Welcome to Visa’s Fiscal Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] 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..

Thanks, Jordan. Good afternoon, everyone and welcome to Visa’s fiscal fourth quarter and full year 2023 earnings call. Joining us today are Ryan McInerney, Visa’s Chief Executive Officer; and Chris Suh, Visa’s Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at investor.visa.com.

A replay will be archived on our site for 30 days. A slide deck containing financial and statistical highlights has been posted on our IR website. Let me also remind you that this presentation includes forward-looking statements.

These statements are not guarantees of future performance and our actual results could differ materially as a result of many factors.

Additional information concerning those factors is available in our most recent annual report on Form 10-K and any subsequent reports on Forms 10-Q and 8-K, which you can find on the SEC’s website and the Investor Relations section of our website.

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

propelling growth across consumer payments, new flows and value-added services. Two, we are focused on delivering for our stockholders. In that light, I'm sure that you saw that we released an 8-K back in September regarding our potential exchange offer program.

We appreciate the dialogue we've had with Class A, B and C stockholders and the board is evaluating next steps as we continue to engage with investors. Finally, you may have seen today that we announced a $25 billion multiyear share repurchase program, which reflects our Board's confidence in our strategy and future potential.

I continue to see tremendous opportunity ahead. Visa has the brand, the capabilities, the strategy and, most importantly, the people to propel our growth for years to come. And with that, let me hand it over to Chris..

Thanks, Ryan. Good afternoon, everyone. As Ryan said, Q4 was another good quarter, closing out a strong fiscal 2023 driven by healthy growth in payments volume, cross-border volume and process transactions and continued solid execution of our strategy, with new flows and value-added services revenue growing faster than consumer payments.

I'll first start with a high-level summary of our Q4 performance and then click into more details. Looking at our drivers. In constant dollars, global payments volume was up 9% year-over-year and process transactions grew 10% year-over-year, both stable to Q3.

Cross-border volume excluding intra-Europe growth was strong, up 18% year-over-year in constant dollars. Fiscal fourth quarter net revenues were up 11% and 10% in constant dollars, with minimal impact from FX, in line with our expectations. GAAP EPS was up 22% and non-GAAP EPS was up 21% in both nominal and constant dollars.

Now, on to the details, starting with the US. Payments volume was up 6% year-over-year, stable to Q3. Credit volume grew 6% year-over-year and debit volume grew 7%. Card-present spend grew 3% and US card-not-present volume, excluding travel, grew 9%. US process transactions growth was stable at 8%.

Over the course of the quarter, we saw payments volume growth tick up from July to September, primarily driven by sequential improvement in ticket size growth that was mostly led by fuel with higher gas prices and easier year-over-year comparisons as well as a positive days mix impact.

Consumer spend across all segments from high to low spend has remained stable since March. Our data did not indicate any behavior change across consumer segments. In international markets, total payments volume growth was up 11% in constant dollars.

Payments volume growth rates were strong through the quarter in most major regions with Latin America, CEMEA and Europe ex-UK growing about 20% or more in constant dollars. Now, to cross-border, which I'll speak to in constant dollars, excluding intra-Europe transactions. Total cross-border volume was up 18% and up 152% versus 2019.

Cross-border card-not-present volume growth, excluding travel, grew 9% year-over-year and 173% versus 2019. Adjusted for cryptocurrency purchases, cross-border e-commerce spending grew year-over-year in the low double-digits, in line with pre-COVID growth rates and consistent with the trends we have seen for most of the fiscal year.

Cross-border travel-related spend grew 26% year-over-year. The cross-border travel volume index to 2019 increased from 139% in June to 143% in September, totaling 141% for the quarter, a 5-point improvement from Q3. We continued to see healthy travel volume levels in and out of LAC, Europe and CEMEA, ranging from 145% to 165% of 2019 levels.

Travel volume into Asia continued to improve, indexing at 128% to 2019 levels for the quarter, up 10 points from Q3, while travel volume out of Asia was up 7 points to 114%. Looking at Mainland China specifically, cross-border travel volume continued to improve but remain below 2019 levels.

