Earnings Call Transcript - V Q3 FY2025

Operator

Welcome to the Visa's Fiscal Third Quarter 2025 Earnings Conference Call. All participants are going to listen only until the question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host, Ms. Jennifer Como, Senior Vice President and Global Head of Investor Relations. Ms. Como, you may begin your conference.

Jennifer Como, Head of Investor Relations

Thank you. Good afternoon, everyone, and welcome to Visa's Fiscal Third Quarter 2025 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 the 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. Our comments today regarding our financial results will reflect revenue on a gap basis and all other results on a non-gap nominal basis unless otherwise noted. The related gap 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.

Ryan McInerney, CEO

Thanks, Jennifer. This quarter, our financial performance once again demonstrated the power of Visa's diverse business model, global scale, commitment to innovation, and relentless focus on our clients. We delivered net revenue of $10.2 billion, up 14% year-over-year, and EPS up 23% year-over-year. Our key business drivers were strong. In constant dollars, overall payments volume grew 8% year-over-year, U.S. payment volume grew 7%, and international payments volume grew 10%. Cross-border volume, excluding entry Europe, rose 11% in constant dollars, and process transactions grew 10% year-over-year. We are obsessed about serving our clients and wake up every morning thinking about what we can do to help them be successful. today and in the future. We recently completed our annual global client engagement survey where Visa again received a net promoter score of 76, a tangible sign of how our clients feel about Visa and our capabilities, services, and products. And as I'm sure you all saw, we hosted our product drop on April 30th. We shared how we are continuing to evolve the Visa as a Service stack to advance our product developments and lead in a number of areas, including AI and stablecoins, across consumer payments, commercial and money movement solutions, and value-added services. Now let's look at some of the specific innovations and progress across our growth pillars this quarter. In consumer payments, we continued to grow through a focus on solutions to address both carded and non-carded volumes across the globe. Total credentials were up 7% year over year, marking the ninth consecutive quarter of at least 7% growth. We are nearing 15 billion tokens, and now more than 50% of our e-commerce transactions are tokenized globally. getting closer to our ultimate goal of reaching 100% penetration. As we continue to transform Visa cards for a more digital future, our Flex Credential is an important solution. We have seen interest across various use cases, such as buy now, pay later, small business, multi-currency, and more. This quarter, we announced that Klarna will be launching a Klarna card powered by our FlexCredential in both the U.S. and Europe. We also expanded FlexCredential geographically with inaugural clients in Vietnam, the Philippines, and Bangladesh. And we have a pipeline of more than 200 client opportunities. Another way that we are advancing a more digital future is with Visa Intelligent Commerce, which enables consumers to shop and buy with AI agents. It combines a suite of integrated APIs, including AI-ready cards with tokenization and authentication, together with a commercial partner program for AI platforms, enabling developers to deploy Visa's AI commerce capabilities securely and at scale. We are excited to announce that we have more than 30 partners testing in our live sandbox, and we will soon enter the live transaction pilot phase with general availability to follow later this year as we see agentic commerce becoming a reality. In the face-to-face environment, we continue to drive cash digitization and habituation through our tap-to-everything use cases. Tap-to-pay penetration is now at 78% of face-to-face transactions globally. As a result of our efforts to increase issuance and acceptance, especially transit, which drives habituation, we now have 75 U.S. cities at 60% penetration or higher, up from 30 cities just last year, and New York City and San Francisco have now surpassed 85% and 80% respectively. Tap to Phone added a record 3 million transacting devices this quarter, and Tap to Add Card continues to expand, with more than 275 issuers participating globally, almost doubling from last quarter. For affluent consumers, we are excited to launch Visa Infinite Privilege in Brazil, a new super-premium offering with personalized, exclusive experiences enabled by dedicated lifestyle managers for each affluent user. Itaú, Unicred, and XP International are our inaugural issuer partners. In Canada, our Visa Infinite Affluent Offerings for FinTech Wealthsimple has been their most requested product, with tens of thousands of cards issued in just two months and hundreds of thousands on the wait list. Throughout all these innovations, we have continued to deepen our relationships with our clients across the globe. We renewed our partnership with ABSA, a leading Pan-African bank in consumer and commercial issuance, consulting, and cybersource across nine countries. And in India, we renewed our consumer credit agreements with HDFC and Access Bank this quarter, two of the country's top five credit card issuers. Our consumer payment strategy is also focused on non-carded solutions like Visa A2A in the UK. With this offering, we bring together Visa's brand, consumer protections, technology, and risk management capabilities to enable simpler, safer, and more secure account-to-account payments. We released APIs on the Visa developer platform a few months ago, and we now have several partners on board and even more in our pipeline with a formal launch soon. Also in the A-to-A space, we're making a very deliberate effort to focus on open banking in the markets that have the greatest potential, such as Europe and Latin America. As an example, in Brazil, we have developed Visa Connecta, a payment initiator that connects with PIX to facilitate open banking payments through Tink technology, both in the face-to-face environment, but more specifically in e-commerce, where conversion is a challenge due to the current customer experience. Now moving to commercial and money movement solutions, or CMS, where we continue to pursue new use cases and verticals, domestic and cross-border flows, and develop unique products. This quarter, commercial payments volume was up 7% in constant dollars, Visa direct transactions grew 25%, and CMS revenue rose 13% year-over-year in constant dollars. In Visa Commercial Solutions, one of our key strategies is addressing the day-to-day challenges of small and large businesses through our vertical-specific solutions. In the healthcare and benefits vertical, we are very active, including providing solutions for employee benefits to more than half of the top HSA providers in the U.S. A recent example of our activity in the benefits space is with Sunny, a healthcare fintech that will issue Visa prepaid disbursement cards to their millions of U.S. consumers to spend integrated health benefits and rewards. In the travel vertical, Checkout.com will begin using Visa virtual cards for online travel agencies, or OTAs, in the U.K. and Europe. In addition, Pliant, already an important issuing partner across numerous verticals in Europe, will be expanding into the U.S., bringing their virtual car-as-a-service offerings with spend management capabilities to OTAs, travel management companies, and others in the travel vertical. And in the fleet and fuel vertical, we continue to make progress with our Fleet 2.0 solution, providing key Visa enhancements such as EMV chips, digital wallet provisioning, and contactless payments. In Europe, Octopus Energy is one of the region's largest energy suppliers, and they selected Visa as their partner as they start issuing cards to fleet managers seeking a single payment solution to manage mobility expenses. In Visa Direct, we have made some important progress in facilitating cross-border flows to further our positioning as the largest money movement platform by transactions, volumes, and endpoints. One of the biggest banks in the UAE, with over 60 branches serving over 1 million customers, ADIB, will use Visa Direct to power Remit, their newly launched remittances program, by offering access