People are using credit cards for smaller and smaller purchases, amounts 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.
Finally, economic weakness and 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.
Developing countries still use mostly cash, and have yet to stumble upon the catastrophe, er, convenience that is 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.
Indeed, since the last recession, Visa has been able to get consumers to increasingly use its debit and credit cards for the purchase of such staples as gasoline and groceries, especially in the developed countries, and to cover such household budgetary costs as utility bills. The upshot: Visa estimates that about 42% of its transactions fall into the "nondiscretionary" category, way up from the 27% recorded for 2000.
"We operate in a large global market undergoing a significant shift from cash and check to electronic payments, said Visa Chairman and Chief Executive Officer Joseph W. Saunders. "We believe Visa is well positioned to build upon our past success and take advantage of this migration to electronic payments."
On December 14, 2009 Visa was included into the S&P500. Since many mutual funds and index fund managers track the S&P500, they will be forced to purchase shares of Visa to keep pace with the overall returns of the S&P500. An increase in the demand of Visa shares will drive up the price of each share.
Visa issued an IPO around March 19th under the proposed symbol V being oversubscribed at 44$. The company made nearly $17 billion , possibly increasing this amount to $19 Billion; on more than 400 million shares, which would be the biggest U.S. IPO ever.
In comparison, Mastercard (MA) went public two years ago. Since closing at $46 on its first day of trading, it's gained more than 300%. Its earnings growth is forecasted at 20% annually for the next several years.
Visa and Mastercard; head to head: In 2006, MasterCard processed 23 billion transactions adding up to $1.9 trillion in spending.Whereas, Visa processed 44 billion transactions adding up to $3.2 trillion.
The steady rise of the internet 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.
I have been in the world of investment banking for over thirty years.
Is the market bad right now? The answer is yes! However, we are on a
return track, as "we" know the new admin will spark a rally, we are
vastly undervalued. Regarding Visa, we may not see the 100's for some
time, however this stock will move up in the next two years as the
long-term market share is over 86%. People are not going to stop using
credit or debit cards, and the holiday season will not be as bad as
most are predicting. It sickens me to see the bashers on this board
telling people BS just so they can dump the stock and short it.
Bashers, I have news for you the C recovery plan is in place and it
will be announced Monday, which will bring all the financials up. The
SEC is also going to ban shorting; this statement will be made
sometime this week. Also, take a look at the technical indicators,
Visa bottomed out on Friday, and picked up a surge of interest at the
end of the trading session.I have heard through circles that both
China and the Saudi's are going to rescue the economy. Both have an
interest in Citi. I look at it this way: If anyone has ever studied
economics/political science, there is something called Power
Transition Theory, to make the history lesson short, we took over the
International System from Britain and became the hegemonistic power in
terms of the financial system. We have declined as a power, and other
nations are going to rise up and take it from us, w/o conflict.
Simply, China is that nation. China already owns several holdings here
in the U.S., and they need us to keep their economy afloat. In
exchange for the bailout we will create a so-called "balance" of trade
to sustain us, but the greater percentage will go to China. If you
would like I can explain in greater detail. However, something big is
coming in terms of this. It may not be made public, for the fear of
the US selling out, however this is how it will shake out. Watch the
Asian markets tonight, they will be up. This rally will continue
Monday, now is the time to buy as this will shoot back into the mid
55's. Enclosed is a chart to view:
262 holders have increased positions to 76,103,654 shares
451 holders have held positions w/o activity 114,685,611 shares
86 holders have new positions with 30,448,543 shares
71 holders have sold out for "cash" with 21,037,757 shares
65% of this stock is owned my major funds, whom make money!
It’s Visa’s unique position that makes it such an alluring investment. In fact, the Visa deal is one of the better IPOs to come down the pike in some time. For one thing, the company is the market leader, dwarfing its rivals in terms of both transaction volume and total transactions .
Moreover, the firm is very well insulated from the credit issues that have scorched the very banks that issue Visa-brand credit cards. The banks - not Visa - carry the consumer debt on their books. Visa generates revenue and profit from transaction fees, which have been advancing steadily for years. In fact, those fees even increased during the last two U.S. downturns - 1991 and 2001.
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.
There are three basic points investors need to understand - especially with the chaotic credit markets investors now face: