WHEN: Today, Tuesday, November 10
WHERE: The CNBC Evolve Summit
Following is the unofficial transcript of a CNBC interview with Visa Chairman and CEO Alfred Kelly live from the CNBC Evolve Summit on Tuesday, November 10th.
Mandatory credit: CNBC Evolve Summit.
CARL QUINTANILLA: It’s great to be with everybody today. Thanks, of course, for coming to Evolve. You know, the payments business is one of those industries right now in this uncertain year that people are looking to judge about the recovery of global growth, recovery of the consumer, and it’s on that note that we are very pleased to welcome Al Kelly today, the Chairman and CEO of Visa. Al, it is great to see you. Thanks for the time.
ALFRED KELLY: Carl, good to be with you. I’m not going to be doing any singing, but I look forward to talking with you.
CARL QUINTANILLA: I want to talk about the business, obviously, internally and externally. But let’s just begin with what this incredible week has brought us, and that’s positive news on the vaccine, a growing sense that maybe the world is changing this week. And if that’s true, we’re going to be looking for areas in which payments would recovery the quickest. I wonder if you could just set us up on your take of the news this weekend and how you’re going to be looking for changes from within.
ALFRED KELLY: Well, look, I think, Carl, the reality is that uncertainty is never a good thing in most businesses, ours included. And the fact that it looks like there’s a resolution to the presidential race, that there’s some hope on the vaccine front, I think have people excited and hopeful. And I think after seven and a half or eight months of people being locked down or having their lives disrupted, people are anxious to get out and be able to do things. Obviously, right now we still have to be very careful and follow all the guidelines that medical experts are asking us to follow. The virus has been very interesting for payments. On one hand, it’s suppressing cash usage as people are worried about germs being spread via currency and so more people, even for small ticket items where they might have used cash in the past, are looking to use a debit card or a credit card. E-commerce has exploded as people are now sitting home and working on their tablets or their computers or their mobile devices and wanting to continue to be able to shop. And we’ve seen an incredible increase in the number of people who, for the first time, are shopping in an e-commerce situation. We’re seeing governments become more interested in digital payments, and that’s a good thing. Governments distribute a lot of funds. We work with the U.S. government and about 15 others on the distribution of everything from unemployment funds to emergency funds to stimulus funds. And obviously the one negative in this has been the impact on travel, Carl. The reality is that you really almost can’t travel right now. It’s very inconvenient, if you can. There are so many restrictions that I really think of travel as being, for all intents and purposes, not a real option for consumers or business people. But I think the hope of a vaccine can change that. I think that the world is an exciting place, and people still want to get out there and travel and knock things off their bucket list, etc. So I’m very hopeful that at some point we will get back traveling and people will be able to enjoy seeing the world, and that will be good for payments, as well.
CARL QUINTANILLA: Yeah. What do you think the bull case is on pent-up demand for leisure, but really more importantly on corporate travel? What argument can be made that we get back to corporate travel habits that we were used to before this pandemic began?
ALFRED KELLY: Well, let me take the consumer part first, because I think it’s the easiest. The bulk of Visa’s travel spend is consumers. I do think consumers are going to want to go back to travel, see family, see friends, see the world. And there’s just so many people who love to travel and love the adventure of it, so I do see the consumer travel when these various inconveniences are lifted. I see consumer travel coming back pretty quickly. Business travel is another story. You know, you and I realize — I haven’t traveled in eight months, and I’m a guy who traveled 80 percent of the time. And I feel like as much as I feel a bit locked down from time to time, I feel like I’ve been pretty efficient. And I think all of us, as business leaders, have realized that perhaps we had people taking trips that might not have been necessary, or we sent too many people on a trip, or we sent somebody to give a presentation for an hour and a half and sent them around the world, and that cost money and it cost time, which is money, and now realize that, boy, a lot of that stuff can be done on any one of these video platforms that work darned well. So I do think there is going to be at least a medium-term adjustment in the amount of business travel. How much remains to be seen. I still think it’s critically important to get out there and see clients and talk to your employees, etc. So I know I expect my travel to come back as soon as the restrictions are lifted, but I do think that, in general, it’s going to be a much slower recovery, Carl, on the business side than on the consumer side.
CARL QUINTANILLA: So when you think now about opportunities, as we start to envision a world post COVID, talk to me about where the white space is for Visa. Is this about — is it going to be a story of chasing millennials? Is it going to be trying to take share from cash? How much of this is about M&A? And I’ll ask you about Plaid in a moment, but I guess where will the battles be fought, do you think, post COVID?