to cards, accounts, and wallets across all corridors. In Bangladesh, we have signed our first four partners to enable Visa Direct, Megna Bank, Trust Bank, Midland Bank, and Brack Bank, specifically for outbound cross-border payments. And in the U.S. and Canada, PaySend, who we have discussed before as an important Visa Direct remittance client with 10 million customers, is now expanding to add more cross-border use cases such as gig economy worker payouts, payroll disbursements, and accounts payable flows as a reseller to third parties. Before I go to value-added services, I think it is important to touch on a topic that has had a lot of interest lately, stablecoins. We are supportive of the Genius Act, and we believe that it marks a key milestone on the path to regulatory clarity for stablecoins. We have been active in this space for almost a decade and believe that stablecoins can solve important payments problems for certain use cases. We believe that Visa's role is to do what we always do, provide trust, standards, connectivity, billions of endpoints, scale, and interoperability to the payments ecosystem. Beyond capital markets use cases, we see product market fit for stablecoins in two important areas. One, in emerging markets where the local fiat currency is volatile and or where consumers and businesses do not have easy or affordable access to U.S. dollars. And two, in cross-border money movement, both B2B payments and consumer remittances. Our in-market solutions, partnerships, market activity, and product roadmap reflect our commitment to this space. For example, we have deployed stablecoin-linked cards in many markets around the world with partners such as Bridge, Reign, and Banks. In the emerging market use case I mentioned earlier, consumers and businesses are using stablecoins to save money in U.S. dollars, but they also want easy and safe ways to spend that money, and there's no better way to do that than using a Visa card. stablecoin linked visa cards are an extension of what we have been doing in the crypto space for years since 2020 we have enabled crypto users to spend more than 25 billion dollars in bitcoin ethereum and an array of other cryptocurrencies and now stablecoins we are also enabling cross border money movement capabilities for P2P and B2B in certain emerging markets, and we are piloting and partnering with stablecoin payments companies who specialize in these markets as we build out our stablecoin treasury stack for settlement and money movement flows. A recent example is with Yellowcard in Sub-Saharan Africa. Together, we are working to streamline treasury operations, improve liquidity management, and enable quicker and more cost-efficient cross-border transactions. Additionally, we are also helping banks issue their own stablecoins and realize the benefits of programmable money through our Visa tokenized asset platform. And we offer multi-chain and multi-coin stablecoin settlement on the Visa network. We recently expanded our capabilities by adding a euro-backed stablecoin, EURC, and through a partnership with Paxos, two additional regulated stablecoins, USDG and PYUSD. We are also adding support for two additional blockchains, Stellar and Avalanche, enabling us to support four stable coins running on four unique blockchains, representing two currencies that we can then accept and convert to over 25 traditional fiat currencies across the world for our clients within our settlement infrastructure. There is so much more to come in this space, and we are excited about enabling commercial and money movement flows globally across networks, currencies, and form factors. Now to value-added services, which had one of our strongest revenue growth quarters up 26% year-over-year in constant dollars. Let me walk through some of the highlights in our four portfolios. In issuing solutions, Pismo continues to expand, benefiting from Visa's deep client relationships and trusted partner status. We have now entered Europe with AB & Ambrose Neobank Boot in the Netherlands and have also partnered with Lunar, who serves over 1 million consumers and business users for the first Pismo-powered Visa card across Denmark, Sweden, and Norway. This quarter, we signed with EML Payments in Australia to deploy Pismo for their global issuance strategy, enabling them to consolidate their multiple processing platforms to one across Australia, North America, the UK, and Europe. In Acceptance Solutions, we continue to grow through both direct relationships with merchants as well as with acquirers. I'll give two examples of each. First, direct with merchants. We renewed our agreement with ShopeePay, a leading digital payments platform serving tens of millions of users and expanded geographically from Singapore, Malaysia, and Vietnam to include the Philippines, Indonesia, and Thailand, and also expanded with additional products such as tokenization. Kareem Pay, part of super app Kareem that serves over 50 million customers across Middle East and North Africa, will utilize several value-added services, including cybersource and account verification. On the acquiring side, in Saudi Arabia, Arab National Bank has selected Visa as their new partner for our cybersource and risk solutions to offer to their merchant clients. We also signed with Bach, the largest acquirer in Central America, to provide cyber source and tokenization to their merchant clients. In risk and security solutions, our feature space capabilities continue to resonate with our clients. This quarter, Tesis, an existing and important partner of feature space, will begin transitioning their tens of billions of transactions to our next-gen SaaS platform so they can benefit from continued innovation in our advanced AI scoring models in a scalable way. Moving on to advisory and other services, where our payments, consulting and marketing experience, data and analytics capabilities, and sponsorships help us to deepen our relationships with our clients. For example, Eon Financial Service, one of our largest clients in Japan, renewed their credit relationship and will add consulting, managed services, and marketing services to help them grow. I'll call out two other examples of our consulting and marketing services at work. In Brazil, our consulting and technical teams are working with Kaisha to help develop a super app for their over 40 million customers, enhancing digital engagement and loyalty. In the U.S., Fintech Chime utilized our marketing services capabilities to support their brand campaign during the NBA playoffs this past quarter. With each of these four portfolios growing at strong levels, value-added services remains a powerful engine of revenue growth for our business. In conclusion, our third quarter results were strong. In Q3 and through July 21st, Even with the continued uncertainty, consumer spending remains resilient. Within the U.S., while spending growth differed among consumer spend bans, all spend bans in Q3 remained resilient and consistent with past quarters. Within spend categories in the U.S., we saw relative stability to Q2 when adjusted for leap year impacts. Both U.S. discretionary and non-discretionary spend growth remains strong, and we see no meaningful impact from tariffs. For cross-border, total volume growth excluding intra-Europe remains strong and above pre-COVID levels, even with continued impacts from currency weakness and travel to specific countries. While we're not immune to macroeconomic impacts, our business has proven to be diverse, resilient, and well-positioned to capture the significant opportunities ahead. We all know that as commerce evolves, so do buyer and seller preferences. We have proven our ability to anticipate these changes and deploy solutions that enable our expanding network of partners to meet and exceed the needs of their users. Visa has become a hyperscaler that enables anyone around the world to access the breadth, scale and resiliency of our network across more than 200 countries and territories, 150 currencies, and nearly 5 billion credentials. Anybody that wants to be in the money movement business or the payments business can build on top of the Visa stack. And as we connect billions of buyers and sellers through seamless, secure digital payments, we're very excited about how that'll help us enable innovative commerce as we drive Visa's growth forward well into the future. Now I'll hand it over to Chris. Thanks Ryan and good afternoon everyone. Visa reached

