growth and opportunity in value-added services continue to be significant and broad-based. In Acceptance Solutions, we signed an agreement with Millicom International Cellular in Latin America for cybersource gateway, decision manager, and token management solutions. As it relates to open banking, just about two years ago, we acquired Tink as we saw the opportunity in open banking to enable the movement of data and money and to provide consumers with control over their financial data. Over those two years, we have been expanding our presence in Europe, winning deals with such as Adyen and Revolut. We're now expanding open banking solutions through Tink into the United States, having signed several data access agreements, including with Capital One, Fiserv, and Jack Henry, so that their customers may share data with Tink. We've also signed partnerships on the fintech and merchant side, including Dwolla and Max Rewards. And across our risk offerings, we continue to bolster them through our technology, innovation, and AI expertise and are expanding their utility beyond the Visa network. Recently, we announced three such capabilities in our Visa Protect offering. The first is the expansion of our signature solutions Visa Advanced Authorization and Visa Risk Manager for non-Visa card payments, making them network agnostic. This allows issuers to simplify their fraud operations into a single fraud detection solution. The second is the release of Visa Protect for account-to-account payments, our first fraud prevention solution built specifically for real-time payments, including P2P digital wallets, account-to-account transactions, and Central Bank's instant payment systems. Powered by AI-based fraud detection models, this new service provides a real-time risk score that can be used to identify fraud on account-to-account payments. We've been piloting both of these in a number of countries, and our strong results thus far have informed our decision to roll these out globally. The third solution is Visa Deep Authorization. It is a new transaction risk scoring solution tailored specifically to the US market to better manage e-commerce payments powered by a world-class deep learning recurrent neural network model and petabytes of contextual data. We also continue to make our offerings available through third-party platforms. We mentioned ServiceNow last quarter, and we are excited to have recently joined the AWS Partner Network to help seamlessly provide our clients running systems in the cloud access to Visa's solutions, initially starting with Currencycloud, now known as Visa Cross-Border Solutions, and Pismo. We also signed an agreement with Stripe for them to distribute Verify solutions through a self-service dispute management platform for their merchants. All of these efforts are part of our strategy to build and offer our solutions for both Visa and our network of networks. Before I hand it to Chris, I wanted to note that we have commenced the exchange offer for Visa's Class B1 common stock that is set to expire at the end of next week. I also wanted to highlight that this quarter, after nearly 20 years of litigation, we have agreed to a landmark settlement with US merchants, more than 90% of which are small businesses, lowering credit interchange rates and capping those rates until 2030 once approved by the court. The injunctive relief class settlement also provides updates to several key network rules, giving merchants more choice in how they accept digital payments. Last, let me share a few closing thoughts on the quarter and beyond. First, our second quarter was marked by stable results and strengthened relationships with clients across the globe. Second, as we head into the back half of our fiscal year and beyond, new flows and value-added services remain key areas of focus. We also see significant opportunity in consumer payments by digitizing cash and check, enhancing our capabilities in e-commerce, and building new solutions for our network of networks. I could not be more excited for what lies ahead. Finally, all of this is possible because of the 30,000 Visa employees who come to work every day in service of our clients and partners. I am grateful for everything that you do. Thank you. And now over to Chris.