Travel volume outbound from the US to all geographies continued to be strong in the mid-150s indexed to 2019. US inbound travel recovery accelerated this quarter, pushing the index above 2019 levels for the first time even as the dollar continued to remain strong relative to pre-COVID levels. Now, let's review our fourth quarter financial results.

Service revenues grew 12% year-over-year versus the 9% growth in Q3 constant dollar payments volume, primarily due to business mix, pricing and card benefits. Data processing revenues grew 13% versus 10% process transaction growth led by value-added services and pricing.

International transaction revenues were up 10% versus the 18% increase in constant dollar cross-border volumes, excluding intra-Europe. Revenue growth lagged volume growth primarily due to declining currency volatility. Other revenues grew 35%, led by pricing, consulting and marketing services, and client incentives grew 20%.

Now, let me dive into revenues growth across our three growth engines. Consumer payments growth was driven by stability in domestic volume growth and process transactions as well as strong growth in cross-border volumes. New flows revenue grew 14% in constant dollars. Commercial volumes were up 9% in constant dollars and up 156% versus 2019.

Remember that revenue is recorded based on last quarter's payment volumes growth, which was 9% in constant dollars in Q3. Visa Direct transactions grew 19% and as we mentioned last quarter, were impacted by a client that transitioned its domestic P2P transactions to an internal ledger system and that was not meaningful to revenue.

Value-added services grew 19% in constant dollars, driven primarily by strong advisory services, select pricing actions and higher volume. GAAP operating expenses increased 13%. Non-GAAP operating expenses grew 9%, primarily due to personnel expenses from growth in headcount, and FX had a nearly 2-point drag.

Excluding net gains from our equity investments of $7 million, non-GAAP non-operating income was $79 million, benefiting from higher interest income due to rising rates.

Our GAAP tax rate was 16.9% and non-GAAP was 17% due to a tax benefit related to the extension of the US foreign tax credit regulations, which resulted in an indirect tax expense in the operating expense line and a much larger tax benefit in the income tax provision. GAAP EPS was $2.27.

Non-GAAP EPS was $2.33, up 21% over last year, inclusive of a little more than 0.5 point of drag from exchange rates. In Q4, we bought back approximately $4.1 billion in stock and distributed $928 million in dividends to our stockholders. We also added $150 million to the litigation escrow account, which has the same effect as a stock buyback.

At the end of September, we had $4.7 billion remaining in our buyback authorization. For the full fiscal year 2023, net revenues increased 11%. GAAP EPS of $8.28 was up 18% and non-GAAP EPS of $8.77 was up 17%, inclusive of an over 2-point drag from exchange rates. Now let's move to fiscal year 2024.

Before we share our perspectives on the year, I want to make a few brief comments. In many ways, FY 2024 will be as close to a normal year as we've had in a while. We have fully lapped the Russia and Omicron impacts and overall inflation continues to moderate in many of our markets.

As such, we're pleased to resume our pre-COVID guidance practices and will provide our outlook for FY 2024, which we will update each quarter. At the same time, we will no longer be providing the intra-quarter 8-Ks associated with interim driver updates. Now let's look at what we've seen through the first three weeks of October.

US payment volume was up 5% with debit and credit both up 5%. The sequential step down from September was primarily driven by the days mix impact in September and declining fuel prices in October. Excluding those two items, payments volume growth was relatively stable from September to October. Reg II has not meaningfully impacted volumes so far.

Process transactions grew 10% year-over-year. Constant dollar cross-border volume, excluding transactions within Europe, grew 19%, and travel-related cross-border volumes were 144% indexed to 2019. Turning now to our key assumptions.

As we said consistently, we're not economic forecasters, and so at a macro level, we are assuming no recession in our outlook. We're also not factoring in any impact from Reg II and student loan repayments because as I mentioned before, we've yet to see any meaningful impact.

