Mike Milotich - Visa, Inc. Alfred F. Kelly, Jr - Visa, Inc. Vasant M. Prabhu - Visa, Inc..

Craig Jared Maurer - Autonomous Research US LP Tien-Tsin Huang - JPMorgan Securities LLC Donald Fandetti - Wells Fargo Securities LLC Harshita Rawat - AllianceBernstein L.P. Darrin Peller - Wolfe Research LLC Lisa Ellis - MoffettNathanson LLC James E. Faucette - Morgan Stanley & Co. LLC Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.

Moshe Ari Orenbuch - Credit Suisse Securities (USA) LLC.

Welcome to the Visa fiscal fourth quarter and full-year 2018 earnings conference call. All participants are in a listen-only mode 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, Mr.

Mike Milotich, Senior Vice President of Investor Relations. Mr. Milotich, you may now begin..

Thank you, Katie. Good afternoon, everyone, and welcome to Visa's fiscal fourth quarter and full-year 2018 earnings call. Joining us today are Al Kelly, Visa's Chief Executive Officer, and Vasant Prabhu, Visa's Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at www.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 reports on Forms 10-K and 10-Q, which you can find on the SEC's website and the Investor Relations section of our website.

Historical non-GAAP financial information disclosed in this call to related GAAP measures and reconciliation are available in today's earnings release. And with that, let me turn the call over to Al..

Mike, thank you and good afternoon, everyone, and thanks for joining us today. Our performance remained strong in fiscal fourth quarter. Revenue growth was 12%, as all our key business drivers remained robust despite the stronger dollar.

Payments volume growth on a constant dollar basis of 11% was right in line with last quarter, with strength in the U.S. offsetting a slowdown in dual-branded card volume in China. Excluding China, our payment volume growth would have modestly accelerated versus the last quarter.

Cross-border on a constant dollar basis was 10%, same as the prior quarter. Processed transaction growth was consistent with last quarter at 12%. Expense growth, adjusted for a donation of available-for-sale investment securities to the Visa Foundation, was 12%, primarily driven by personnel-related investments. Adjusted EPS growth was 34%.

We also returned approximately $2.1 billion of capital to shareholders in the quarter, consisting of $1.6 billion of share repurchases and $500 million through dividends. Looking back on this entire fiscal year of 2018, our global leading network connecting issuers and merchants got stronger on a number of dimensions.

The number of cards, including virtual cards, increased by about 80 million to 3.3 billion. Total Visa volume surpassed a record $11 trillion, driven by 182 billion transactions, or an average of 500 million transactions every single day during fiscal 2018. Payments volume totaled over $8.2 trillion, increasing by almost $900 billion year over year.

Our payments volume growth was strong across the globe, with double-digit growth in constant dollars in all regions except Europe, which grew at 9.2%. And with our payments volume growing twice as fast as global PCE, Visa's penetration of global purchased PCE increased by 0.5 point to over 16% this year.

Transactions processed totaled $124 billion, up 12%, lifting our processing penetration by 1 point globally. A very important part of measuring the health of our network is found in the activity and results relative to merchants and issuers. In 2018, merchant locations increased by 7 million or 15%, reaching a total of 54 million locations globally.

And relative to issuers, deal activity picked up in Q4, particularly in Europe, where we completed the shift to commercial client contracts. Beyond Europe, during the full year we completed new agreements with clients, driving roughly 15% of our total payments volume.

By the way, in fiscal 2019, we're expecting more deal activity with new agreements for clients who drive roughly 20% of our global payments volume, including Europe. The fact that 20% of our volume is up for renewal is not surprising given that our typical contract length is five years.

Now let me talk about how we've expanded our breadth and reach in 2018, which has set us up well for the future. I will share a few highlights from across the globe and then provide insights into how we are driving growth into our digital solutions, accelerating adoption of our acceptance technology, and expanding into new key segments.

So let me start with some regional highlights, starting in Europe. The technical migration to our global VisaNet platform was completed in late September, with the authorizations components finished following the clearing and settlement migration, which completed in the first quarter.

Our European clients have now access to all our global capabilities. In fact, more than 60 clients are already utilizing at least one of our advanced risk services, having just completed the migration. This was a very large effort that required sustained vigilance on our part to ensure there was no disruption to our clients.