ALFRED KELLY: Well, look, you know, every single day, in every corner of the earth, people have a choice on how to spend. They can spend on cash or they can spend writing a check or they can use a Visa card or a MasterCard or an AmEx card or some local scheme card. So the battleground always is out in the local market every day, and we operate in 230 countries and territories around the world, and we want to win as many transactions as we can. When I look ahead and say where is the white space, it’s in several areas. There’s still $18 trillion spent in the world on cash and checks. So that remains an enormous opportunity for us, and one that I think accelerates because of some concerns about viruses and germs and cash. We have great opportunities geographically. I’m in the midst of a virtual trip to Africa, and yesterday I talked to the vice president of Nigeria; today I talked to the head of the Central Bank in Nigeria. And I look at the continent of Africa as an example of really fertile ground for growth as we look forward. We’re also going to get a lot of growth by operating our network in the opposite way that people generally think about our network. People generally think about Visa as a network where you go and buy goods and services from somebody, and your money gets pulled from your bank account and gets paid to the seller or the merchant. We’re increasingly having our network work the other way, where we are supporting use cases where money goes back in your bank account. So, for example, after an insurance claim is adjudicated, we will send — the insurance company, instead of mailing you a claims check, will send it directly to your bank account via Visa rails. An Uber driver, at the end of a shift, can go on to their app and have their profits or pay from that day sent to them directly and immediately to their bank account using Visa. We power all the big P2P players in the U.S., and in other countries as well, but Venmo, Zelle, Apple Cash, Square Cash, etc. When you and I, or one of my children and I move money between each other, that movement is happening on Visa Rails. And we call that capability “Visa Direct.” It’s our push platform, where we’re pushing money to people. And I think there’s still — even though we have 3.5 billion Visa cards in the world, used at over 70 million locations, I think both those numbers are still way too small, Carl. I think there’s a tremendous opportunity to grow the number of credentials, and I think there’s a huge opportunity to grow the number of places where people can use their cards. One of the exciting areas we’re very focused on, although right now it’s obviously being impacted by COVID, is mass transportation. I’m hugely bullish on mass transportation. If we can create the — it could be habit-forming. If we can get people to use their credit card or their debit card on their ten commutes in the course of a week, it really starts to break them into the habit of using their card, and they’ll use it to buy their coffee in the morning and their lunch and maybe a snack in the afternoon, etc, and all of a sudden you’re getting a lot of transactions that heretofore you might not have gotten. So I see that as an enormous growth opportunity for us as well. The reality is, and the exciting part is, I come to work every day figuring out how to grow the pie. It’s a very unique part of our industry, and makes it very, very exciting. Sure, we focus and nudge — get into skirmishes with our competitors over various corners of the pie. But, in general, my job every day is to come and figure out how to grow that pie. And that’s a very unique aspect of the payment and money movement space.
CARL QUINTANILLA: Interesting. I mentioned Plaid just briefly, but what does it say — what is your motivation behind Plaid and is the pushback from regulators a sign that that growth will come with some friction?
ALFRED KELLY: Well, we weren’t — we’ve known Plaid for a while. We were an investor in Plaid, and we’re very impressed with the management team there and what they’re doing. We’re a network. Increasingly, we’re trying to become a network of networks. And Plaid is a network like we’re a network. They sit between — in the United States, between about 11,000 financial institutions, banks, brokerage houses, etc, and about 2700 Fintech developers. They facilitate the movement of data. We facilitate the movement of funds or money. So when you go to sign up for Venmo, Carl, you are actually presented with a set of screens that ask you where you bank, what your bank account is, etc. Those screens are provided by Plaid, and Plaid facilitates the movement of information for those Fintech developers to be able to deliver the great experiences they deliver. So Plaid is just, at its most simple level, it’s another network that we believe fits into our desire to have multiple networks on which we move information and money around the world. We continue to be very excited about them. I truly think that the government really doesn’t fully understand the differences here. And it’s, you know, disappointing, but we will fight this vigorously. And I believe we will prevail, because this is a very pro-consumer play and I think people will recognize that as we get into it a little bit more.
CARL QUINTANILLA: You mentioned Fintech in general, Al. And we did get one viewer question from Christopher, who says: What is Visa doing in the crypto-asset space? I guess it’s an inevitable question that you must be fielding all the time.
ALFRED KELLY: Well, in crypto, you know, crypto is a developing part of payments in the world. t’s in the very nascent state right now. And we’re very interested in cryptocurrencies. We’re not as interested in crypto that is more of a commodity-based play. So we’re interested in crypto that ultimately becomes fiat based so there’s a clear understanding of the value when there’s an exchange of crypto for the purchase of a good or a service. We’re working with about 25 crypto players already in the world today, Carl, where we’re facilitating putting a Visa credential into their system, where you can convert your crypto based on fiat currency and put the funds in a wallet where you can use them at anywhere Visa is accepted. It’s a way of making those funds valuable and usable across our network. The other thing that’s happening is central banks around the world are looking at central bank digital currencies. They are in early stages, probably China is the furthest advanced. But we expect to be working — continue to work with central banks around the world in how we can help those central banks as they develop a digital currency for the future. Ultimately, I can see digital currencies running on our Visa network on a more regular basis. I think it’s a number of years out, but we’re certainly open to any vehicle that helps facilitate the movement of money around the world. We want to be in the middle of it. And I think crypto can play a role, especially in countries that are emerging markets where there’s a lot of underbanked and unbanked people in the world. And we think that number is about 1.7 billion people on the face of the earth that are not banked in the mainstream banking system, in whatever country they happen to live in, including some here in the United States.
