Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
Visa (V)Stock (Credit Services Industry, Financial Services Industry)
 Visa (NYSE: V) operates the world's largest retail electronic payments network, in terms of transaction volume and the number of branded credit and debit cards in circulation. The cards are accepted in more than 170 countries.[1] Through its VisaNet platform, the company provides its customers with a broad offering of secure processing tools. In 2007, the system processed more than 78 billion authorizations. Other value-added services include: risk management, loyalty services, dispute management, and debit issuer processing. [edit] Business FinancialsVisa's primarily revenue source comes from card service fees, data processing fees, and international transaction fees. For the fiscal year ended September 30, 2007, revenues increased from $3.9 billion to $5.2 billion. During this period, company's pro forma net income went from a gain of $453 million to a loss of $861 million. Although, in 2007, the company recognized a charge of $1.9 billion because of litigation settlements with American Express Company (AXP) and Discover Financial Services (DFS). As the largest processor of retail payments the world, Visa Inc. dwarfs its rivals. It accounts for 60% of the debit-card transactions in the U.S. market - a four-to-one advantage over rival MasterCard. As the chart demonstrates, it is also bigger by total transactions and total volume.
Visa is simply a transaction-processing company that collects a fee based on the number and dollar value of the transactions that it processes. Visa doesn't actually extend credit to customers - its member banks such as Capital One Financial (COF) do that. This lack of credit exposure means Visa is only indirectly exposed to credit-crunch-related catastrophes that have obliterated other lending businesses. [edit] Key Trends and Forces[edit] A Changing WorldInvestors have been eager to grab shares in Visa’s offering as shares of the much-smaller rival MasterCard Inc. (MA) have more than quadrupled in value since the company went public in May 2006. MasterCard shares have largely been untouched by the stock-market turmoil generated by the ongoing credit crisis and closed Wednesday at $206.39, down $1.86, or 0.88%. They are down 8% from their 12-month high of $227.18. The fervor reflects investors’ view that Visa is in a lucrative position as consumers and businesses alike rely increasingly on its electronic network to make payments instead of using cash and checks. Visa is expected to milk the phenomenon to become an even bigger cash cow than it already is. [edit] Global Payments Industry:The sector is undergoing a major shift; that is, moving away from paper-based approaches to electronic payments. From a recent Nilson Report, the global market for card purchase transactions grew at a compound annual growth rate (CAGR) of 14% from 2000 to 2006. The report forecasts the market to grow at a CAGR of 11% from 2006 to 2012. [edit] Emerging Markets:The strong growth rates in markets – such as in Asia Pacific, Latin America and Caribbean, and Central and Eastern Europe, Middle East and Africa -- should be a boost to the global payments industry. [edit] Benefits:Increasingly, customers are realizing the advantages of debit and credit cards. These include: convenience, security, rewards and premium services. [edit] Corporations/Governments:These entities realize the efficiencies of providing electronic payments, such as with vendors and employees. [edit] Internet:The growth in online shopping -- which relies heavily on electronic payments -- continues to be a boost. [edit] Mobile IndustryThere are more mobile devices than Internet-connected desktops. As cellphones and PDAs get more sophisticated, there is likely to be strong long-term growth in mobile electronics payments. [edit] Initial Public Offering:Visa will IPO around March 19 or 20 under the proposed symbol V for between $37 and $42. The company stands to make nearly $19 billion on more than 400 million shares, which would be the biggest U.S. IPO ever. Visa is currently larger than Mastercard in terms of transactions (44 billion versus 23 Billion for Mastercard) worth $3.2 Trillion in 2006. Both MasterCard and Visa are smarter than American Express (AXP) and Discover (DFS). The latter two lend money to customers and customers pay them back over time at high interest rates. [edit] Developing countries still use mostly cashThese countries have yet to stumble upon credit cards. The sad truth is that most people just can't manage cards properly in their own favor, so they end up carrying balances at exorbitant interest rates. That's neither here nor there to MasterCard and Visa, though. They just process. [edit] The steady rise of interestThis means more shopping will happen online. That will boost credit card usage as well but is not as much of a factor as developing country adoption rates. People already use credit cards when shopping in physical stores. There should be a little boost from online usage, though. [edit] People are using credit cards for smaller and smaller purchasesThese small transactions each amounting to around $5. Many stores don't even require a signature for purchases under $20 or $30. Customers find it convenient and processors love it because they get a fee. Only merchants dislike it because they have to pay a fee on each transaction. The customer usually wins out, though, and this trend toward plastic payment for everything will remain. [edit] Economic Weakness:What appears to be the steady de-sophistication of consumers all but guarantees a broader use of credit cards. People may skip their house payment, car payment, hospital payment and so on, but they still need to buy food and other items. If they're loath to shoplift, that leaves just credit cards as an option for the cash bereft. [edit] CompetitionCompetitors in the general purpose payment card industry: Discover Financial Services (primarily in the US) JCB (Japan) China UnionPay (China) Competitors in the debit card segment: Maestro (owned by MasterCard) STAR (owned by First Data Corporation) PULSE (owned by Discover) NYCE (owned by Metavante Corporation) Interac (Canada) EFTPOS (Australia) [edit] Notes |
The Shelf
|
Edit
History
Bookmark