As the year progresses and we gather more information with regard to these assumptions, we will continue to provide updates. For key drivers, we are assuming that the trends we saw in Q4 generally continue throughout the year.

Overall payments volume growth and process transaction growth are expected to be in the low double-digits on a year-over-year basis. Cross-border, card-not-present ex travel and ex crypto volume growth will continue to be in the low double-digits year-over-year on a constant dollar basis.

Cross-border travel volume, excluding intra-Europe, year-over-year growth will moderate to the low 20s in constant dollars and when compared to 2019 would equate to a 4- to 5-point improvement each quarter.

This assumption is driven primarily by improving AP cross-border travel volume mostly from China and, to a lesser extent, improving US inbound travel volume.

In terms of what this means for the financials, I'll speak to the numbers on an adjusted basis, which we define as non-GAAP results presented in constant dollars and excluding acquisition impacts, which you can review in the footnotes in our earnings release and earnings presentation for more detail. Okay. First, let's discuss net revenues.

For the full year, we expect low double-digit adjusted net revenue growth. Based on current currency forward curves, FX will be approximately a 1-point drag for the year. We are assuming that currency volatility moderates slightly from Q4 levels but remains relatively stable throughout the year.

On a year-over-year basis, incentives are expected to grow slightly less than what we saw in FY 2023. For new flows and value-added services, we continue to expect those to grow faster than consumer payments in FY 2024. Now moving to expenses.

Our current plans are to grow adjusted operating expense in the high single-digit to low double-digits with approximately 1.5 points of FX benefit to nominal non-GAAP growth. Non-operating income is expected to be between $250 million and $300 million.

The tax rate is expected to be slightly favorable to our typical rate of 19% to 19.5% due to some offsetting factors. On the one hand, we have the impact of tax rate increases in certain countries, which puts our new run rate closer to 19.5% to 20%.

However, we also anticipate some onetime tax benefits in the second half related to the resolution of certain tax matters. In total, this will put us between 18.5% and 19% for the full fiscal year. Putting all this together, we expect full year adjusted EPS growth in the low teens with about 0.5 point of FX drag to nominal non-GAAP growth.

Also FY 2024 will likely be a tale of two halves with variability in our growth rate from the first half to the second half. A few aspects to keep in mind. First, cross-border volume ex intra-Europe grew 31% year-over-year in the first half of FY 2023 and 20% in the second half.

Second, recall that we had relatively high currency volatility in the first half of FY 2023, and it moderated considerably in the second half. Third, incentives were 16% higher in the second half of FY 2023 versus the first half due primarily to deal timing and client performance.

As a result, we expect overall adjusted net revenue growth to be lower in the first half than in the second half of FY 2024. This will also be the case on a nominal basis, even with a slightly larger FX headwind in the second half of FY 2024 than the first half.

On the expense side, as Ryan mentioned, this is an Olympics year, and we expect Q2 and Q3 expense to have the largest percentage increases as we ramp. But adjusted operating expense growth and the FX impact will roughly be the same in both half.

The tax rate is expected to be lower in the second half than the first due to the anticipated onetime tax benefits I mentioned.

So for the first quarter specifically, given the variables I just described, Q1 is expected to have the lowest adjusted year-over-year net revenues growth rate with an improving trend throughout the year, and Q4 is expected to be at the highest adjusted growth rate.

We expect first quarter net revenues growth in the upper mid to high single digits on an adjusted basis. A few factors to keep in mind.

Again, one, currency volatility was the highest in Q1 of 2023; two, cross-border volume grew 31% in Q1 of 2023; and three, Q1 2023 other revenue was strong due to FIFA World Cup related value-added services revenue, and incentives were lower than expected due to client performance and other items.

Adjusted operating expense growth is expected to be in the high single digits, driven by headcount growth and salary increases. We anticipate approximately 0.5 point FX headwind to nominal net revenues growth and approximately 1.5 point benefit to nominal non-GAAP expense growth.

