Jennifer Como: Next question, Holly.
Operator: Our next caller is Bryan Bergin with TD Cowen. You may go ahead.
Bryan Bergin: Hi. Good afternoon. Thank you. I wanted to ask on new flows, so a nice recovery there in growth. Can you give a comment on what areas were most pronounced in the underlying growth recovery relative to what you saw last quarter?
Chris Suh: Yeah. Let me talk about Q2 growth. The two pieces of information that we gave you in terms of Q2 growth. We saw commercial volume growth globally 8%, stable to Q1 and in fact, stable over the last several quarters. And we saw very strong growth in Visa direct transactions, growing 31% for the quarter. New flows revenue in total growing 14%, which was in line with our expectations that we shared with you at the start of the year. I think the recovery that you’re referencing to was because Q1 growth was lower and that was really due to some lapping issues that were one-time and non-recurring, which we passed at this point.
Jennifer Como: Next question, Holly.
Operator: Our next caller is Will Nance with Goldman Sachs. You may go ahead.
Will Nance: Hey, guys. I appreciate you taking the question. A bit of a dual-part question on just some of the prior guidance commentary you made around first-half versus second-half dynamics and some of the drivers of acceleration over the course of the year. And I guess specifically, I guess, incentives, you talked about a step-down in the growth rate from first half to second half. Is that still your expectation despite that coming in a lot lower in the most recent quarter? And then for the similar question on the volume growth trends, I guess, I hear you on the Asia trends, but I guess overall, you had some kind of upbeat commentary on ticket sizes over the course of the year and kind of easing inflation in comps, it seems like gas prices might help that as well. So just any commentary on ticket sizes and specifically the negative ticket sizes you’ve seen in the US? Any commentary on kind of what’s structural versus kind of more environmental there? Thanks.
Chris Suh: Yeah. Okay. Let me start first with incentives, the first part of your question. So, as you all have seen from quarter-to-quarter, incentive growth can vary based on a number of factors, client performance, deal timing, which is what caused half one to come in lower than anticipated. For our outlook for the second half of the year, our expectations remain largely unchanged. We still expect year-over-year growth to be lower in the second half than in the first half as we lap the higher incentives that we saw starting in the second half of last year. And we do expect the Q4 incentive growth rate will be the lowest growth quarter of the year. So expectations for half two are unchanged. To your second question on ATS, let me — there’s a lot of moving parts in here.
And so maybe I’m just going to kind of go through it in detail and unpack bit by bit. Globally, Q2 ATS year-over-year growth was down slightly, which is consistent with the growth that we saw in Q1. Breaking that apart between the US and international. In the US, ticket size growth actually continued to improve from Q1 to Q2, still slightly negative, but the trend improved from Q1 to Q2. And looking ahead in the US, this is something that we’ve spoken to previously, we do continue to expect ATS will turn positive in the second half of this year as we lap the lower ticket sizes in the second half of last year. Internationally, outside of Asia-Pacific, let’s set that aside for a second, we saw improvement in several regions, including the impact from higher inflation in several markets.
And so overall, excluding Asia, we still expect ATS to turn positive in the second half based on the expected improvements in the US with the impact of Asia factored in, global ATS will be slightly negative and that was factored into the revised payment volume outlook that I gave for the full year.
Jennifer Como: Next question, Holly.
Operator: Our next caller is Moshe Katri with Wedbush Securities. You may go ahead.
Moshe Katri: Hey, thanks for taking my question. It seems that there was a pretty significant uptick sequentially in growth for value-added services. Is there anything to call out there? Thanks.
Ryan McInerney: I mean, I’ll talk about the business just for a minute, Moshe. Thanks for the question and then, Chris, you can add any specific callouts. As I think I said in my prepared remarks, the business is really hitting its strides in a lot of different areas in terms of the product we’re bringing to market, the success our sales teams are having around the world, we’re really focused on three big areas of trying to drive growth. One is just deepening the penetration of products we have with existing clients. That’s — if you think about it is the most near-term opportunity that we have and we’ve got metrics, client-by-client all around the world, what are they using, what are they not using. We’re arming our sales teams with that.
We’re building case studies on how we can help them and we’re driving progress in terms of deepening the relationship we have with our existing clients. And then we’re building new products that we’re bringing to market. I mentioned a few of those in my prepared remarks today, both in the risk and fraud space as well as in the open banking space and then driving geographic expansion. I mentioned I think just one cybersource deal in my prepared remarks, but cybersource has been a great example of a platform where we’ve been having success growing in markets where we hadn’t traditionally been as deep. AP is actually a positive example of that in the cybersource space. So those are a couple of call-outs, Moshe, in terms of kind of how we’re just seeing the broader business.
Jennifer Como: Next question.
Operator: Our next caller is Cris Kennedy with William Blair. You may go ahead.