So we really couldn't be happier about the execution, and we're now moving forward with one global platform. Our European clients also now enjoy the highest level of security and protection from our global cybersecurity systems and processes.

In fact, earlier today we inaugurated our Cyber Fusion center in London, making it our second fusion center globally. The conversion of the European client contracts to commercial incentives is now officially complete, as we signed the last remaining deals during the quarter after agreeing to terms earlier in the year.

We are very pleased with the outcome of this effort, as there was a lot of risk in opening well over 100 client contracts in such a short period of time. As we have said previously, the amount of business we retained was better than we expected at the time of the acquisition.

As we get past the integration, one of our priorities in Europe is gaining momentum with FinTechs by moving faster, being more flexible, and establishing an investment fund to provide financial support. This quarter, we are beginning to have more success with FinTechs both in terms of signings but also agreements still to be contracted.

We signed agreements this quarter with Revolut, YAYA in the UK, Solaris in Germany, and G2A in Central Eastern Europe. Let me now move to Asia-Pacific, where Q4 was an active quarter for deal renewals and wins across the region.

A few examples include NTUC FairPrice co-brand, which is Singapore's largest supermarket chain, The Mall Group co-brand, one of Thailand's largest retailers, and the AirAsia co-brand in Malaysia.

In New Zealand, Kiwi Bank selected Visa as its long-term exclusive partner for all its payments products, which brings us to four of the top five issuers now exclusive long-term Visa partners in that market.

In China, we renewed the dual-brand card relationships with China Construction Bank and CITIC Bank, as well as we won the new prepaid deal with Ctrip. Building a new debit business in Japan continues to be one of our top priorities for the region given the size of the opportunity.

We now have over 8 million debit cards in the Japanese market, up over 40% since last year, across 23 different issuers. In India, we renewed deals with many of the leading banks in the market, including the State Bank of India, HDFC, ICICI, Axis Bank, and Kotak Mahindra.

And we are confident that these deals will contribute to further strengthening of our market leadership position across debit and credit products. Regarding the India data localization mandate, over the last six months Visa has been working towards implementing a solution to comply with the RBI's requirements.

As of October 15, we are storing data locally, where we can also facilitate the RBI's requirement of access to Indian cardholder payment transaction data.

We have submitted a detailed status update and action plan to the RBI, including how we will re-architect our existing global processing systems to fully comply with the data only-in-India requirement. Our technology teams are working virtually around the clock to complete our solution with minimal impact to our clients and our cardholders.

In Latin America, we also had several co-brand wins, including Decolar in Brazil, which is the largest online travel agency in Latin America, with an affluent customer base.

Also in Brazil, we signed 10-year agreements with Bradesco, one of our largest issuers in the market, and CREDZ, a processor and local private label brand that will convert about 1 million cards to Visa contactless.

In Argentina, one of our largest markets in Latin America, we will begin processing 100% of our domestic transactions in January of 2019. This enables us to provide all of the value-added services, cyber capabilities, and network reliability to our clients in addition to future innovations that we will add to our global platform.

Adding all of Argentina to VisaNet will increase our processing penetration of domestic transactions in Latin America by more than 10 percentage points. And finally, one quick but important point on CEMEA, airline co-brands are an important portfolios in the Middle East to capture the travel of the most affluent consumers.

This quarter we had a number of wins, including Emirates in the UAE and Saudi Arabia, as well as the HBL Qatar Airways portfolio in Pakistan. Now let me turn away from the regional updates and give some insights into how we're driving growth in our network using our digital solutions.

Let me start with Visa Direct, which is one of the key ways we're capturing new incremental payment flows. Global growth continues to be over 100% this quarter, fueled by increased activities by end users as well as continued expansion of our reach and our scale.

Our 2 billion-plus Visa debit credentials globally enabled us to execute Visa Direct transactions in more than 150 countries this fiscal year. But it's also important to note that the speed of funds within our total reach is very important, with payment originators automatically leveraged when issuers move their credentials to Fast Funds.

We are quickly increasing the number of issuers moving to real-time, adding Spain and Ireland this quarter, for a total of over 70 countries where Fast Funds are enabled. In the UK, Barclays moved to Fast Funds, allowing participating Barclays cardholders in Visa Direct programs access to money real time.