The tax rate is expected to be closer to a new run rate of between 19.5% and 20% in Q1. This puts first quarter adjusted EPS growth in the upper mid-single digits with minimal impact from FX. Keep in mind that the adjusted basis is defined as non-GAAP results presented in constant dollars and excluding acquisition impacts.

And non-GAAP expenses and EPS exclude acquisition related items and the litigation provision for the first quarter of 2023. For FY 2024, the estimated results exclude approximately $20 million or $0.01 of acquisition-related costs and approximately $40 million or $0.02 from the amortization of acquired intangibles.

And finally, moving to capital return. As Ryan said, the Board has authorized a $25 billion multiyear share repurchase program and increased our quarterly dividend by 16%. In summary, Visa's underlying business continues to be healthy and stable and the growth opportunities are significant.

While there continue to be macro uncertainties, we feel confident in our ability to manage the business through a changing environment and deliver value for our stockholders. And now, Jennifer, let's move to Q&A..

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

[Operator Instructions] Our first question comes from Darrin Peller with Wolfe Research. Your line is open..

Hey guys. Thanks for the time and congrats on the quarter. Just when thinking about your guidance for the fiscal year ahead, it's good to see the constant currency double-digit growth rate.

So, I just want to make sure we understand the inputs and how you think about structural growth as far as some of the inputs like value-added services, new flows? So, number one, I mean, maybe you can give us a little more color on what you're assuming for some of those -- some of the VAS and new flows growth potential? And then more importantly, do you believe that's the right algorithm medium term? Is the structural growth of this company sustainably yet at the same 10% to 12% rate it's been or has anything changed?.

Hi Darrin, yes, let me address that. This is Chris. So, yes, a couple of things I'll say about the FY 2024 guide. First, the underlying drivers, as we shared, both payments volume and process transactions will be growing in the low double-digits, which is very consistent and reflects the stable business trends that we see in the underlying drivers.

I also said on the call commentary that we do expect VAS, value-added services, and new flows to continue to be our growth engine, growing faster than the consumer payments part of the business. And so I think that structure, which you described, is consistent in many ways to 2023, and that's what we certainly expect to see in 2024..

Next question Jordan..

Our next question comes from Dave Koning with Baird. Your line is open..

Yes, thanks so much. Good job. And I guess two quick ones. Asia-Pacific constant currency volume growth was 4%, a little lower than normal. Maybe you could dive into that. And then tax rate longer term, basically in the out years, 19.5% to 20%, that's how we should think about it? Thank you..

Hey Dave, I'll talk about Asia and maybe put it in the context of what we're seeing around the world, and then Chris, you can take the tax rate. Just to answer your question specifically on Asia, as you said, growth ex-China slowed four points from Q3. There's a couple of things going on there.

One is we're lapping some strong COVID ramp in Q4 of 2022, but we're also seeing a little softness in a couple of places, notably Australia, what I'd point you to.

If you guys just kind of back up and look at that in kind of the bigger picture, what are we seeing around the world, outside of Asia, it sounds like you've looked at the numbers and you would have seen we're seeing resiliency.

Outside of North America and Asia, if you look at Europe ex-UK, Latin America, CEMEA, most of these regions are growing at around 20% or more. So, we feel good about what's happening there. On the tax rate, Chris, I'll turn it over to you the long-term tax rate..

Yes, sure. Hi, Dave. Yes, I do think that's the right way to think about it. At least based on what we know now, the new run rate, we would put at about 19.5% to 20%. It does -- it is related to how our tax -- the mix of our tax jurisdictions around the world and certain tax increases in certain parts of the world.

As we talked about in the next fiscal year, we'll be below that due to some of the benefits that we anticipate in the second half of the year. But based on what we know today, the new run rate is as you estimated..

Next question, Jordan.

Our next question comes from David Togut with Evercore ISI. Your line is open..

Thank you. Good to see the 19% growth in Visa Direct transactions, and in particular, the 65% growth in cross-border P2P transactions year-over-year.