Chris Suh, CFO

a record 10.2 billion dollars in quarterly net revenue in our third quarter, up 14 percent year over year, better than expected, driven by lower incentives, a lower FX headwind, and higher value added services revenue. Net revenue was also up 14% year-over-year in constant dollars. Underlying business drivers remain strong. In constant dollars, global payments volume was up 8% year-over-year, and cross-border volume, excluding intra-Europe, was up 11% year-over-year. Total process transactions grew 10% year-over-year. EPS was up 23% year-over-year in nominal and constant dollars, better than expected, primarily due to the strength in net revenue growth. Let's go into the details. Total international payments volume was up 10% year-over-year in constant dollars in Q3, relatively consistent with Q2 when adjusted for leap year. U.S. payments volume was up 7%, with e-commerce growing faster than face-to-face spend. Credit was up 6%, and debit was up 7%. When we look at U.S. payments volume year-over-year growth on a monthly basis, April was stronger than March, primarily due to Easter timing and some portfolio loss lapping that continued throughout the quarter. May was relatively in line with April, and June was softer, primarily due to the impact of both days mix and bill pay timing. Putting it all together, total Q3 U.S. payments volume growth was generally consistent with Q2 adjusted for leap year. Now to cross-border volume, which I'll speak to in constant dollars and excluding intra-Europe transactions. You may recall that we expected Q3 total cross-border volume growth to moderate from Q2 and be slightly below Q4 of FY24, primarily due to the impacts of weaker currencies

Nate Spenson, Analyst — Deutsche Bank

in certain countries and the Canada-to-U.S. travel corridor. In Q3, those impacts generally played

Chris Suh, CFO

out as we expected, with total cross-border volume year-over-year growth at 11%, e-commerce up 13%, and travel up 9%, even with some monthly variability. April benefited from Easter and Ramadan timing, and May moderated from April without this timing benefit. In June, we saw the growth stepped down from May, primarily due to further weakening of the U.S. dollar and a few smaller factors that largely reversed in July. As Ryan said, Visa's Q3 total cross-border volume growth was strong and remained above the pre-COVID trend. With that as a backdrop, I'll move to discuss our financial results, starting with the revenue components. Service revenue grew 9% year-over-year versus the 8% growth in Q2 constant dollar payments volume, helped by pricing and card benefits that more than offset the exchange rate to rate drag. Data processing revenue grew 15% versus 10% in process transaction growth, primarily due to pricing. International transaction revenue was up 14%, above the 11% increase in constant dollar cross-border volume, excluding into Europe, helped by elevated currency volatility and exchange rates, partially offset by hedging and mix. Other revenue grew 32%, primarily driven by advisory and other value-added services and pricing. Client incentives grew 13%, lower than expected, primarily due to two factors. First, deal timing, as we saw some expected deals shift out of Q3. Second, we expanded several client relationships, which led to updated incentive terms and one-time reductions in the associated accruals. Now to our three growth engines. Consumer payments revenue was driven by strong payments volume, cross-border volume, and process transaction growth. Commercial and money movement solutions revenue grew 13% year-over-year in constant dollars. Commercial payments volume grew 7% year-over-year in constant dollars, accelerating slightly from Q2, adjusted for leap year, primarily due to the lapping of certain portfolio losses. Visa direct transactions grew 25% year-over-year to 3.3 billion transactions with strength in both domestic and cross-border P2P. Value-added services revenue was $2.8 billion, with growth accelerating to 26% year-over-year in constant dollars. This was driven by strength across all portfolios and pricing. Operating expenses grew 13%, higher than expected, primarily due to a lower than expected FX benefit and higher than expected personnel expenses Non-operating income was $191 million, helped by investment income from higher cash balances Our tax rate for the quarter was 17.3%, in line with expectations EPS was $2.98, up 23% over last year, with minimal impacts from both exchange rates and acquisitions. During the quarter, we issued €3.5 billion of fixed-rate senior notes with maturities ranging between 3 and 19 years, and interest rates from 2.25% to 3.875%. In addition, we bought back approximately $4.8 billion in stock and distributed $1.2 billion in dividends to our stockholders. At the end of June, we had $29.8 billion remaining in our