In our goal to expand our reach, we will continue to look for opportunities to access accounts not directly linked to a Visa credential. To that end, our most recent expansion is with our Plus interbank ATM network, which is leveraged by many non-Visa bank issued ATM cards.

TD Bank Canada was the first bank to enable its Plus debit credentials to receive Visa Direct deposits on non-Visa credentials. This is a great first step. As other Canadian issuers enable this expanded reach, we can serve most of the Canadian bank population of consumers and small businesses.

We are then building upon Visa Direct's unique reach by rapidly scaling solutions through use case expansion and large platform enablement. We continue to deepen our penetration of existing verticals, including property and casualty insurance, where our clients enhance their customers' experiences.

This category represents $330 billion in claims payments, approximately 45% of which are paid by check today in the United States. This past quarter we signed new partnerships with a couple of insurance companies to enable more real-time disbursements to their customers. There are also many use cases that support the gig economy.

For example, we partnered with PayActiv, one of the largest gig economy earned wage access providers, to incorporate Visa Direct as a real-time payroll option.

Given the growth in the number of workers participating in the gig economy, we believe this is a big opportunity, since many employees in the gig economy want access to their wages as they are earned. Visa Direct's distribution model also scales quickly in partnership with platform providers around the world.

As you probably know, Visa Direct is powering many of the P2P solutions globally. And another new example is Samsung's recent launch of P2P payments in partnership with VTB Bank in Russia, providing a seamless customer experience for making payments as well as sending and receiving money.

Another example of platform partners is in India, with Paytm and PhonePe, both leading mobile payment apps, who have activated credit card bill payments on the Visa Direct platform, enabling over 100 million mobile app customers.

We recently announced the commercial expansion of the Visa Token Service for 20 credential-on-file token requesters, which we believe is a significant step in further securing customer payments in the digital channel.

These leading acquirer gateway and technology partners include Adyen, Braintree, PayPal, CyberSource, Elavon, Square, Stripe, and Worldpay, just to name a few. And they will tokenize credential-on-file digital payments on behalf of their merchant and payment clients.

In addition to reducing fraud risk by not exposing cardholders' more sensitive account information, we're focused on improving card-not-present authorization rates that, frankly, continue to be too low.

Visa tokens also allow issuers around the world to push dynamic updates on lost, stolen, or expired credentials to enable a frictionless merchant and customer experience. So Visa now has over 60 global token requesters across 40 markets on our token platform.

Last week, a significant milestone was reached for secure remote commerce after EMVco published a draft of the technical specifications. This now enables the ecosystem to begin building to the standard while also allowing merchants and issuers a feedback period before the final specifications are published in about two months' time.

The specifications for branding and the user experience are still expected to be published in early 2019. We again are working closely with partners such as Adyen, Braintree, CyberSource, Stripe, and Worldpay to activate the ecosystem for the initial launch of secure remote commerce in mid to late 2019.

Now a few quick updates on the adoption of our acceptance technologies, including contactless and scan-to-pay. Let me start with contactless or tap-and-pay adoption, which continues to grow rapidly, as it is a better consumer and merchant experience than paying with a dip, swipe, or scan.

One in four domestic face-to-face transactions that run over our network globally are now contactless. If you exclude the United States, domestic contactless penetration is over 40%, which is up over 12 percentage points in the last year and up almost 4 points versus the last quarter.

More than 20 countries have increased their domestic contactless penetration by more than 20 points since last year, led by Russia, which is up 38 points to over 50%. During the FIFA World Cup, contactless payments accounted for 45% of all Visa purchases across the 11 host cities in Russia. The U.S.

market is poised for significant contactless growth over the coming year. There are a few facts to note. Number one, on the acceptance side, in the past three months several of the largest merchants have enabled contactless in their stores, including 7-Eleven, CVS Pharmacy stores, and Costco.

Over 70 of the top 100 merchants by transactions now accept contactless, an increase of more than 20 in the past year. Additionally, over half of all face-to-face transactions now occur at a contactless-enabled merchant, up from over a little bit around one-third of all merchants a year ago.