As we look to FY 2024, what are some of the biggest, most promising new use cases you're working on for Visa Direct?.

Hey, David. Cross-border remittances is a big one. Since you called that out, I'll highlight it. And I mentioned, I think, on this call and some others, the work we're doing with Paysend and Shinhan and things we're doing around the world we've mentioned in previous calls with some of the both kind of traditional and fintech remittance players.

65% year-over-year growth is strong and continue to invest behind that with new partners and try to drive further growth going forward. We're focused on bill payments. We're focused on earned wage access. We're focused on insurance disbursements.

We continue to focus on P2P more broadly in new geographies around the world, both domestic and cross-border. If you just back up, I've said this, I think, on previous calls. I believe at this point in time, Visa Direct is the largest at-scale money movement network on the planet.

We have made investments consistently year-over-year to get to a point where we now have 8.5 billion endpoints, 3 billion cards, 3 billion accounts with some of the news I announced in my prepared remarks, 2.5 billion digital wallets. And we'll continue to invest in expanding the network even further.

But now we've got the ability to work with enablers around the world, sell new use cases in and put this network to work. And we're going to continue to do that and look forward to hopefully talking to you about more good results to come..

Next question, Jordan.

Our next question comes from Ramsey El-Assal with Barclays. Your line is open..

Hi, thanks for taking my question. You guys had a lot of great commentary on commercial and B2B progress and deal wins in the quarter.

Can you just give us a broader update on your commercial strategy? Where do you see the bigger opportunities there going forward?.

Yes, thanks. It was -- we did have some really good commercial wins in the quarter. I'd put it in a couple of different buckets. One is we're looking to expand our partnerships, right? So I mentioned Citi and IBM this quarter. I mentioned SAP last quarter.

And we're just -- we're having good success building and expanding those partnerships around the world. Second thing we're focused on is expanding verticals. You've heard us talk about government, travel, fleet and fuel. I talked about agro, I think, last quarter, working and selling into marketplaces, like I mentioned, healthcare.

So taking these products, innovating, creating new use cases and delivering them into new verticals. And then just making the products easier to use. Yesterday, we announced that actually we had a new product to make it easier to accept virtual cards. We call it virtual card acceptance platform.

Virtual cards are a preferred acceptance of many suppliers, but they're not as easy to accept as sometimes we'd like them to be. So putting new platforms out to make the core products like virtual cards easier to use. And then continuing to invest in the partnerships that we've announced over the last couple of years.

WEX is a great example of a partner that we announced a couple of years ago that we've invested in and growing in and really getting to see some of the benefits of that around the world. So, I guess the last thing I would say, Ramsey, is just also taking these products more broadly around the world.

In so many different countries outside of the most developed markets that we work in, there's opportunity to get some of the basic products into the hands of small businesses, for example.

In a lot of countries we're doing business, there's still a lot of small businesses that are actually using consumer products instead of the more sophisticated advanced small business products, let alone the large and middle market products that we can get out there.

So, more partners, more use cases, more verticals, more countries, we'll continue to invest in that business..

Next question Jordan..

Our next question comes from Will Nance with Goldman Sachs. Your line is open..

Hi guys. Appreciate taking the question. You had some interesting commentary around processing market share gains. Wondering if you could just give us kind of a state of the union of where you stand with that. And if there's any geographies that are kind of top of mind as opportunities to increase processing share, what would those be? Thanks..

Yes, sure. I mean, we're very focused on processing share for a couple of reasons, but the one I noted in my prepared remarks is a very important one, which is we can deliver more of our value-added services when we're actually processing the transaction.

Obviously, we earn more yield when we process the transaction as well, just on the core processing of it. But the ability to serve our clients more effectively, deliver them our risk capabilities, our issuing capabilities, our loyalty capabilities and those types of things are enhanced when we actually process the transaction.

So, we spend a lot of time on it. I think we've made very good progress over the last many years. I mentioned Colombia in my prepared remarks, and Colombia is a good use case.