Nate Spenson, Analyst — Deutsche Bank

buyback authorization. Now let's move to what we've seen so far in Q4. Through July 21st,

Chris Suh, CFO

U.S. payment volume was up 9%, with debit up 10%, and credit up 9% year-over-year. Even when adjusting for lapping the weather and technology outages impacts from last July, we saw strong growth, primarily due to the timing of July 4th, the day's mixed impact I mentioned for June, now helping July, and the timing of promotional shopping events. process transactions grew 11 year over year for constant dollar cross-border volume excluding transactions within europe total volume grew more than 10 year over year with e-commerce up 13 and travel up 9 july total cross-border volume growth accelerated more than a point from june as we saw improvement in both e-commerce and travel primarily due to strong retail spend in e-commerce, the dollar strengthening versus certain currencies, and the reversal of a few smaller factors that impacted June. Now, on to our expectations. Remember that adjusted basis is defined as non-GAAP results in constant dollars and excluding acquisition impacts.

Tien-Tsin Twisting, Analyst — J.P. Morgan

You can review these disclosures in our earnings presentation for more detail.

Chris Suh, CFO

For Q4, when we take the latest trends for business drivers and volatility, as well as our current view of deal timing, our adjusted net revenue expectations are unchanged in the high single digits to low double digits. On a nominal basis, this puts Q4 net revenue growth generally in line with first half of FY25 nominal net revenue growth, which was about 10%. Moving to adjusted operating expenses, which we expect to grow in the high single digits to low double digits.

Tien-Tsin Twisting, Analyst — J.P. Morgan

Non-operating income in the fourth quarter is expected to be minimal. And our tax rate in the fourth quarter is expected to be between 18.5% and 19%.

Chris Suh, CFO

As a result, we expect adjusted fourth quarter EPS growth to be in the high single digits. For acquisition impacts, we expect a minimal benefit to net revenue growth, an approximately one and a half point contribution to operating expense growth, and an approximately half point headwind to EPS growth in the fourth quarter. Pulling it all together for the full year, we have no changes to our full year adjusted guidance, except for non-operating income, which we expect to be about $250 million as a result of the third quarter. However, it is important to note that when you incorporate our performance year-to-date with our Q4 guidance, even though the full-year guidance ranges are unchanged, we now expect our net revenue growth and EPS growth to be stronger than previously anticipated. It's also a good reminder of the strength of Visa's diverse business model, where in the face of changing conditions throughout the year, we still expect to deliver strong growth and leading profitability. As we look ahead and plan for 2026, while we're contemplating a variety of economic scenarios, the strength and diversity of our business model that I just mentioned, the resilience of the consumer, and our clear and effective strategy, together give us the confidence as we make investment decisions to build the future of payments and drive long-term growth. And now, Jennifer, it's time for some Q&A.

Jennifer Como, Head of Investor Relations

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

Operator

Thank you. If you would like to ask a question, please press star 1 and clearly record your name. You will be announced prior to asking your question. To ensure all questionnaires are heard, we ask that you please limit yourself to one question. Once again, to ask a question, please press star 1. To withdraw your question, please press star 2. Our first question comes from Harshita Rawat with Bernstein. You may go ahead.

Harshita Rawat, Analyst — Bernstein

Hi, good afternoon. Chris, I want to follow up on the fourth quarter guide, if you can provide more color. Can you maybe help us kind of bridge the kind of deceleration from the third quarter? I know you talked about kind of FX volatility, to some extent incentives, but anything else to call out? Also, I think it's with regards to cross water. Thank you. Okay, good. Hi, Harshta.

Chris Suh, CFO

Yeah, so let's talk about Q4. We're expecting a fundamentally strong Q4 with strong drivers and continued, resilient consumer spending. Now, the guide reflects reported growth in Q4 that is being impacted by the lapping of some items that we spoke about last Q4. Specifically, there were one-time impacts that reduced incentives to the lowest growth quarter of last year. If you recall, Q4 last year grew 6% incentives. And also, we had a very strong vast quarter related to the Summer Olympics, again, last Q4. If you normalize for those lapping items, those one-time lapping items for last year, Q4 growth would have been firmly in the double digits. So that's sort of the absolute description of Q4. Now, versus Q3, which was your specific question, Q3 was a very strong quarter, driven by strong drivers, higher currency volatility, strong vast and lower incentives, as we talked about. And if I compare the two quarters, really the big differences are going to be currency volatility, which was high in Q3, especially early in the quarter, has settled down, and that's our assumption through the rest of Q4. And the second one is incentives, where, again, Q3 benefited from one-time incentives that we talked about, that I talked about in my prepared comments, and Q4 is anniversaring the benefits that we saw incentives from a year ago. So normalize for those two things, Q3 is a strong quarter, Q4 is a strong quarter, and when you add it up, we're going to finish very strong FY25, higher than we thought entering the quarter.