On the issuing side, several of our largest clients will begin issuing contactless cards over the next few quarters. We expect that there will be over 100 million Visa contactless cards issued in the United States by the end of 2019.

Costco is a good example of the potential impact when both the issuing and acceptance come together, since the Citi-Costco co-brand card is contactless-enabled. Over half of in-store payments at Costco on their co-brand card are now paid with a tap after Costco enabled contactless payments just in mid-August of this year.

Establishing scan-to-pay acceptance and cardholder usage is progressing very well. As we discussed in prior quarters, India is our largest market, where we now have over 700,000 scan-to-pay acceptance points. But we're also seeing momentum in a number of markets in the CEMEA region.

In Tanzania, this quarter we signed a deal with Halotel, a leading mobile network operator, to put Visa credentials into their mobile phone wallets. We also launched scan-to-pay in Pakistan with HBL, the country's largest issuer and acquirer, with 50,000 consumers being enabled in the first few days.

And they have plans to make the solution available to almost 1 million customers and thousands of merchants in the coming months. In Kazakhstan, we partnered with a leading mobile network operator to introduce cashless ticketing in 3,000 public transport buses across four cities.

Lastly, we continue to expand into new segments, and B2B is our top priority. Specifically, we continue to innovate and grow our B2B payment offerings across both core card solutions and expanding to new payment flows. In terms of core card solutions, we remain the global leader, but there still is tremendous opportunity for growth.

Our B2B payments volume was $950 billion, or over 11% of our total payments volume this fiscal year, and the growth has been accelerating into the mid-teens in the past two quarters. Let me also share three examples of new payment flow opportunities we're capitalizing on in the B2B space.

One, we continue to expand our virtual card business, including a partnership with Nexus to enable their clients, who are typically real estate property managers, to pay suppliers more quickly, safely, and conveniently by using Visa virtual cards.

In Russia, we signed a new partnership agreement with Sberbank to support their growth in the small business and enterprise segments and maintain their leadership position in B2B in Russia. This is an example of partners seeing the value in differentiating to small businesses rather than just offering them a consumer card option.

We continue to enhance and scale our B2B Connect solution. In addition to Visa virtual card being a payment option that are offered to Bottom Line's clients, we've extended our partnership with Bottom Line to enable B2B Connect as a payment option for large-ticket cross-border payables.

We're also launching a digital identity solution that tokenizes an organization's sensitive business information, such as bank account numbers, giving them a unique identifier that could be utilized for their B2B Connect transactions. There were two other notable events in the quarter.

The first, we reached a settlement with the damages class on the U.S. MDL lawsuit in September and have submitted it to the court for preliminary approval, which we expect to take a few months. There will be a period for merchants to opt out or object.

But assuming the court assesses the settlement to be fair and reasonable, we expect formal approval to take at least a year to be in place. This settlement does not resolve the injunctive relief class claims seeking modifications to network rules.

We are certainly pleased to be making progress, but it's hard to say when the MDL litigation will actually conclude. For more than 30 years, Visa has been a proud sponsor of the Olympic Games, and this quarter we renewed our partnership through the 2032 games, which includes the upcoming venues of Tokyo, Beijing, Paris, and Los Angeles.

The Olympic Games provides an unparalleled opportunity to promote the Visa brand at a regional and global level while also facilitating partnerships and joint business initiatives with clients that come to life through cobranding and/or client usage of Olympic IP.

The world's largest sporting event also provides a unique platform for showcasing product innovation and launching new business initiatives.

So fiscal 2018 was a great year where we delivered strong business driver and financial performance while also advancing key initiatives that will drive future growth such as Visa Direct, B2B, contactless, and digital solutions.

We also successfully concluded the major aspects of the Visa Europe integration with the completion of the platform migration and the shift to commercial client contracts. However, fiscal 2018 is behind us now, and we are totally focused on 2019.

Our financial outlook for fiscal 2019 includes annual net revenue growth of low double digits on a nominal basis, with approximately 1 percentage point of negative foreign currency impact, and a de minimis impact from the new revenue accounting standard.

And we look for mid-teens earnings per share growth on a non-GAAP nominal dollar basis, also including approximately 1 percentage point of negative foreign currency impact. To share more of our details on our results and more on our 2019 outlook, I'll now turn it over to Vasant..

exchange rate shifts of course; the possibility of a hard Brexit; economic dislocations like we had in Argentina and Turkey; geopolitical changes like trade wars, et cetera. As we normally do, we will update our outlook when we talk to you each quarter.