In a lot of these markets, to really unlock the processing, we have to work with the local processor, which we did in Colombia and then worked with the clients to get them on that processor. They will then test out the transaction, see how they're working and ultimately move those transactions to VisaNet, which we like.

We've been very focused in Latin America. We've made some good strides in several different countries in Latin America, and I think we continue to have opportunity in Latin America.

We're making strides in Europe, and we'll continue to focus on processing opportunities in several of the different countries that have local schemes in Europe as well as some places in Asia-Pacific. So, those are some of the opportunities we have, Will. Thanks..

Next question Jordan..

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

Great. Good afternoon everybody. Just want to circle back on the travel component of cross-border and how you're thinking about that in the coming year. I can appreciate, as you guys have often said, you're not necessarily economic forecasters.

But can you just repeat for us what your underlying assumption is for the coming year? And then maybe give a little bit of color on inputs of how you're arriving at that expectation and target for the year? Thanks..

Let me give some context on how we think about just cross-border travel in general, and then, Chris, you can add and/or fill in the blanks on the assumptions that we've made for the year. Here's how we think about it. In and out of Asia, we still have yet to normalize.

So, as Chris alluded to or said in his prepared remarks, we have opportunity to continue to catch up to pre-COVID travel levels in and out of Asia. There's also the opportunity to still catch up into the United States. But more broadly around the world, I would say we've got to normalize in terms of cross-border travel.

But I think what's interesting is we've normalized at a growth rate higher than pre-pandemic levels. People are traveling international at this new normal at a faster rate than they would have been, all else equal, before the pre-COVID level. So in a couple of quarters, we still have an opportunity to catch up to what would be normalized levels.

Around the rest of the corners around the world, I think we've normalized but at higher growth rates than we saw pre-COVID.

Do you want to mention the numbers for the year?.

Sure. The only thing I'd really add and I covered a lot of the assumptions in the call commentary. The thing that I might just emphasize is that it is pretty healthy growth.

And if you look at what we've shared in terms of what we expect the index to grow at four to five points a quarter, I think that does reflect what Ryan said, which is normalized in many cases and continuing to be elevated growth..

Next question, Jordan?.

Our next question comes from Jamie Friedman with Susquehanna. Your line is open..

Hi. Thanks for taking my question. Ryan, in your prepared remarks, you called out CyberSource. I know it's a very important asset for you and always has been. But why is -- am I inferring that there's an increased cadence in the business? And if so, why would that be? Thank you..

Yeah. As I said, Jamie, in my prepared remarks, we're seeing great strong client demand around the world for CyberSource. Why? I think it's a result of a lot of the investments we've made in the platform over the last several years. We've been very purposeful about investing in our omni-commerce capabilities for CyberSource.

We've been very purposeful in investing in our tokenization capabilities, our risk management and fraud prevention capabilities.

And a lot of that has been driven by sitting down with our clients and partners, understanding their road maps, understanding what they needed us to deliver, making those investments and then having success growing with our partners.

And in any given market around the world, when clients start adopting the CyberSource platform and others look around at the success they're having with authorization rates or transaction success or others, that leads to new opportunities, and we've had the ability to sell into those. So thanks for the question..

Next question, Jordan?.

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

Thanks. I have a question on Reg II. Chris, you mentioned no impact yet and also caveated the outlook. I'm just wondering, is there anything that gives you pause there? And then, Ryan, anything you guys are doing proactively to get in front of any adverse impacts? Thanks..

Why don't I talk just contextually about Reg II and then you can answer anything else on Sanjay's question? So two things going on, obviously, with Reg II, let's just talk about them both. One is the change that was made last summer that went into effect with regards to routing in the e-comm space.

As we mentioned in our prepared remarks there, we haven't seen any meaningful impact.

Having said that, there's a lot of work happening around the ecosystem and we're out there talking to clients and partners about our products and our value propositions, making sure they understand the benefits of a Visa transaction, especially in the e-commerce space, where often the merchant holds the fraud liability.