Operator

Next question, please. Thank you. Our next caller is Tyn Twisting with J.P. Morgan. You may go ahead.

Jennifer Como, Head of Investor Relations

Hi, Tyn Jen. Are you there?

Tien-Tsin Twisting, Analyst — J.P. Morgan

I am. Can you hear me, Jennifer?

Jennifer Como, Head of Investor Relations

Now we can. Now we can.

Tien-Tsin Twisting, Analyst — J.P. Morgan

No, thanks. uh yeah my name is a hard one just wanted to uh maybe i'll ask on investment priorities if that's okay i'm just curious if that's changing at all given i know ryan you've talked a lot about ai and stable coin uh to us here intro quarter so i'm just curious if your priorities have changed because it does look like optics is running a little bit higher and in fourth quarter reported implies uh not that much operating leverage i'm just curious if you're changing some of your investments that are given someone to use, Genius Act, et cetera.

Ryan McInerney, CEO

Hi, Ginger. Let me talk about your question around priorities, and then I'm actually going to have Chris just talk briefly about OPEX, because I think there's a very clear explanation that'll be helpful to you. In terms of priorities, no change from what I've been talking about publicly. You know, we have a deep and rich product pipeline. We feel great about the products that we put out into market, both the ones that we've deployed and the ones that we announced at our product drop in April. And, you know, we're always nipping and tucking in certain markets and adjusting, you know, kind of where we're going to go launch in this country versus that country. But, no, overall, priorities remain the same. We feel great about the momentum that we have in market and, you know, continue to drive that forward. But, Chris, I think he was teed off a little bit by the OPEX part of his question.

Chris Suh, CFO

You want to just address OPEX in general? Let me address that. So I'll talk about Q3 and Q4. So Q3 OPEX did come in a little higher than we anticipated. There was a couple things. One was the FX benefit was less than expected. And then the second one, which I mentioned on the call, was higher personnel costs. And just to click into that, specifically the overage came from higher costs related to the mark-to-market, of the deferred compensation liability. But just for clarity, that's EPS neutral is because we record the equivalent gain on that mark-to-market in NOI and that contributed part to the NOI overperformance. As far as Q4 goes, as Ryan talked about, we're investing in many things across our broad business to drive growth, and we're anticipating to grow OPEX in the high single digits to low double digits. as we're doing all that investment and growing OPEX in line with revenue for Q4.

Operator

Next question, please. Thank you. Our next caller is Trevor Williams with Jefferies. You may go ahead, sir.

Trevor Williams, Analyst — Jefferies

Thanks very much. I wanted to go back to the spread between international transaction fees and the nominal cross-border volume. I think this quarter that spread was less than one point, even though, Chris, you called out currency vault being up pretty significantly year over year, and I think hedging and mix were the main offsets that were also mentioned. If you could just expand on both of those, and then especially on MIX, you guys have been clear about U.S. inbound travel having slowed. I'm just curious how much of an impact that's having overall on the yield dynamic there. Thanks very much.

Chris Suh, CFO

Sure, Trevor. Let's go into all the different components, as you called out. Well, the two numbers that I'll reference is the 11% growth in total cross-border versus the 14% international, and as you point out, the spread shrinks on a nominal basis. So, the three factors were higher currency volatility. We've talked about that at length. And then the other two items, hedging, which is in line with our strategy to mitigate cash flow impacts of FX movements. And in this quarter, we had a hedging loss that offset a portion of the favorable impact of the weaker U.S. dollar. And then the third one being mix. You mentioned Canada to U.S. That is a variable in here. So across our business, the composition of our yields can and does vary, different clients, different regions, and that's the example I'll use. U.S. inbound is one of our higher-yielding corridors, and that's being impacted by the Canada to U.S. volume. So the mix can certainly be an offset to the higher volatility. Those are the puts and takes for the quarter within that line specifically. But, you know, all in all, we're pleased, again, that revenue, whether it's in international or in data processing or service fee, we're outgrowing volumes in all three categories.

Jennifer Como, Head of Investor Relations

Next question, please.

Operator

Timothy Chioda with UBS. Please go ahead.

Timothy Chiodo, Analyst — UBS

Great. Thank you for taking the question. I want to see if we can dig in a little bit to Visa Direct. So, on our estimates, it's becoming a more important part of the volume growth algorithm and particularly for debit. it. I wanted to see if we could hit two topics. One is some of the newer or faster growth use cases. One in particular that you mentioned earlier in the prepared remarks around banks signing up to use Visa Direct as their cross-border platform. And then the second item I was hoping we could touch on is some of the pricing dynamics. At the Investor Day, there was a slide that showed the roughly $0.09 to $0.10 yield on Visa Direct. I was hoping you could talk a little bit about the pricing strategy there and to the extent that that may or may not be evolving to maybe add some ad valorem fees and whether or not that might have contributed at all to any of the strength