Thanks, Ryan. Good afternoon, everyone. As Ryan said, Q2 was a strong quarter with relatively stable growth across payments volume, processed transactions, and cross-border volume. Looking at our drivers, in constant dollars, global payments volume was up 8% year-over-year, and processed transactions grew 11% year-over-year. Cross-border volume growth excluding Intra-Europe was up 16% year-over-year in constant dollars. Fiscal second quarter net revenue was up 10% in nominal and constant dollars, which was slightly above our expectations, primarily due to lower-than-expected incentives and better-than-expected value-added services revenue that collectively more than offset lower-than-expected currency volatility. GAAP EPS was up 12% and non-GAAP EPS was up 20% in nominal and 21% in constant dollars. So let's go into the details, starting with total payments volume. Global payments volume growth in Q2 was 8%, consistent with Q1 growth. There are a couple of things I'd like to highlight when comparing Q2 to Q1. First, the extra day for the leap year was a benefit to the quarter. This was offset primarily by slowing payments volume growth in Asia-Pacific, mostly due to macroeconomic weakness in Mainland China. When we adjust for Asia and some other smaller factors, we see second quarter global payments volume growth generally in line with the first quarter. Now on to the US. US payments volume grew 6% year-over-year, credit grew 6%, and debit grew 6%. Card present spend grew 4%, and card not present volume grew 8%. Reg II had a similar modest impact in Q2 as we saw in Q1. When we normalize for leap year, we see relatively stable US payments volume growth. Consumer spend across all segments from low to high spend has remained relatively stable. Our data does not indicate any meaningful behavior change across consumer segments. Moving to international markets, where total payments volume growth was up 11% in constant dollars. Payments volume growth rates were strong for the quarter in most major regions with Latin America, CEMEA, and Europe, ex-UK, each growing more than 19% in constant dollars. Normalized for leap year and weakness in Mainland China, total international payments volume growth was relatively stable to the first quarter. As a reminder, domestic volumes in Mainland China drive a very small amount of revenue, and therefore the impact to our financial statements is not significant. Now to cross-border, which I'll speak to in constant dollars and excluding Intra-Europe transactions. Total cross-border volumes were up a healthy 16% in Q2, generally in line with our expectations. Cross-border card-not-present volume growth, excluding travel and adjusted for cryptocurrency purchases, was in the mid-teens, stronger than expected. Cross-border travel volume was up 17% or 152% indexed to 2019. Consistent with our expectations for the year, we continue to see strong travel volume growth in and out of LAC, Europe, and CEMEA; and out of the US, ranging from 158% to 192% of 2019 levels. The US inbound travel volume has continued to recover within our expectations, up several points from Q1 versus 2019 levels. Asia-Pacific travel volume continues to recover, but the pace has been slower than we anticipated. Travel volume into Asia indexed at 142% of 2019 levels for the quarter, up eight points from Q1, while travel volume out of Asia was up two points to 124% of 2019. We see the primary drivers being one, macroeconomic weakness in key markets like Australia and Mainland China; two, weakness in some Asia-Pacific currencies, which is impacting consumer purchasing power, particularly for Japan; and three, airline capacity that is still below 2019 levels, particularly the Mainland China and North American corridor. Altogether, we're pleased with our total cross-border volume growth with e-commerce growth generally offsetting the travel weakness in Asia, and this is a great testament to the strength and diversification of our model. Now let's review our second quarter financial results, starting with the revenue components. Both service revenue and data processing revenue grew generally in line with their underlying drivers, which resulted in their respective revenue yields remaining relatively consistent to the first quarter. Service revenue grew 7% year-over-year versus the 8% growth in Q1 constant dollar payments volume. Data processing revenue grew 12% versus the 11% process transaction growth. International transaction revenue was up 9% versus the 16% increase in constant dollar cross-border volume, excluding Intra-Europe, impacted by lapping strong currency volatility from last year. As volatility reached lows that we haven't seen in about four years, the revenue growth was lower than we expected. Other revenue grew 37%, primarily driven by strong consulting and marketing services revenue growth and, to a lesser extent, pricing. Client incentives grew 12%, lower than we expected due to client performance and deal timing. Across our three growth engines, consumer payments growth was driven by relatively stable payments volume, process transactions, and cross-border volume. New flows revenue improved as expected to 14% year-over-year growth in constant dollars. Visa Direct transactions improved to 31% year-over-year growth helped by growth in Latin America for interoperability among P2P apps. Commercial volumes rose 8% year-over-year in constant dollars. In Q2, value-added services revenue grew 23% in constant dollars to $2.1 billion, primarily driven by issuing and acceptance solutions and advisory services. GAAP operating expenses increased 29%, driven by increases in the litigation provision and G&A expenses. Non-GAAP operating expenses grew 11%, primarily due to increases in G&A and personnel expenses. FX and Pismo each represented an approximately half point headwind. Excluding net losses from our equity investments of $30 million, non-GAAP non-operating income was $189 million. Our GAAP tax rate was 15.4%, and our non-GAAP tax rate was 16% due to the resolution of some non-US tax matters. GAAP EPS was $2.29 and non-GAAP EPS was $2.51, up 20% over last year, inclusive of an almost one-point drag from exchange rates and an approximately half-point drag from Pismo. In Q2, we bought back approximately $2.7 billion in stock and distributed over $1 billion in dividends to our stockholders. At the end of March, we had $23.6 billion remaining in our buyback authorization. Now, let's move to what we've seen so far in April through the 21st. US payments volume was up 4%, with debit up 4% and credit up 5% year-over-year, down from March, primarily due to Easter timing. Process transactions grew 9% year-over-year. Constant dollar cross-border volume, excluding transactions within Europe, grew 15% year-over-year. Travel-related cross-border volume, excluding Intra-Europe, grew 15% year-over-year in constant dollars or 151% indexed to 2019. And cross-border card not present ex-travel grew 15% in constant dollars. Now on to our expectations. Remember that adjusted basis is defined as non-GAAP results in constant dollars and excluding acquisition impacts. You can review these disclosures in our earnings presentations for more detail. Let's start with the full year. We are reaffirming our prior year guidance for the full year for adjusted net revenue and operating expense growth in the low double-digits and EPS growth in the low teens. As for drivers, things are progressing generally as we expected, except for the trends in Asia that we discussed. Accordingly, we are making a small adjustment to our outlook for total payments volume growth to the high single digits from the low double digits. Total cross-border volume, excluding Intra-Europe, is expected to continue to grow strongly in the mid-teens with the strength in e-commerce generally offsetting weakness in Asia travel. Remember that our drivers assume no recession or no further increase in Reg II impacts. Currency volatility remains low, and we are assuming volatility in the third quarter continues at a similar rate to the second quarter and adjusts up slightly in the fourth quarter. Now on to the third quarter expectations. We expect adjusted net revenue growth in the low double-digits, generally in line with the adjusted second quarter growth rate. Adjusted operating expenses in the third quarter are expected to grow in the low teens, driven primarily by Olympic-related marketing expense due to the strong client engagement that Ryan referenced. Non-operating income is expected to be between $50 million and $60 million, and the tax rate is expected to be between 19% and 19.5% in Q3 with the full year unchanged. This puts third-quarter adjusted EPS growth in the high end of low double-digits. For the third quarter, Pismo is expected to have minimal benefit to net revenue growth and an approximately one-point headwind to non-GAAP operating expense and an approximately half-point drag to non-GAAP EPS growth. FX for the third quarter is expected to have an approximately one-point drag to net revenue growth and approximately one and a half-point benefit to non-GAAP operating expense growth and an approximately half-point drag to non-GAAP EPS growth. In summary, we had another solid quarter in Q2 with relatively stable underlying drivers and strong financial results. We feel good about the momentum in our business as we head into the second half across consumer payments, new flows, and value-added services. We remain thoughtful with our spending plans as we continue to balance between short and long-term considerations in the context of a changing environment. So now, Jennifer, let's do some Q&A.

