REUTERS: Visa Inc on Thursday fell short of analysts' estimate for first-quarter revenue and said revenue this year would be crimped by incentives it provide to banking clients, sending its shares down nearly 3per cent.
The world's largest payments network said it now expects client incentives as a percentage of revenue to be in the high-end of its forecast range of 22.5per cent to 23.5per cent in 2020.
Client incentives are what Visa pays out to their issuing bank partners to increase its total payments volume (TPV), and when a partner renews, Visa's TPV goes up.
In October, Visa said about 15-20per cent of its TPV is slated to be renewed in the first half of 2020.
"Since then (the fourth quarter), it has become apparent that renewal activity in fiscal year 2020 could be even higher," Chief Financial Officer Vasant Prabhu said on a post-earnings conference call on Thursday.
Total payments volume rose about 8per cent to US$2.36 trillion in the quarter.
Visa has been spending more on rewards and perks such as airport lounge access, roadside assistance programs and travel insurance which pushed operating expenses up by 14per cent to US$2.04 billion in the first quarter.
Payments processors have also leaned on acquisitions to fend off competition from digital rivals.
Earlier this month, Visa said it would buy fintech startup Plaid for US$5.3 billion, as it seeks to expand into the digital economy.
The company's net revenue rose 10per cent to US$6.05 billion in the first quarter, but missed analysts' estimates of US$6.08 billion, according to IBES estimates from Refinitiv.
For the quarter, the company's client incentives rose 20per cent to US$1.75 billion.
The company's net income rose 10per cent to US$3.27 billion, or US$1.46 per Class A share.
On an adjusted basis, Visa earned US$1.46 per share, in line with analysts' estimate.
Visa shares, which have risen 51per cent in the past 12 months, were down at US$201.85 in extended trading.
(Reporting by C Nivedita and Amal S in Bengaluru; Editing by Maju Samuel)