Looking at VISA’s Investor relations page, and recent fillings, I believe there is still plenty of time to get in on Visa’s growth opportunity.
A quick look:
Visa is at the centre of more than half of the world’s credit card transactions. Founded in 1958 (as BankAmericard) Visa cards are used over 40 million times every day. And the Visa brand is one of the most recognised on the planet.
But what do they do?
There are 3 key ways VISA makes money:
1. Service Fees:
Visa charges banks on their network a small percentage every time the customer of the bank makes a transaction (basically a commission), this fee is typically around $.07, plus 0.11% so the more a product costs, the more money Visa makes. This is particularly interesting, as it’s a built-in hedge against inflation.
In 2018, Visa’s services revenue was $8.9 billion on $8.1 trillion of network spend.
2. Data Processing Fees:
Visa also earns a fee for settling transactions between banks, these fees are based on the total number of transactions made on Visa’s network, regardless of the dollar amount. So, it costs Visa the same to process one million transactions as it does 10 million.
In 2018, Visa’s data processing revenue was $9 billion, on 124 billion transactions, or $.07 per transaction.
3. Cross Border Fees:
Visa charges fees for processing cross-border transactions, these transactions are typically harder/ more complex to process meaning the fees are much higher than normal transactions.
In 2018, Visa’s cross-border revenue was $7.2b with an estimated yield of 1%, making it Visa’s most profitable product.
Other interesting stats:
- 65% Operating Margin
- $49 billion has been paid to shareholders in the form of buybacks and dividends since 2010
There is still a lot of work to do:
- Move to a cashless society: 71% of payment volume in the US is Card & Electronic, meaning there is 29% to still eat into. By Visa’s estimate, $17 trillion is still spent on cash and check each year. And this is just the U.S there are plenty of completely unbanked countries.
- E-Commerce: Its obvious E-Commerce is growing at an enormous rate, which is great for Visa! They estimate that they earn $0.43 of every dollar spent online vs. %0.15 for physical transactions, (because you can’t use cash online) so the more that moves online, the better it is for VISA.
- B2B: Visa has always been a business to consumer company, but they’re currently exploring B2B segment with products like Visa Connect.
- Acquisition of Visa Europe
To sum everything up, I think Visa is a sure bet on global economic expansion.
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