Thanks, Chris. And with that, we're ready to take questions, Holly.

Thank you. Our first caller is Sanjay Sakhrani with KBW. You may go ahead.

Thank you. Chris, a clarification question. You mentioned Easter was mainly affecting the quarter-to-date trends. Is it fair to assume that the growth rate would be commensurate with the last quarter if you adjust it for that? And then just on a related matter, did the tax refund timings have any impact later in the quarter or in the quarter or into the quarter-to-date trends? Thanks.

Thanks for the question. April volumes, as I mentioned earlier, were lower than those in March during the first three weeks. This difference can be attributed to the timing of Easter, which occurred in March this year rather than in April like last year. Consequently, when you consider this timing in the growth rates for March and April, the variation between the two months is not significant. Regarding tax payments, I don't have any new information at this time, but they have been relatively consistent so far this year.

Next question, Holly.

Our next caller is Timothy Chiodo with UBS. You may go ahead.

Great. Thank you for taking the question. There were some helpful comments around the e-commerce strength within cross-border offsetting some of the travel weakness. When we think about the components of overall cross-border, clearly, there's the traditional travel, so card present and card not present. And then there's the traditional e-commerce, right, so retail e-commerce. But there are other faster growing but smaller portions, whether it be the remittances or marketplace payouts, or you gave the Thunes example earlier. I was wondering if you could maybe size the, in aggregate, how large some of those other maybe faster growing portions of cross-border have become as a part of the overall mix?

