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Visa's Outlook: Developed Economies, India, and e-Commerce

PART:
1 2 3 4 5 6 7 8
Part 6
Visa's Outlook: Developed Economies, India, and e-Commerce PART 6 OF 8

Visa’s Strategy Related to Incentives and Payments Volume

Management’s view

According to Visa (V), its volumes and incentives are directly proportional to each other. As a result, the rise in volumes would lead to a rise in incentives.

Another measure that adds to the growth of incentives is the level of competition. A rise in incentives can occur due to the company’s strategy to position itself in the minds of its customers.

Visa’s Strategy Related to Incentives and Payments Volume

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A rise in incentives would be beneficial to Visa when seen from the long-term perspective. Payment companies need to plan incentives in a way that could provide growth to their net revenues.

Visa reported a return on invested capital on an LTM (last-12-months) basis of ~15.2%. The company’s peers (XLF) Total System Services (TSS), Fidelity National Information Services (FIS), and Vantiv (VNTV) reported returns on invested capital on an LTM basis of 8.8%, ~4.4%, and ~7.7%, respectively.

Growth drivers

According to Visa’s (V) management, the momentum in the digitization of cash is not slowing down. These factors are trending upward as the concept of digitization is gaining global support.

In the past five years, Visa has witnessed growth of ~10.0% in its payment volumes, which is mainly due to two factors. The first factor is a rise in the global nominal GDP, and the second factor is the penetration of cash. Movement in the nominal GDP could also lead to upward movement in consumer expenditures.

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