(Bloomberg) -- You can thank the millennials.
Spending on Visa Inc. debit cards -- the favored plastic of the younger set -- continues to grow at a faster clip than on credit. Spending on the firm’s debit cards jumped 16.3 percent in this year’s first three months, helping the firm raise its financial outlook for 2018. Credit-card spending rose 13.7 percent.
“Every aspect of the debit business looked very good this quarter,” Chief Financial Officer Vasant Prabhu said On a conference call with analysts. It “attests to a pretty strong consumer profile in terms of propensity to spend.”
Younger consumers prefer to pay with debit cards or cash after cultivating an aversion to credit while coming of age during the financial crisis. They also don’t typically qualify for top credit cards until becoming older. Visa, the world’s largest payment network, generates more-lucrative fees from credit-card use yet has a larger debit business than rival Mastercard Inc.
Total spending on Visa’s network climbed 14.9 percent to $2 trillion in the first three months of the year, topping the $1.98 trillion average of analyst estimates compiled by Bloomberg. That helped boost revenue to $5.1 billion, a 13 percent increase compared with a year ago, exceeding estimates of $4.82 billion.
Prabhu also said the firm’s results benefited from a weaker U.S. dollar in the first three months of the year. Cross-border payment volumes rose 11 percent.
“Revenue growth was better than anticipated and many of our key business drivers accelerated compared to the first quarter, including strong growth in cross-border and payments volume,” Chief Executive Officer Al Kelly said in the statement announcing results for the fiscal second quarter.
Visa raised its forecast for full-year, earnings-per-share growth rate to the “low 60s” from the mid-50s and it now expects adjusted EPS growth in the “high 20s.”
The stock rose 3.1 percent to $125 at 5:50 p.m. in late trading in New York. It had climbed 6.3 percent this year through the close of trading on Wednesday, compared with the 1.8 percent advance of the S&P 500 Information Technology Index.
Here are other metrics to watch:
- Net income jumped to $2.6 billion, or $1.11 a share, from $430 million, or 18 cents, a year earlier, when the company incurred extra costs from reorganizing its legal entity in Europe. That topped analysts’ $1.02 average estimate.
- Operating expenses climbed 4 percent to $1.74 billion, the company said, primarily driven by an increase in personnel and marketing costs. That topped the $1.61 billion average of 12 analyst estimates compiled by Bloomberg.
- Visa spent $1.29 billion on incentives for banks to issue cards on its network in the quarter. That came in lower than the $1.39 billion analysts expected.
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