Ryan McInerney, CEO

in data processing. Thank you. Hi, it's Ryan. I'll try to hit the high points of what you're asking there. Thanks for the question on Visa Direct. Love talking about Visa Direct. Coming back to the top of your comments, you know, and we shared this at Investor Day as well, You know, we now crossed the $10 billion transaction mark, at least on a rolling 12 months, which we're very excited about. So I think, you know, Visa Direct has really scaled in a meaningful way. As I mentioned in my prepared remarks, it is the largest at-scale money movement platform in the world, you know, however you want to measure it, whether it's endpoints or transactions or volumes or partners or what have you. And, you know, the investments that we've made in that platform over time are what are helping our sales teams and client teams around the world sell into a lot of these new and exciting use cases. You mentioned the banks enabling and embedding Visa Direct as their cross-border money movement platform. That's something we've been very focused on, and we're having, you know, good success. And I believe there's a big opportunity here. I think there's a big opportunity for banks around the world to play a more direct role in money movement. You know, when we're sitting and talking to our bank partners around the world, they often recognize that a lot of their users are leaving their bank app and maybe going to another fintech or another money movement platform to send remittances, for example. And they view that as a lost opportunity. And so they're using Visa Direct to power a remittance platform and a money movement platform and embed that in their app so that they can deepen their relationship with their users. Their users are getting more value from their financial institution and ultimately driving more value as well. In terms of the pricing and the yield dynamics, it really differs. You know, we price to value, as we always talk about on this call. The competitive dynamics are different in every vertical, in every use case, in every country around the world. We're going up against different competitors in Samia than we are in Latin America, than we might be in Europe. And the pricing has different components to it as well. Just because we talked about the yield in cents per transaction, don't necessarily assume that reflects all the different pricing, whether it's the remittance topic that you asked about specifically or just Visa Direct in general. So we talked about it in that way because that's generally the right way that we think to think about the revenue dynamics is kind of what are we earning in cents per transaction. And, you know, as we said during Investor Day, it's similar yields to what we're seeing in the debit business globally. So feeling good about all those, on all those fronts and the momentum that we have in the Visa Direct business. Next question, please.

Operator

Thank you. Gus Gallo with Maness Crespi-Hart. You may go ahead, sir.

Gus Gallo, Analyst — Mannes Crespi-Hart

Hey, Chris. Thank you for letting me on for the call. uh street is currently looking for an acceleration in volume transaction fiscal 26. um if we think of the macro kind of persisting from june july levels kind of there and bank activity level kind of staying where it is is that kind of a realistic expectation and then on the comments on uh the lower there was large peer uh five sort of commented on lower bank activity levels. You mentioned deal timing being moved back in prep remarks. Any part of the stack or transaction where that's maybe happening within VAS or parts of VAS where that's more acute? I mean, granted, you guys still accelerate in the quarter, but just any call around that would be very helpful. Thanks. Why don't I take the second part of the question

Ryan McInerney, CEO

on VAS, and then you can address the first part of the question, which I think was a question. You were going a little in and out, so sorry to – I think it was a question around 2026. We really feel great about the momentum in the value-added services business. As you heard in both my and Chris's prepared remarks, you know, firing on all cylinders across all of the different businesses, maybe just as a reminder in terms of how we're thinking about the overall VAS strategy, because I think you're seeing the results of that strategy now. You know, we've been focusing our VAS business for a long time about enhancing visa transactions, making visa payments safer, simpler, easier, more reliable. And, you know, that has been historically how we've generated most of the VAS revenue that we've generated. Where we've really seen a lot of success is in the two additional strategic levers that we've talked about. The second is putting our VAS to work, enabling all different types of payments, other card payments, account-to-account payments, digital wallet payments, partnering with RTP networks around the world and digital wallet players. You know, I mentioned in my prepared remarks the partnership that we have in Brazil to power PIX payments. So, you know, we're really starting to see a lot of momentum in this second leg of the strategy by putting our VAS to work to enable all different types of payments. And then the third area, which is really going beyond payments and helping our clients with a whole range of things, from marketing to managed services to strategy to analytics to data. And there, too, in my prepared remarks, you heard a lot of great examples from all around the world of the success we're having in that area. So, you know, good progress, good momentum, and you're starting to see kind of the strategy that we talked about a couple years ago really start to come through in the performance and the numbers.

Chris Suh, CFO

And then, Chris, I think there was a question about 2026. Yeah, let me comment on 2026. Obviously, we're focused on closing Q4 and finishing FY25 strong, but we are also in the planning phases for FY26. And broadly, we see tremendous opportunity across our three growth engines, consumer payments, CMS, and VAS. And as we think about 2026, we're evaluating several drivers and parameters, including various macroeconomic scenarios, expected client renewals, and pricing in both the card present and card not present environment, as well as the investments we want to make to build the future payments. Now, we'll have a lot more to say about 26 in our next earnings call.

Operator

Next question, please. Will Nance with Goldman Sachs, please go ahead.

Will Nance, Analyst — Goldman Sachs

Hey, guys. You got all the way to me here without getting a stable-going question, and so I'll ask one on the remittance space, which you guys called out as a potential use case. Could you talk a little bit about how you see the role of stablecoins in that space? Is it on the pricing side, the settlement side, and do you expect the value of the role that stablecoins play to accrue to the service providers in that space, or do you expect it to accrue to the consumers in the form of lower pricing? Thank you.

Ryan McInerney, CEO

Thanks, Will. A lot in there. And as you know, it's early days, but we see a lot of opportunity specifically in remittances. And as I said in my prepared remarks, more broadly in cross-border, whether it's, you know, P2P or B2B. So let me hit a couple points. First is, you know, Visa Direct. Visa Direct, as you know, is our remittance platform. And it is a network of networks that enables money movement all around the world in lots of different currencies. You know, we're able to push money and, you know, to I think it's 14 billion different endpoints now, whether it's cards, wallets, or bank accounts. And for some of those use cases and some of those corridors, the money movement and transactions are near instant. But sometimes, you know, for example, sending money from a Visa card to a bank account in an emerging market, we're reliant on local banking infrastructure. So, in these types of use cases, stablecoins could enable us to have faster cross-border transactions. By the way, that's true for consumers or for businesses. And we've been testing that out and having some good results. You know, we've been testing a series of corridors and putting stablecoins to work directly versus the fiat currency money movement options that we're able to deliver to, you know, our clients and their users today. And at this point, we've got a pretty good sense on which corridors we can provide faster money movement, cheaper money movement, which ultimately is, you know, value, I think, that will accrue both to end users and to our clients. So, you know, we're working through all of those things. I do think, as I said in my prepared remarks, that, you know, there is real product market fit for stable coins in remittances for certain corridors. And, you know, as the largest money movement platform around the world, we're going to be an early adopter of a lot of those things on behalf of our clients and their end users.