Yeah, sure. Why don't I start? Yeah, we don't have specifics to break-out. As we talked about, the e-commerce business has been strong. It continues to grow above what we expected. The yields across our entire cross-border business are positive and accretive to Visa overall. And so we're happy with all flavors of cross-border, but I don't have a further breakout for you in terms of the pieces that you were asking about.

Next question, Holly.

Our next caller is Craig Maurer with FT Partners. You may go ahead.

Thanks for taking my question. I wanted to ask about the trends in US debit. April continued the weakening trend we observed in March and since February. I would like to know how much your guidance for the third quarter and the year takes into account further weakening in US debit. It appears that recent restaurant data indicates the lower-income segment of the US is significantly cutting back on spending in certain areas. I'm curious to hear your thoughts on this. Thank you.

We see relatively stable volumes in the US for both credit and debit, normalizing for the factors I mentioned. Additionally, the impact of Reg II remains stable. Our data indicates stable volume growth in the US.

Next question, Holly.

Our next caller is Bryan Bergin with TD Cowen. You may go ahead.

Hi. Good afternoon. Thank you. I wanted to ask on new flows, so a nice recovery there in growth. Can you give a comment on what areas were most pronounced in the underlying growth recovery relative to what you saw last quarter?

Yeah. Let me talk about Q2 growth. The two pieces of information that we gave you in terms of Q2 growth. We saw commercial volume growth globally 8%, stable to Q1 and, in fact, stable over the last several quarters. And we saw very strong growth in Visa direct transactions, growing 31% for the quarter. New flows revenue in total growing 14%, which was in line with our expectations that we shared with you at the start of the year. I think the recovery that you're referencing to was because Q1 growth was lower, and that was really due to some lapping issues that were one-time and non-recurring, which we passed at this point.

Next question, Holly.

Our next caller is Will Nance with Goldman Sachs. You may go ahead.

Hey, guys. I appreciate you taking the question. A bit of a dual-part question on just some of the prior guidance commentary you made around first-half versus second-half dynamics and some of the drivers of acceleration over the course of the year. And I guess specifically, I guess, incentives, you talked about a step-down in the growth rate from first half to second half. Is that still your expectation despite that coming in a lot lower in the most recent quarter? And then for the similar question on the volume growth trends, I guess, I hear you on the Asia trends, but I guess overall, you had some kind of upbeat commentary on ticket sizes over the course of the year and kind of easing inflation in comps, it seems like gas prices might help that as well. So just any commentary on ticket sizes and specifically the negative ticket sizes you've seen in the US? Any commentary on kind of what's structural versus kind of more environmental there? Thanks.

Sure. Let me begin with the incentives part of your question. As you have observed, the growth of incentives can fluctuate from quarter to quarter due to various factors including client performance and the timing of deals, which is why we experienced lower numbers in the first half than expected. Looking ahead to the second half of the year, our expectations have not changed significantly. We anticipate that the year-over-year growth in the second half will be lower than in the first half, as we compare it to the higher incentives from the same period last year. We also expect that the growth rate for incentives in the fourth quarter will be the lowest for the year. So, our expectations for the second half remain the same. Regarding your second question about ATS, there are many factors at play here, so I will break it down for you. Globally, year-over-year growth in ATS for the second quarter was slightly down, which aligns with the first quarter's growth. When we differentiate between the US and international markets, ticket size growth in the US improved from the first to the second quarter, still slightly negative, but there was a positive trend. Looking ahead in the US, we believe that ATS will become positive in the second half of this year as we compare it against the lower ticket sizes from the same period last year. Internationally, excluding Asia-Pacific for a moment, we noticed improvements in several regions, partly driven by higher inflation in those markets. Overall, outside of Asia, we still expect ATS to turn positive in the second half due to anticipated improvements in the US. However, considering the situation in Asia, the global ATS may remain slightly negative, and this has been incorporated into the revised payment volume outlook I provided for the full year.

Next question, Holly.

Our next caller is Moshe Katri with Wedbush Securities. You may go ahead.

Hey, thanks for taking my question. It seems that there was a pretty significant uptick sequentially in growth for value-added services. Is there anything to call out there? Thanks.