So our sales teams are in with merchant clients and acquire clients day in and day out, explaining the value of our product, showing them the value of our products. And going forward, we feel good about our ability to compete.

The second thing that's going on with Reg II that I'm sure people would have seen is the Fed has announced that they're going to, I think it's tomorrow, announce some changes potentially to the debit interchange rate in the US. We don't know what they're going to say. We'll obviously follow it very closely.

And when they do publish something, we'll take a look and see if it merits a response on our behalf. And just as a reminder, interchange is the exchange value between the merchant and the issuer.

And I think what's notable about our business model is we've proven that we can be resilient and have a strong business in regulated interchange markets, not regulated interchange markets, in markets that have higher regulated interchange and lower regulated interchange.

So, as you alluded to, a lot going on in the US with Reg II, but we're all over it and we feel good about our ability to compete..

Yes, and I'll just add on from a guidance perspective. Hopefully, we're very clear on the call, we have not seen any meaningful impact thus far, and therefore, haven't included any impact of that in our FY 2024 guidance.

But it is early days and there's a lot going on, as Ryan described at length, and so we'll keep you posted as things evolve in the coming months..

Next question Jordan..

Our next question comes from Dan Perlin with RBC Capital Markets. Your line is open..

Thanks. I just wanted to ask a question around tokenization and the implications for just broader-based authorization rate improvements, and this is not just like domestic but like international. It just feels like a lot of your partners are able to drive higher authorization rates as a result of the token.

So, I'm just wondering how you're viewing that in the context of being able to drive incremental transactions back to Visa? Thanks..

Yes, thanks for the question. Just for a reminder for everyone, tokenization is technology that we use that essentially helps protect issuers, merchants and consumers, and to your question, ultimately, drives higher authorizations and lower fraud. I think I said in my prepared remarks, we crossed 7.5 billion tokens as of the end of September.

We're in 198 markets. I think we have 14 billion token transactions in the fourth quarter, which is growing at like 60%. So, this is another example of a platform and a service that we invested in over many years and we're now scaling broadly around the world. To your question, we are.

We're seeing, on average, somewhere between 4% and 5% higher approval rates across our partners. And we also see it with a reduction in fraud -- a 30% reduction in fraud.

So, you say, why do we have 7.5 billion tokens that are now out there in the ecosystem? Well, if you're one of our partners, as you said, and you can reduce your fraud rates 30% and drive your auth rates four or five percentage points, that is a great opportunity. That's higher sales, that's lower fraud, that's better customer experience.

And we continue to invest in that platform as well. We see a lot of benefits to our issuers, to our consumers who ultimately use the products. You'll see more from us enhancing the platform in terms of using the Fido biometrics and enabling merchants to be able to authorize and authenticate customers across multiple devices and those types of things.

So, yes, higher auth, lower fraud. We love the platform, continue to invest in it..

Next question Jordan..

Our next question comes from Trevor Williams with Jefferies. Your line is open..

Great. Thanks a lot. Chris, I wanted to clarify on incentives within the guide. I think you said you're assuming slightly slower growth than in fiscal 2023. Just want to make sure, is that year-over-year growth in dollars or as a percentage of gross revenue? And then just the second part to that. You're framing this as a more normal year.

Should we be interpreting that as meaning all else equal, a normal year incentive should be going up kind of plus or minus 100 basis points as a percentage of gross revenue? Thanks..

Hi, Jeff [ph]. Yeah, let me try to clarify a bit. As I said, 2024 is, in many ways, a normal year. It's still normalizing in some aspects, but in many ways, it is normalizing. And as a result, we've made some changes. We've returned to pre-COVID practices on a number of fronts.

We provided formal guidance as you went through -- as we went through in detail, and we talked about on this call, for the full year and next quarter, and we'll continue that practice.

And that guidance is on net revenue guide specifically and directional commentary about the growth in incentives, which to your specific question, it is a dollar year-over-year growth rate that we said will grow slower in 2024 relative to 2023.