Moving on to capital, cash flow, dividends, and buybacks, capital spending in fiscal 2019 is likely to be around $800 million.

This includes capital associated with hardware, support growth, resiliency and cybersecurity, an upgrade of our data center in the UK, investments in other facilities, as well as capitalization of software from our technology development projects.

Based on our earnings outlook and capital spending plans, free cash flow from operations is anticipated to be in excess of $13 billion. Most of this free cash flow will be returned to shareholders in the form of dividends and buybacks. In fiscal 2019, we anticipate returning at least $11 billion to shareholders in dividends and stock buybacks.

The Visa board has authorized a 19% increase in our quarterly dividend to $0.25 for the first quarter of fiscal 2019, in line with our dividend policy. This puts our payout ratio in the 20% to 25% range. In fiscal 2018, we completed additional buybacks to neutralize the impacts from stock issued to Visa Europe owners as part of the acquisition.

In fiscal year 2019, we anticipate buying back at least $8.5 billion of Visa stock. As a reminder, we will hit the three-year anniversary of the Visa Europe acquisition in June 2019. In June we will be making a cash payment of a little over €1.1 billion to the former owners of Visa Europe, as per the terms of our acquisition agreement.

We should also point out that as interest rates have risen, we are earning more investment income from our cash balances, which offsets some of our interest expense. Both interest income and expense are recorded in non-operating income/expense.

In summary, as Al described with facts and figures, the Visa system continues to expand and thrive in a fast-changing payments landscape. As evidenced by our growth in fiscal year 2018, the opportunity to digitize cash in new and different ways has never been better.

With a tailwind of strong global economies and robust consumer spending enhanced by the growth strategies that Al outlined, we look forward once again to delivering on the revenue and earnings growth you have come to expect from us. With that, I'll turn this back to Mike..

Okay. We're willing to run 10 minutes long, so we have more time for questions. So with that, we're ready to get started with questions..

Thank you Our first question today comes from Craig Maurer with Autonomous Research. Your line is now open..

Hi, thanks for taking the time today, two questions. First, what gives you confidence that the U.S.

dollar will start to retreat in the back half of the year next year to put that in the guidance? And secondly, can you talk about yields on Visa Direct and push payments, as we hear a lot of Fast growth in that area going on globally from all networks? Thank you..

Craig, it's Al. I'll take the second question and I'll let Vasant take the first. We initially guided to Visa Direct heavily in the P2P space, where frankly, there's not a lot of economics. Our yields there tend to be less than we would get on normal Visa transactions.

But as we move into some of these new use cases, we aren't expected to get yields that are similar to what we get in the typical pull transactions that we do today. Let me ask Vasant to talk about what our view is on the retreating U.S. dollar in back end of the year..

I don't think our crystal ball is any better than anybody else's, and so we don't really try to predict those things. We just look at forward curves and make some assumptions based on that.

But the thing that happens, if in fact the dollar begins to weaken, let's say, in the second half, it will help us in certain corridors and it will hurt us in other corridors, and there's a net effect of that. So even if it doesn't happen as might be projected by forward curves, there are normal balancing effects in the business.

So it's not a one-way bet in a sense. So if the dollar weakens, clearly we benefit from a translation standpoint. We have given you our best guess of about 100 basis points of impact in net revenue. On the cross-border side, we would benefit with the inbound corridor to the U.S.

But on the other hand, we will benefit in other parts of the world from the dollar weakening. So there's a lot of offsetting factors..

Next question?.

Our next question comes from Tien-Tsin Huang with JPMorgan. Your line is now open..

Thanks a lot. You covered a lot of ground in the prepared remarks, it's useful. I wanted to ask on the revenue outlook. You're calling for low double-digit for fiscal 2019. At this time last year, you guided to high single-digit growth, I believe, and you landed at 12%. So I'm curious why you're more optimistic this year versus last year.

Is your visibility perhaps a little bit better? Is there a different level of conservatism maybe that you're baking in? Just curious to compare where you stand this year on your outlook versus this time last year. Thanks..