I appreciate the question, Moshe. To briefly discuss the business, as I mentioned in my prepared comments, we are seeing significant progress in various areas regarding the products we are introducing and the success of our sales teams globally. We are focusing on three main strategies to drive growth. The first is enhancing the usage of our products among our existing clients. This represents our most immediate opportunity, and we are collecting data on what each client is utilizing. Our sales teams are equipped with this information as we create case studies to support them and strengthen our relationships with these clients. Additionally, we are developing new products to bring to market, which I highlighted earlier in areas like risk and fraud, as well as open banking. Lastly, we are expanding geographically. One example I mentioned is the cybersource deal, which illustrates our success in expanding into markets where we traditionally had less presence. A positive example of our growth in cybersource is AP. Those are a few highlights on how we are enhancing the broader business.

Next question.

Our next caller is Cris Kennedy with William Blair. You may go ahead.

Good afternoon. Thanks for taking the question. You talked about bringing Tink into the US. Can you talk about the open banking opportunity in the US relative to Europe? Thank you.

Thank you, Chris. Europe is the leading open banking market globally. We acquired Tink two years ago, believing it was the best platform in Europe, and that belief has been validated as we've operated it over the past couple of years. On the client front in Europe, we're making excellent strides, winning business and gaining market share with both fintechs and traditional banks, merchants, and others in both payment and account information services. I would characterize the US market as less advanced compared to Europe, presenting us with the chance to apply the insights we've gained from the more mature European market, along with our successes and challenges with clients, to the US market. We are eager to pursue this opportunity, especially since the US market is still in its early stages of development. It’s an opportune moment for us to compete, and we are optimistic that in the coming quarters and years, we will be able to share many successes from the US market.

Next question, please.

Our next caller is Dan Perlin with RBC Capital Markets. You may go ahead.

Thank you, Ryan. I wanted to ask about the Visa Deep Authorization commentary and the market related to it. I want to ensure I understand correctly: are you using this as a way to standardize e-commerce authorization rates across the market, so that acquirers need to partner with you more closely and don't compete individually on authorization rates within e-commerce, or is there something different about this platform? Thank you.

Hey, Dan. Let me clarify. This is somewhat different from what you described. In the US e-commerce market, we have discovered that it is the most advanced e-commerce market in the world, but it has also become a hotspot for sophisticated fraud and attack methods. We are introducing Visa Deep Authorization, an e-commerce transaction risk scoring platform specifically designed for the unique attack vectors we see in the US. As I mentioned in my prepared remarks, this platform is built on deep learning technology that is finely tuned to the sequential and contextual understanding of accounts in our market. Our main objective, as with many of our fraud and authorization products, is to enhance the experience for both buyers and sellers. We aim to lower fraud rates, boost authorization rates, and increase shopping conversion for our merchant partners. We believe Visa Deep Authorization will be another valuable tool to achieve these goals.

Next question, please.

Our next caller is Tien-Tsin Huang with JPMorgan. You may go ahead.

Thanks so much. It sounded like the Middle East deal activity is in a good place here. I believe Emirates is a takeaway for you. I'm just curious if there's something new going on there from a pipeline perspective. It sounds like maybe some investing. Is this the growth market we should be paying more attention to maybe? Thanks.

Thanks, Tien-Tsin. I think what you're seeing is good execution from our sales team, doing what we do when we do it best, which is in with our clients, listening, learning, obsessing about what's important to them and then bringing them products and value propositions that are helping meet their needs and drive their strategies and really just kudos to our team on the ground there and the great work that they're doing.

Next question, please.

Our next caller is Trevor Williams with Jefferies. You may go ahead.

Great. Thanks a lot. This one is for Ryan. Just wanted to go back to the merchant settlement in the US, clearly you guys aren't directly impacted by lower interchange, but I'm just curious kind of what you're expecting the downstream impact to be on Visa, the relationships between you and your issuing banks. And if you think it in any way kind of changes the competitive dynamics at all within the US credit market? Thanks.

Thank you, Trevor. The positive news here is that it brings clarity and stability to the market. This litigation has been ongoing for nearly 20 years. Significant efforts have been made to achieve a resolution. To recap, the resolution consists of two main components. First, it will lower interchange fees for credit cards in the US market for both Visa and Mastercard, and there will be no increases in interchange fees for the duration of the five-year agreement. Secondly, there will be tools that provide merchants with more flexibility in managing payments, particularly regarding surcharging and similar aspects. Overall, as I mentioned, it's about clarity and stability that allows everyone operating in the US market to progress and continue fostering the growth of the digital payments ecosystem we've developed collectively in the United States.