Cristopher Kennedy: Good afternoon. Thanks for taking the question. You talked about bringing Tink into the US. Can you talk about the open banking opportunity in the US relative to Europe? Thank you.
Chris Suh: Yeah. Thanks, Chris. I think Europe is the most developed open banking market in the world. We bought Tink two years ago believing that it was the best platform in Europe and I think that’s proven true over the couple of years that we’ve had a chance to own it. On the client side, in Europe, we’ve been making great progress. I think I mentioned a couple in my prepared remarks, we’ve been — we’ve been winning business and winning share with both fintechs as well as more traditional banks, merchants, and others, both in the payment side of things and in the account information side of things. I would describe the US market as less developed as Europe. And so I think it’s an opportunity for us to take the learnings that we’ve had in the much more developed Europe market as well as the success we’ve had with our clients, the products, the services, the wins and the losses and bring all of that to the US market.
So we’re excited to do that. And as I mentioned, I think the US market is still at the very early stages of its development. So I think it’s a good time for us to be a competitor in the market. And we’re hopeful that over the coming quarters and years, we’ll have a chance to share with you a lot of the success that we have in the US market.
Jennifer Como: Next question, please.
Operator: Our next caller is Dan Perlin with RBC Capital Markets. You may go ahead.
Daniel Perlin: Thanks. Ryan, I just wanted to ask a question on the Visa Deep Authorization commentary and kind of that market there. I just want to make sure I understand, are you — are you doing this as a means with which to like equalize kind of e-commerce across the market for authorization rates, so that like acquirers need to be partnered with you more specifically and therefore, they’re not competing maybe shows individually on kind of author rates within e-commerce or is there something different within this platform? Thank you.
Ryan McInerney: Hey, Dan. Let me backup. I think this is a little different than what you were describing. What we found in the US e-commerce market is that it’s the most — on the one hand, it’s the most developed e-commerce market on the planet. On the other hand, it’s become the place of the most sophisticated fraud and attack vectors that we see anywhere in the world. And so what we were bringing — we are bringing to market with Visa Deep Authorization is an e-commerce transaction risk scoring platform and capability that is specifically tailored and built for the unique sets of attack vectors that we’re seeing in the US. So it’s — as I was mentioning in my prepared remarks, it’s built on deep learning technology that’s specifically tuned to some of the sequential and contextual view of accounts that we’ve had in the US market.
And the whole goal is what we do with a lot of our fraud and authorization products. We want to — we want to make it a better buyer and seller experience. We want to reduce fraud rates, increase authorization rates, increase shopping conversion for our merchant partners. And we think Visa Deep Authorization is going to be yet another tool that will help do that.
Jennifer Como: Next question, please.
Operator: Our next caller is Tien-Tsin Huang with JPMorgan. You may go ahead.
Tien-Tsin Huang: Thanks so much. It sounded like the Middle East deal activity is in a good place here. I believe Emirates is a takeaway for you. I’m just curious if there’s something new going on there from a pipeline perspective. It sounds like maybe some investing. Is this the growth market we should be paying more attention to maybe? Thanks.
Chris Suh: Thanks, Tien-Tsin. I think what you’re seeing is good execution from our sales team, doing what we do when we do it best, which is in with our clients, listening, learning, obsessing about what’s important to them and then bringing them products and value propositions that are helping meet their needs and drive their strategies and really just kudos to our team on the ground there and the great work that they’re doing.
Jennifer Como: Next question, please.
Operator: Our next caller is Trevor Williams with Jefferies. You may go ahead.
Trevor Williams: Great. Thanks a lot. This one is for Ryan. Just wanted to go back to the merchant settlement in the US, clearly you guys aren’t directly impacted by lower interchange, but I’m just curious kind of what you’re expecting the downstream impact to be on Visa, the relationships between you and your issuing banks. And if you think it in any way kind of changes the competitive dynamics at all within the US credit market? Thanks.
Ryan McInerney: Thanks, Trevor. I think the good news on this front is it brings clarity and stability to the market. This is litigation that’s been out there for the better part of 20 years or so. I think there’s been a lot of great work that’s been done to bring this to a resolution. Just to remind everyone what the main planks of the resolution are. It really is two different sets of things. One is it will reduce interchange for US — for credit cards in the US market for both Visa and Mastercard and it will have no increases in interchange for the five years of the agreement. And then the second set of things are tools that give merchants more flexibility to how they manage payments significant — specifically as it relates to surcharging and things like that.
I think, overall, it’s what I said, Trevor, which is clarity and stability that lets everybody who operates in the US market move on and move on continuing to grow the digitization of this great payments ecosystem that we’ve all collectively built in the United States.
Jennifer Como: Next question, please.
Operator: Our next question is from Harshita Rawat with Bernstein. You may go ahead.