Sure, Tien-Tsin. As we normally do, we give you our best sense of the upcoming year based on the facts we have available at this point in time. And if you looked at where we were at the end of last year, clearly the strength of the U.S. consumer in particular ended up being stronger than we expected.

As you saw, our debit growth was mid-single digits for quite a few quarters leading up to the year. And then starting in the second fiscal quarter of 2018, we jumped into the double digits and have stayed there. So there were various elements of the business that clearly changed their growth trajectory after we gave you the outlook for the year.

So you could say that things happened that were stronger than we expected. The global economy was stronger than we expected. In the second quarter and the third quarter in particular, the exchange rate tailwinds were stronger than we might have expected when we went into the year. So these things happen, and we update you as we learn them.

As we look ahead, again, we're doing the same thing. We're giving you the best sense we have of the business as we enter the year. And therefore, we give you as much color as we did as to what our assumptions are. Obviously, we'll update you as the year progresses.

I know some people try to read into what we say, things like oh, they're being conservative. They want to leave room to raise it in the future and all that. And as we've told you all along, we give you our best sense at any point in time. We are not trying to be overly conservative or otherwise, and this is our best sense as we stand today..

Next question?.

Our next question comes from Don Fandetti with Wells Fargo. Your line is now open..

Al, so it's pretty interesting to see double-digit revenue growth coming again this year for a company with a $300 billion market cap.

As you look out over the intermediate term and you think about revenue growth, the model, do you still see the same secular contribution coming through as payments move away from cash? Because sometimes it's hard for us to see when we might at a tipping point given a lot of new technologies and payment initiatives coming in..

Don, as you might guess, I'm not going to give a long-term forecast on revenue. We just explained how we got to the number for just this year and the assumptions in that.

That said, I'm quite confident in the business over a long period of time, and we've got lots of different vectors on which I think we can continue to grow this business, whether it's by penetrating new payment flows, penetrating new segments, penetrating new geographies, bringing more of the unbanked around the world into the mainstream financial system.

I think some of these capabilities that we are developing in terms of things like Visa Direct, some of the technologies that I think are enabling a better user experience at the actual moment when a user uses a card, whether that's contactless or QR, and hopefully, in 2019, the big change in e-commerce as we move to secure remote commerce.

So I think that there are just a good number of growth vectors for this business that give me a good deal of confidence in our ability to continue to grow our volumes. And as we grow our volumes, obviously revenues should come along. And so I remain confident about the future of Visa in terms of the volumes we can deliver..

And just adding to that, we've historically talked a lot about you might call our traditional payment flows, which is the B2C – B2B business – I'm sorry, the consumer-to-merchant business, C2B. And as you know, we believe there's a lot of opportunity there to continue to digitize cash and increase PC penetration.

But increasingly, as Al said, it's these new payment flows as we call them that are enabled by things like Visa Direct, which would be P2P, and disbursements, which is a B2C, that we're getting increasingly excited about. And then of course, Visa Direct also enables many elements of B2B and G2C, government-to-consumer.

And then B2B remains a huge opportunity. We are already close to $1 trillion in payment volume there, and we would like to see it grow much faster than let's call it our core consumer to – C2B business..

Next question?.

Our next question comes from Harshita Rawat. Your line is now open..

Hi, good afternoon. Thank you for taking my question. I want to ask about emerging markets. There appears to be a lot happening underground in some of these markets that government involvement needs domestic schemes in certain instances, almost a new Fast ACH and API infrastructure.

So my question for you is how should we think about your ability to quickly adapt in these very rapidly evolving markets? And is there anything you need to do on the pricing partnerships on the technology front?.

Harshita, many of these emerging markets which are – where there's clearly lots of dynamics, as you talked about, Visa has been on the ground in these markets for in many cases multiple decades, and we've got experienced teams in those markets.

And I think if I put China aside, where we actually still don't have a domestic license, but we look at some of the countries in Asia, some of the countries in South America, some of the countries in Africa, we I think have had a market leadership position, and we I think will continue to look to forge both good partnerships with people where it makes sense.

The reality is the payments ecosystem is hugely about partnerships already. And I think as I look forward, there will be even more partnerships as some of the FinTechs really take hold and provide various value-added services. We are committed to VisaNet. We think it is the best network in the world in addition to being the biggest in the world.