Next question, please.

Our next question is from Harshita Rawat with Bernstein. You may go ahead.

Good afternoon. So, Ryan, I want to follow up on value-added services, such an important part of your growth story. I know you've talked about the five types of services you offer and how your top 250 clients use almost 2x the number of services versus the rest of your client base. Can you give us some sense on how these penetration numbers have evolved over time? And finally, as you kind of think about pricing for these services, to what extent it's a bundle pricing along with core versus kind of a separately priced service? Thank you.

You have a great memory. As we've mentioned, our top 265 clients typically utilize about 22 of our value-added services. We don't disclose how this changes from quarter to quarter, but the potential is significant considering the number of clients we have globally. As I mentioned earlier, we have equipped our frontline teams with detailed information on client usage, identifying what services they are currently using, what they aren't using, and where we have opportunities to provide value by leveraging specific services. We are achieving considerable success, which is reflected in our numbers. Regarding pricing, we employ different pricing models for various products and service suites in different regions. We continuously strive to find the optimal pricing strategy for our products in the market. Our portfolio of value-added services covers a range from issuing to acceptance, risk and identity, advisory, and open banking, with distinct and deep competitive landscapes in each market. Therefore, we are adopting diverse pricing strategies tailored to each market globally to best serve our clients.

Next question, please.

Our next caller is Ramsey El-Assal with Barclays. You may go ahead.

Hi. Thanks for taking my question. I wanted to ask about one of the consumer payment opportunities that Ryan called out, namely taking share from domestic card networks. How do you drive that? Is it just a question of getting banks to issue more of your cards, or is it more on the acceptance or consumer side? What are the levers that you have to basically speed that up?

Thank you for your question. It's really about the first point you raised. We need to ensure strong acceptance and capabilities in all the markets where we operate. This involves working closely with clients to demonstrate the advantages of a Visa debit card compared to cards tied to domestic schemes. We focus on the e-commerce features that Visa Debit offers, which clients may not receive from domestic options. Additionally, we highlight cross-border travel benefits available with Visa cards versus those domestic cards. We also discuss risk and fraud prevention measures, the ability to approve more transactions, and reduced fraud rates, along with tokenization and other advantages we've frequently mentioned. Our teams can help explain these benefits to clients, who often conduct pilots and tests. They typically see positive results, such as increased spending and customer satisfaction, making the choice to issue Visa cards a straightforward decision for them.

Next question, please.

Our next caller is Jamie Friedman with Susquehanna. You may go ahead.

Hi. I was wondering if you could share some color on how Prosa is doing so far and how you view the opportunity in Mexico as you start to press and productize into the Mexican market. Thank you.

Yeah. Thanks, Jamie. We view the Mexican opportunity as a very significant one. And coincidentally, I was just down there a couple of weeks ago meeting with clients and meeting with the Prosa team as well. So as I think I explained on one of these calls, today, because we don't process transactions domestically in Mexico, we're not able to deliver a lot of the value-added services that I've mentioned over the course of this call to our clients. And so first and foremost, our clients are very excited about us having the opportunity to have a majority ownership stake in Prosa and then bring these world-class capabilities that we've built to the Mexican market, the things I mentioned earlier, tokenization or the risk scoring algorithms that I mentioned or the e-commerce capabilities that I mentioned, those types of things. Now Prosa itself is a great asset. It's been operating for 50 years in Mexico, has deep processing experience, it has scale. They do more than 10 billion transactions annually. They have a great base of clients. So it's really the combination of both Prosa's experience and deep footprint in the Mexican market combined with our experience, our technology, our track record in bringing a lot of these services to market, the combination of those two things gives us a lot of confidence and our clients a lot of confidence that we can digitize the significant amount of cash and check and electronic payments that exist today in Mexico.

Next question, please.

Our next question is from Andrew Schmidt with Citi. You may go ahead.

Hey, Ryan. Hey, Chris. Thanks for having me on the call here. I wanted to go back to cross-border for a second. Obviously, a part of the back-half growth is the narrowing of the spread between cross-border revs and volumes. Maybe if you could talk a little about how, whether those assumptions have changed at all with FX volumes coming down or if there's other puts and takes we should consider there? Thanks a lot.