Jennifer Como, Head of Investor Relations

Next question, please.

Operator

Thank you. Dan Dolev with Mazuho. You may go ahead, sir.

Dan Dolev, Analyst — Mizuho

Thank you. And just tying the two things together, really strong, vast growth and stable coins, Have you been – has the growth been helped by your services and consulting that you're providing on stablecoins? And are you monetizing that? If I could squeeze in one housekeeping question on sort of the right way to think about incentives, you know, mid-20s in the fourth quarter and heading into the 26th, if you can answer it.

Ryan McInerney, CEO

I'll let Chris answer the question on incentives. Thanks for your question on advisory. Our advisory business has been doing strong growth all around the world for a while now, and as you alluded to, and as you, I think you would expect, the most complicated, most impactful topics that are happening around the world in money movement are the ones where we're engaging with our clients. So, yes, on stablecoins and crypto more broadly. We launched our crypto advisory practice several years ago. I can't remember now. But our clients, both issuers and people on the seller side of the ecosystem, have really come to rely on our team of experts around the world to help them inform their strategies. And also, you know, that leads to opportunities for us to put our products and services to work. So, for example, the Visa tokenized asset platform is a platform that we've built to help financial institutions issue and mint and burn stable coins. And when we're working with them on their stable coin strategies, that's a natural opportunity for us to kind of embed a platform like that. We're also, you know, having a lot of success working with our clients on Agentec, both AI broadly in terms of how they're running their companies, but specifically, as you'd imagine, the implications and the products and services that they're going to need to bring to market to win kind of in the agentic space. And those are just a couple examples. I just want to take the opportunity to say thank you to our teams all around the world that have been working with our clients on all those tough topics and really helping them and serving our clients in a meaningful way. Chris, I think I had a question about incentives.

Chris Suh, CFO

Q4 incentives was the question. So I want to provide a little bit of context. You know, a lot of what I'm going to say is things that were in my prepared comments, but also reminding you of some of the things that we said in previous quarters. As we've communicated all this year and earlier in my comments, we expected incentives to step up sequentially into Q3 and into Q4. And as a result, we have always consistently expected Q4 to be the highest growth quarter of FY25 from an incentive point of view, in part because of the lapping that I talked about in the Q4 number when we talked about the lapping of the one-time items, but also what I spoke about last quarter, which was the impact of performance adjustment and some deal timing that occurred prior to Q3. And so when you add that all up, Q4 was going to be the high point for incentives. But that all said, again, I'll just reiterate, you know, our guidance today, our view of adjusted net revenue for Q4 is unchanged from the view that we had a quarter ago. Even after contemplating all the re-estimation of the current volatility outlook, drivers, and our latest view of deal closures into Q4, it's going to be a fundamental strong Q4 to cap off a strong FY25.

Operator

Next question, please. Darren Peller with Wolf Research. Please go ahead.

Darren Peller, Analyst — Wolfe Research

Hey, thanks, guys. Can we just touch on, number one, the pricing dynamic that we're seeing in data processing and the spread between growth on revenue and volume was obviously strong. Just maybe explain a little more of what's going on behind it, where you're seeing the value on raising price there, and just the timing on it. Is it sustainable? And then just to revisit incentives also on timing also, because I think this year fiscal 25 was supposed to be a higher year of renewals. I think you had talked about 20% of the buck or something along those lines versus a norm more like 15. So is that still the case, and would we expect that to be more normalized next year? Thanks, guys.

Chris Suh, CFO

I'll take both of these, Darren. So pricing, you know, again, I'm going to go back to some of the things that we said earlier in this year. When we entered this year, we said the pricing benefit in FY25 is going to be similar to FY24, but the timing would be more back half-weighted. And if you recall in Q1 and Q2, you know, when we were having these conversations about revenue versus yield, pricing was less benefit than we might typically see in half one, consistent with that timing of pricing. And so now pricing back half loaded, we're having a more concentrated impact in Q3 and Q4, and that's really sort of what's happening. And so it's great that we see revenue outperforming volumes on data processing and a number of other spots. In terms of your second part of your question around the amount of volume of deals and deal timing. You are correct. 25 is a bigger year for renewals than 24. You quoted the 20% number. We still believe 20% of our PV is impacted this year above the 15% last year. It's just more deal activity. And, you know, as you know, the deals are long in duration, increasingly more expansive, which inherently brings a level or complexity, these are important deals, and so sometimes they take a long time to get right, and we're going to take the time to get them right. The good news is we feel really good about the success we're having renewing and expanding our client partnerships, but as you can see, the timing can vary a bit from quarter to quarter.

Jennifer Como, Head of Investor Relations

Next question, please.

Operator

Fahad Kunwar with Rothschild and Co. Redburn. You may go ahead.