We continue to invest in it in big ways and will continue to invest in it. That said, we are very pragmatic people.

And to the degree that there are other rails that Visa transactions might – or Visa credentials might be used on where we can do something in partnership, where perhaps there are various value-added services we might be able to still provide, even if a transaction isn't running on our rails, we'll be committed to do that.

So I think that we are going down multiple paths where we're both trying to continue to strengthen the assets we have today, starting with our network, but also the investment in lots of capabilities we're doing. But we're also going to be smart about partnering where partnering makes sense.

We're committed to try to be in the middle of as many payment flows as possible. And if we can control – if we can have the full control of that payment flow, great. If in some cases we're participating in it as a partial player, that's also fine as well. So I think that we are well-positioned.

If you look at India as one case study, that's a market we've been in for 35 years. We've got a big team on the ground there. And we continue to be the market leader even though there's lots of activity going on there in terms of both government intervention, as you talk about, as well as new players that are emerging..

Next question..

Our next question comes from Darrin Peller with Wolfe Research. Your line is now open..

Hey, thanks, guys. Look, I know there are some pricing initiatives at the company, and you touched on the anniversary of some in 2019. But maybe you could just help us understand from a cadence standpoint what kind of benefit we could have through the year.

And then, Al, just higher level, between Europe and other areas, do you see similar pricing opportunities in 2019 and 2020 that you saw in 2018? Especially on the back of Europe front-end integration being done now, do you have some room there? Thanks..

So, Darrin, I'd say two things. One is both Vasant and I have been clear about what we see in terms of pricing in Europe.

The second thing I'd say is that we have had a longstanding policy of not getting involved, for many reasons, including competitive reasons, in forecasting specific pricing actions that we would take and where we would take them geographically and in terms of on the network.

And I think we're going to revert back to not commenting on specific pricing plans on a going-forward basis. But obviously, that said, we recognize that it's an important lever..

And our plans for 2019 include pricing. There's carryover pricing from 2018 that flows into the first half of 2019. And as I said in the comments earlier, we have some pricing coming in, in 2019. And so order of magnitude, across the whole business, there's about similar kinds of pricing between the two years..

Next question..

Our next question comes from Lisa Ellis with MoffettNathanson. Your line is now open..

Lisa?.

Sorry, good afternoon, guys. My question is about Visa Direct. I like to see the strong metrics there year on year. Can you give an idea of – so you highlighted use cases associated with P2P disbursements, some B2B use cases.

Can you give a sense for is there a pathway and what does it look like to using Visa Direct for things like bill pay or even more traditional merchant transactions, particularly in geographies where there is incumbent Fast ACH networks, where that type of push payment is already heavily in use for those types of transactions? Is that a focus area, and can you give a sense for what that timeline or that pathway looks like?.

So we already do, Lisa, have some bill pay use cases that are happening in different geographies around the world. And again, our view is that by reversing the typical way that our network works that we have lots of opportunity in lots of different use cases.

And we've got a dedicated team that's spending a lot of time thinking about bill pay, P2P, disbursements, and faster payments to merchants. I think those are the four primary businesses that at the moment that we can see ourselves playing in in terms of Visa Direct.

And specifically on bill pay, I know both in Singapore and in India we have use cases going on right now..

Next question..

Our next question comes from James Faucette with Morgan Stanley. Your line is now open..

Great, thank you very much. I just wanted to ask a point of clarification first on – I think, Vasant, you mentioned that there's 20% of your total volume that's up for renewal in 2018.

You touched on its impact on incentives, but as a dull roar (1:02:12), how does that compare to previous years? Or at least what has been in the last few years by comparison, just to contextualize it a little bit? And then, Al, I wanted to follow up on the questions related to – on new technologies and partnerships.

When you look at some of the things that you've rolled out like the recent announcement of B2B Connect, et cetera, how close are you working with your partners to visualize and then push the boundaries on new initiatives? And I'm wondering how much is like being pulled from your partners as they look for opportunities.

I'm just trying to get a sense as to how receptive the market may be to some of these new initiatives. Thanks..