Sure. I spoke extensively about volatility. In the second quarter, we experienced currency volatility at multi-year lows, which is difficult to predict. For the third quarter, we are assuming that these low levels of currency volatility will persist in our guidance. We do foresee a slight improvement in the fourth quarter, aligning generally with market expectations. That reflects our perspective on currency volatility. However, we are optimistic about the underlying health of our business going into the second half of the year, particularly in consumer payments, new flows, and value-added services. Volatility remains a variable, and we will need to monitor how it unfolds.

Next question, please.

Our next question comes from Jason Kupferberg with Bank of America. You may go ahead.

Thank you, guys. Can you talk about your second-half expectations for new flows and VAS revenue growth as well as cross-border travel volume growth? Thanks.

Sure. Let me elaborate on that a bit. We have reaffirmed our guidance for the full year, including adjusted net revenue growth, operating expenses, and earnings per share. However, I mentioned that volatility will lead to our international treasury revenues being lower than we expected in the third quarter. Nevertheless, our full-year expectations remain unchanged. Our projections for new flows are consistent with what we shared at the start of the year. We anticipate that for the full year, new flows will outpace consumer payments, particularly with more significant growth expected in the second half of the year, as reflected in the 14% growth we saw in the second quarter. We expect to maintain strong growth in the latter half of the year. Additionally, value-added services have exceeded 20% growth in both of the first two quarters, showing clear momentum. Regarding your question about cross-border travel volumes, we adjusted our outlook based on first-half trends. Overall, we are very pleased with our first-half cross-border performance, achieving 16% growth in the second quarter, which aligns with our expectations. Travel growth was at 17%, and e-commerce growth exceeded our expectations in the mid-teens. Looking at travel specifically, most of our expectations were realized as we planned earlier in the year, showing strong performance in regions like Latin America, Europe, and CEMEA, although Asia's recovery is progressing slower than anticipated. This is balanced out by strong performance in the e-commerce cross-border business, which has exceeded our forecasts. We expect these trends to carry into the second half, so we have slightly adjusted our travel outlook because of Asia while raising our expectations for e-commerce. In summary, we believe total cross-border volumes will remain robust, growing in the mid-teens during the second half, which is a more meaningful metric for our financial performance due to the strong yields in both travel and e-commerce.

Next question, please.

And our last question comes from Ken Suchoski with Autonomous Research. You may go ahead.

Hey, good afternoon. Thanks for taking the question. A lot of my questions have been asked. I just want to ask about the service yields, though, because they came in a little bit lighter than we were expecting. So can you just talk about what drove that? It looks like the service yield declined year-over-year, but maybe there's some offset with client incentives also coming a little bit lower in the quarter. So any detail there would be helpful. Any thoughts on how to think about the year-over-year change in that yield going forward? Thanks.

As we talked about, both service revenue and data processing revenue grew generally in line with their underlying drivers, service revenue at 7% versus the 8% in constant dollar PV, Q1 constant dollar PV that's impacted by a number of smaller things, none of which I would call out as a single thing. Data processing revenue grew a little bit above processed transactions, 1.12 versus 11 and that was helped aided a little bit by pricing. From a yield perspective, I think the thing that's important is that our second quarter yields remained consistent with Q1 and consistent with the average over the last several quarters. And so we're seeing very stable yields across the business, and we're pleased to see that. And even more broadly, our net revenue yield across the whole company remained quite stable.

Great. And last question please, Holly.

And our last question comes from Paul Golding with Macquarie Capital. You may go ahead.

Thanks so much. Ryan, you were talking about the addressable opportunity of $20 trillion of which cash and check was half. I was wondering if you can give any thought to quantifying the ACH versus the domestic network conversion and where you think you are in that opportunity capture for each of those. Thanks.

Yeah, thanks. We're having great success in all three. I gave you examples. Some of our teams are ahead of others in different parts of the world and domestic schemes are more prevalent in some parts of the world than others, like I mentioned Europe as an example. But the opportunity is enormous in all three of these areas, and we've been having really good success in all three of the areas.

And with that, we'd like to thank you for joining us today. If you have additional questions, please feel free to call or email our Investor Relations team. Thanks again, and have a great day.

And this concludes today's conference. Thank you for participating. You may disconnect at this time and have a great rest of your day.