CARL QUINTANILLA: All right. Speaking of moving money around, there’s still hope out there that we get an infrastructure bill, that we get small business aid, that there’s something to be done to mitigate unemployment in this country. I know you’ve got some thoughts on that.
ALFRED KELLY: Well and I said this to the head of Central Bank in Nigeria today, 50 percent of the small businesses in Africa are in Nigeria. And I believe wherever you look around the world, and I’ve had the opportunity to travel much of it, the reality is that small businesses are the engine of growth. And they’re not only the engine of growth for the economy, Carl, they play a very important role in communities. If you live in a community that has a Main Street, these small businesses bring some energy to that community. Nobody wants to live on a Main Street that just has bank branches and a gas station and a couple of restaurants. They want a variety. They want to be able to walk on a Saturday or Sunday afternoon and poke their head in all kinds of different shops. So we’re deep believers in the importance of small businesses, and we’ve got to get them back to work. They really suffered in this COVID-19 pandemic, and we’ve got to make sure we’re doing everything we can to help them get back to work. And I think some of the initial bills were focused on asking these small businesses to keep their payroll going, which was really hard for them. Most of them had to get rid of or furlough their people early on, and their costs were really about rent, insurance, and those kinds of things. So I think we have to be a little bit more flexible in how any kind of emergency or stimulus funds are allowed to be utilized by small business owners. And I think something like an infrastructure bill that you alluded to is very important in the United States. Our infrastructure is not as good as it needs to be. It’s crumbling in some cases. And this is a win, win, win where we can create an awful lot of jobs and, at the same time, improve the infrastructure of this country for the next generation. And I certainly hope that the next Congress can see the value of it, and we can get an infrastructure bill done and we can make sure that we’re taking care of small business owners. We’re certainly trying to do everything we can on our part to help small business owners.
CARL QUINTANILLA: We’ve only got a couple minutes left, Al, but you mentioned cities and walking down the sidewalk and wanting to see a rich display of small businesses and retailers. Just your thoughts on cities right now in general, and how that plays into return to the office, what you’re doing internally, what concerns employees have, and whether or not you see Visa using your corporate real estate footprint at 100 percent again someday.
ALFRED KELLY: Well, a lot of questions there. It’s really amazing how the world can change very, very quickly. The whole world pre-COVID was moving to cities, you know? Everywhere I go in the world, it’s impossible to get from the airport into these cities. It takes 2 or 3 hours, especially if you are trying to do it during the rush hour. And the whole push was people getting to cities, living in cities, and urbanization was a big deal. You know, the virus has pushed people away from cities. Now, I personally do not think that’s a long-term change. I think it’s going to cause some people to think, but I think our cities have so much culture and life to them, and convenience to them, etc, that I think cities will come back. And they’ll come back as businesses start to open again, as well. That said, look, the virus has shown all of us, even naysayers, about flexible work. And I’ll put my hand up and say I was a bit of a naysayer. But our company has, for eight months now, operated pretty efficiently with 95 percent of our employees working from home, and I fully expect that, as we look forward, we’re going to have an awful lot of people operating under a more hybrid, flexible work model; couple days in the office, couple days at home. I personally believe that everybody’s got to get to the office for certain numbers of days a month. It’s critical for orientation of new employees. It’s important for culture. I think it’s very important for inclusion, so that people in minority populations are not left behind or left out. I think it’s important for brainstorming and creativity. I think it’s important for training. So I expect us to be a company that has a lot more flexible work models, but the way I’ve been talking internally about it, Carl, is I want a flexible, flexible work model; meaning, employees can have a baseline understanding with the company of, for instance, how many days they might be at home and how many they might be in the office, but it’s critical that shareholders and other key constituents come first. And if you’re supposed to be home on a Tuesday and we need you in the office for whatever reason we need you, you’ve got to be flexible, the employee — you, the employee, have to be flexible as well and come to the office on that day. And likewise, by the way, if you’re supposed to be in the office one day and all you’re doing is meetings by phone or video, there’s no reason why that day can’t be a day you end up working from home. I do think, therefore, to your last point, our real estate will have to be reconfigured a bit to accommodate a situation where we have some employees who want to work full-time in the office, some who need to because of the nature of their job; and then we have to be able to have the flexible space for people who are coming in and out for team meetings, for brainstorming, for cultural types of events, for town hall kinds of meetings. And that’s something I have a whole task force looking at, that whole return to work and our real estate footprint, and what that means for us all around the world, because we have offices ranging from 10 people to 4,000 people. So they each have — come with their idiosyncrasies and their own challenges.
CARL QUINTANILLA: Well, normally, you know, you and I might have been doing this chat on stage in front of a huge audience. Instead, we’re doing it on this interface. But it would be nice to have the option one day. That’s certainly the take-away from a lot of this. Al, we’re so grateful.
ALFRED KELLY: Yeah, and I think it’s important. Well, Carl, it’s great to see you, great to be with you and your audience.
CARL QUINTANILLA: Our thanks, too.
ALFRED KELLY: Stay safe. Thank you.
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