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Visa looks for more partnerships, investments to compete in B2B payments

Partnerships are "key" for Visa Inc. as it looks to build out its distribution in the business-to-business payments market.

The megamergers in the banking technology sector have thrust B2B payments into the spotlight. The tie-ups — Fiserv Inc.-First Data Corp., Fidelity National Information Services Inc.-Worldpay Inc., and Global Payments Inc.-Total System Services Inc. — will round out the combined companies' solutions, as payments players are increasingly looking to provide a full end-to-end offering.

When asked how Visa will respond to these new combined offerings and especially how it will build out its cross-border distribution, Chairman and CEO Alfred Kelly Jr. said he intends to build a network of partners.

"Partnerships are not simply additive to our business model, they are fundamental to our business model, whether it'd be our traditional financial institutions or fintech," Kelly said on a call to discuss quarterly earnings. Calling Visa's pipeline of partnerships "robust," Kelly added that he expects to sign several other "significant renewals and new deals" in the remainder of the fiscal year 2019.

The payments giant highlighted several partnerships in key development markets around the world, including a co-brand credit card with Ola Cab, the largest cab app aggregator in India, and a prepaid card in Brazil with Colombian delivery startup Rappi SAS.

Visa also extended its long-standing partnership with JPMorgan Chase & Co. through the end of 2029, though Kelly declined to provide additional details about the agreement.

Analysts expect more deals are on the horizon, although Kelly said Visa's M&A strategy has not changed. In the most recent quarter, Visa closed its acquisition of U.K. cross-border payment services provider Earthport PLC. It also agreed to acquire the token services and ticketing businesses of Rambus Inc., a silicon IP and chip provider, as well as Verifi Inc., which provides solutions that reduce fraud risk and eliminate chargebacks in the payments industry.

The chief executive attributed successful partnership wins in part to having surpassed the integration phase in Europe and also to focusing more on financial technology.

"We were a little bit slow out of the chute a year and a half ago," Kelly said. "But over the last five quarters or so, we've been very, very focused on fintechs and making sure that we're easy to do business with [and] easy to integrate with."

In the third fiscal quarter, Visa's payments volume grew 9% on a constant-currency basis year over year, while cross-border volumes were 7% higher than the year-ago quarter.