Fahad Kunwar, Analyst — Rothschild and Co. Redburn

Hi, both. Thanks for all the answers to the question. Super helpful. I had one more on incentives, if you don't mind. If I go back a little further, you know, incentive growth as a percentage of revenue has been going up about a percentage point a year for the best part of 10 years. It does feel like in the last kind of year and a half, it's stabilized, or at least in the last year, at that 28% level. I know you talk about renewal cycles now, but is this an inflection point? Do we think that incentive growth now broadly runs in line of revenues, and that kind of trend line up has kind of inflected to be flat, or is there something else that we're missing with some other change as to why we might see an inflection back upwards to that old growth rate? Thanks.

Chris Suh, CFO

Sure. I'll take this one as well. No, I mean, it's just honestly not the way that we think about our business. You know, this is consistent with the way we've been talking about net revenue growth, and that's our focus. We're growing volumes. We're growing net revenues along with our partners, and incentives are simply a tool for us to achieve mutual goals. And it does get impacted, of course, by the volume of expirations and renewals, and it can vary from year to year. But I certainly am not going to comment on sort of the relationship between those two. We're driving net revenue growth and driving volumes, and that's the most important thing.

Operator

Next question, please. Nate Spenson with Deutsche Bank. Please go ahead.

Nate Spenson, Analyst — Deutsche Bank

Hi, guys. Thanks for the question. I wanted to talk a little more about cross-border trends, especially travel. I know you gave some clear in the prepared remarks, but it looks like we've had a couple of soft months here in June, maybe a little bit of recovery in July month to date. Hoping you can give an update on what you're seeing specifically in international travel in your book of business, maybe what bookings look like, what impact recent FX moves are doing to consumer demand, et cetera. And then anything to call out on specific corridors. I know we talked about inbound U.S. from Canada, but anything like Europe to U.S. or any other changing dynamics you've seen maybe over the past three months or July month today?

Chris Suh, CFO

Sure. Okay, let's talk cross-border. And this one, you know, we'll sort of try to break into a fair level of detail, so bear with me. Just starting from the top, just so we have sort of a complete picture, cross-border growth in Q3, as we reported, 11 percent. That's enter Europe, and constant dollar, largely in line with the directional expectations that we had set at the beginning of the quarter. We did see variation from month to month for the factors that we talked about, holiday, timing of Easter, Ramadan, weakness in currency, U.S. to Canada, all those things that we had anticipated to happen in Q3, you know, much of it did play out. We did see the U.S. dollar weaken further, which may have impacted the June month as well. And then, obviously, in July, you referenced this as well. We've seen it accelerate more than a point from June. And we've seen that improvement in both travel and e-commerce related, we believe, due to the dollar strengthening again in July versus certain currencies. But also, we see strong retail spend in e-commerce and the reversal of some of the few of the smaller factors that we referenced in June. So, obviously, the growth rates month to month, it's a little bit fluid and we're likely to see it continue to be fluid as long as we continue to see currency exchange movements at the speed and pace that we're seeing it. But we also don't believe circumstances like the current Canada to U.S. corridor are permanent structural changes either. And so, we could see some strengthening there or we could see further, you know, sort of impact from sentiment around the world. In specific to corridors, which is the second part of your – I'll give a few examples. We've talked extensively about Canada to U.S. That's remaining relatively consistent. U.S. outbound, you know, historically that's been very sensitive to the strength or weakness of the U.S. dollar. And with the recent weakening, U.S. outbound, we believe, has been impacted in a correlated way. AP currency has remained weak as well and has continued to remain weak across a number of markets in AP, and that's impacting travel there as well. And then, of course, the timing of various holidays. Easter, which had a larger impact in Europe. And Ramadan, of course, had a larger impact in Samia. Those are some of the things that we're seeing from a corridor standpoint. But, again, if we zoom out of the month-to-month and we look at cross-border and total, the overall level, the data, the trends, and, you know, we understand sort of the currency impacts that can have – that can be – that can show up, cross-border volume, we think, in total, has remained strong and above pre-COVID levels.

Operator

Last question, please, Michelle. Thank you. Sanjay Sakrani with KBW. You may go ahead, sir.

Sanjay Sakrani, Analyst — KBW

Thank you. I had a bigger picture. Do you think stablecoins dilute that, or do you think it keeps its contributor, in your view?

Ryan McInerney, CEO

Sanjay, you're the best. I think you go back to the product market fit that I described. If you agree with that, which clearly I do, I think it's a lot of opportunity for us. And why do I say that? The first, on the emerging markets use cases, the bulk of those markets around the world are very cash-rich markets. The bulk of those markets around the world are markets where we haven't been as successful digitizing cash as we have in more mature markets. And so to the extent that stablecoins get adopted in a broad-based way by both consumers and businesses, and assuming that we are able to continue to have success with our playbook of making Visa cards the preferred way for people who have stablecoins in those markets to pay for things, I think that could accelerate our progress digitizing consumer payments and small business and commercial payments in those markets. The second, you know, area of product market fit that I mentioned was cross-border. And as you know well, the cross-border TAM, in terms of whether it's remittances or B2B money movement, those are enormous TAMs that were still relatively low in terms of our penetration of those as well. And so I think to the extent that we can do the types of things I was mentioning in the question that Will asked earlier, for remittances on our Visa Direct platform, you know, that's going to be an opportunity for us to continue to expand and accelerate our growth in remittances. So, you know, I'm genuinely optimistic about what stablecoins could do to accelerate our progress, digitizing flows, whether it's consumer payments or, you know, opportunities in CMS. And, you know, we'll continue to update you as we learn more. And with that, we'd like to thank you for

Jennifer Como, Head of Investor Relations

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. Thank you all for participating in

Operator

Jesus' fiscal third quarter 2025 earnings conference call. That concludes today's conference. You may disconnect at this time and please enjoy the rest of your day.