I'll take the first one, and Al I think is going to answer the second one. In terms of the renewal tempo, FY 2017, fiscal year 2017 and 2018 was heavy in Europe. As Al was even saying, we opened up 100 contracts, more than 100 contracts and redid them, and you saw that in some of the client incentive movements.

2016, 2017, and 2018 in the rest of the world were somewhat lower than the 20% pace. So 20% inclusive of Europe is probably more of – a little higher than the last couple of years on a global basis, but 2015 was a bigger year from a renewal standpoint. So that gives you some flavor for it.

Our average contracts run from three to seven years typically, so about five years is a decent estimate. The 20% is getting more to par for the course..

James, on the second question related to new technologies, first of all, I'd say that we try to be very client and consumer/business owner-centric in all we do. We don't just try to come up with capabilities and technologies for the sake of having them.

We want and are only interested in creating capabilities and products that we think solve a particular problem or fill a particular need in the payment ecosystem.

That said, there are cases where we are sometimes being pushed by our clients to move faster, and there are cases where we're pushing or pulling our clients along, asking them to come along more quickly. And by the way, for the same capability or the same product, we can have each of those cases at different clients.

So we could have some clients who we have to pull along and some who are pushing for us to move faster. So constant communication and an open stream of dialogue is critical in these cases.

And we try to sit with clients, particularly our biggest clients, and give them a sense of what's in our product pipeline, what are we thinking about over the next year or two, so that they have some transparency into what we're thinking.

Because often we need them to come along, because often one of the things that is on the critical path of progress is them opening up their tech queues and making sure that they're doing whatever changes they need to make to accommodate some capability or product that we're putting into the marketplace..

Next question..

Our next question comes from Sanjay Sakhrani with KBW. Your line is open..

Thanks, a quick question on the China dual-card spending volumes. I was under the impression that the conversion to two cards had stopped.

Is that not the case anymore because you guys mentioned that weakness? And then secondly, on these tokenization partnerships, I guess when we think about what the longer-term or even intermediate-term benefits are, are there specific pilots that you will launch around those partnerships or any economic benefits?.

On the first question, Sanjay, there are definitely a good number of our Chinese bank partners. I don't know how many. We have 55, I think 56 China bank issuer partners, and a good number of them are still issuing dual-badged cards. So yes, that's still happening. On the tokenization partnerships, look, this is something we're very committed to.

We have always taken a lead in trying to make sure the payment ecosystem is as secure as it possibly can be. And getting to a point where payment credentials are codified in a different way using tokens versus the actual card number we believe is critical for the infrastructure.

My personal belief, by getting these large token requesters on board now and getting to the point where we have 60 very strong token requesters in 40 markets around the world is going to start triggering some key merchants to start moving to tokenizing their card-on-file pans from today.

And I think like everything in life that this is one of those things that if we can build some momentum, which I think we can, that it will really start to take off. But clearly, like everything, again, you need some tipping point where the momentum really starts to take off and you move from pushing an initiative uphill to watching it roll downhill.

And I think in the case of tokenization, we're probably still trying to push it uphill a little bit, but I feel like we're close to the top of the hill, and we'll start seeing it roll down the hill as key merchants get enabled by these token requesters that we've recently signed..

Okay, last question, Katie..

Our final question today comes from Moshe Orenbuch with Credit Suisse. Your line is open..

Great, thanks. Most of my questions actually have been asked and answered. But, Al, maybe you could just elaborate a little bit on the last point.

What are the types of transactions that you wouldn't see running over the network today because of not having the tokenization partnership, and how would you see that developing over the next year or two?.

I think they're two unrelated things. Look, as big and as broad and as large as our network is, we are not connected to every single bank account around the world.

And so I think that there could be cases, certainly as it relates to the movement in certain markets towards real-time payments, where we're doing something in partnership with another set of rails. I think as we do that, one of the things we will bring to the party, among many capabilities that we uniquely have on our network, will be tokens.

But there will be other capabilities that we bring along as well, including the fact that we're global, including the fact that we have rules that handle things like disputes and chargebacks, including the fact that we've got a great array of risk and fraud tools that we can bring to the party. So that's how I think about it, Moshe..

We'd like to thank you for joining us today. If you have any additional questions, please feel free to call or e-mail our Investor Relations team. Thanks again and have a great day..

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