As Visa continues its long reintegration of Visa Europe, the card brand is tackling the continent's changing regulatory environment — and is sending its top executive overseas to address its needs.
Visa CEO Alfred Kelly told investors he is on his way to Europe to meet with regulators to discuss the Payment Services Directive and other rules that impact authentication, security and data.
"There is more regulatory activity in Europe than in other regions," Kelly said during Wednesday's earnings call, adding Visa is having an "open dialogue" with regulators and would meet with regulators in London on Thursday.
The pending Payment Services Directive, or PSD2, mandates more data sharing between banks and third parties to accommodate the growth of technology startups. That could pressure Visa's issuers in Europe as they tackle changes in data rules and reengineer to compete in an "open banking" environment.
There are also changing authentication standards in Europe as regulators seek to shore up security for digital payments, Kelly said. "We are engaging actively with regulators to build relationships…where it all lands and the various use cases are probably less clear," Kelly said.
Visa is integrating Visa Europe, which it acquired in 2016 after years of operating as separate companies. The conversion involves technology migrations and extensions of existing partnerships, such as expanding Visa's collaboration with PayPal. Visa appointed Charlotte Hogg, former deputy governor at the Bank of England, to lead the card network's business in Europe.
Beyond the regulatory challenges, Visa is "bullish" on Europe, and earnings are already getting a boost from a strong local economy, Kelly said.
"Five quarters in [with Visa Europe], revenues are tracking above expectations and expenses are below expectations," Kelly said. "There is more to do, but we are off to an excellent start."
The card network hopes to reach mobile-savvy markets and markets where digital lags. Germany, while one of the world's largest economies, is still a mostly cash-based economy, while the Nordic countries use very little cash.
"There's a good deal of upside with large cash-based economies coupled with other countries that are almost cashless," Kelly said. "The migration of the tech platform is key for us."
For the quarter ending Sept. 30, Visa reported an 11% jump in net income to $2.14 billion in the fiscal fourth quarter, from $1.93 billion from the prior year. Profits for the full fiscal year 2017 grew 12%, to $6.7 billion, from about $6 billion. Revenue for the quarter was $4.86 billion, topping analysts' expectations of $4.62 billion, and profits per share were $0.90, also higher than analysts' expectations of $0.85 per share.
These earnings were aided by new card deals with Costco and USAA in the U.S., card payment growth from its deals with Sberbank and Alfa Bank in Russia, and the migration away from cash in India.
"Economic growth has been strong, driving more e-commerce payments," Kelly said. "Good economies around the world are spurring travel and positive moves by governments are driving card payment growth in less developed countries."