Importantly, this is very, very consistent and it's aligned with how we think about the business, how we manage the business going forward. We haven't guided on the percentage, which is the other part of your question because, again, this is consistent with how we manage the business.

The thing that we do track very importantly is that we look at the yield across our net revenue yield specifically, and that's remained very stable, and that's very consistent again with how we think about deal economics..

Next question Jordan..

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

Hi, thanks. I'm actually at Money20/20, is really good energy here. I'm curious, Ryan, if you'd characterize the deal pipeline as being any different than what it was a year ago. How does that feel to you? And if you don't mind me asking just on the credential side, I think you said up 7%.

I'm curious same thing, is pipeline there to support that same high single digit growth in fiscal 2024, credentials? Thanks..

Hi, Tien-Tsin. Glad there's great energy at Money20/20, and I hope my Visa team members that are there are serving clients, finding sales opportunities growing our business. Yeah, we see a great pipeline. We really do with clients issuing, fintechs, co-brands, with opportunities to grow credentials.

I mentioned some of the new things on my prepared remarks. And we're having good success. I think just some of the wins on the call, whether it's Citi or US Bank, FNBO, Fidelity, Shinhan, China Merchants Bank, Shopify, I mean, list goes on, right? IBM, DBS, Etihad, Saudi. We feel good about the pipeline.

We feel good about the way our teams are out there serving clients around the world. We feel good about the wins that we have and feel good about the growth that it's generating..

Next question Jordan..

Our next question comes from Ashwin Shirvaikar with Citi. Your line is open..

Hi, Ryan. Hi, Chris. Congratulations on the quarter. Questions on open banking, CFPB obviously proposed a rule to jump-start competition, shift to open banking a few days back. You guys have dealt with open banking frameworks outside the US in many different geographies.

Just kind of curious how that translates in terms of products, in terms of acquisitions you made like Tink, Pismo and so on, to bring that over to the US?.

Thanks for the question. I think the CFPB rule that they put out is good for Americans. I think it's great for clarifying the structure and the regulatory framework here in America. I think it's likely to be a catalyst for growth of open banking in the United States, is it gives clarity to all the various different players in the ecosystem.

If you think about it, like, it's a great opportunity for Americans to be able to put their own data to work in different types of digital tools that will help their own personal financial management, help them manage their financial lives better, get a better view of their finances across multiple different providers.

And then to your point, we've seen different regulatory frameworks in different markets around the world. Our Tink business continues to perform very well in Europe, which obviously was one of the leaders in terms of establishing a regulatory framework for open banking. And we look forward to the opportunity to bring Tink outside of Europe.

So when we look at the proposed rules here in the US, we welcome that because we want to understand what the regulatory expectations are so that we can build a business that will thrive and serve our clients and serve consumers effectively. So thanks for the question..

Last question, Jordan.

Our final question comes from Harshita Rawat with Bernstein. Your line is open..

Good afternoon. As you're looking into the next fiscal year and beyond, I want to ask about the cash digitization opportunity in your growth to drive [ph] business. As you know, this is always a persistent question for Visa investors and thinking about it again, given the pandemic moving forward and during inflation tailwinds.

So how are you thinking about the runway especially segmenting it between developed markets and also EM a little bit more competition? Thanks..

Yes. Thanks for the question. We continue to be excited about the cash, check digitization opportunity around the world. We continue to digitize cash and check around the world, and economies continue to grow around the world.

So I think continues to surprise many people when they look at developed markets like the United States, how much cash and check still exists. And certainly, when you look to the developing world, how much cash and checks still exist. So we continue to be excited about the runway. We think it offers us tremendous growth opportunity.

And we're going to continue to work with our partners across the ecosystem to get more credentials into consumers' hands, get more acceptance out there in the ecosystem, especially among micro and nano merchants and work with our partners to drive more activation and usage among the credentials and feel good about that entire algorithm..

And with that, we'd like to thank you for joining us today. If you have 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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