Increased Spending, Electronic Payments Beneficial for Visa


Dec. 4 2020, Updated 10:52 a.m. ET

Consumer preferences

Consumers are using more technology and electronic media to carry out their purchases. The shift toward an organized technology-driven market is beneficial for the global payment-processing industry. Visa (V) has consistently seen increases in the total number of transactions over the past few years. Total transactions represent the payments and cash transactions reported by the company’s clients on their operating certificates. The company reported total transactions of 27.9 billion in fiscal 4Q15, as compared to 25 billion in 4Q14.

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Total transactions grew by 11% on a YoY (year-over-year) basis. The composition of the spending changed marginally. Of the total transactions, 38% were credit transactions. The remaining transactions were made with debit cards. US transactions recorded 11% growth, while growth in international transactions was flat. Processed transactions include those involving Visa, Visa Electron, Interlink, and Plus cards.

Declining oil prices affect Visa’s international growth

Oil and other commodities have seen a continual decline in their prices due to the slowdown in China. Visa’s international growth rate fell primarily due to Russia’s impact and falling commodity and crude oil prices (USO). Visa transferred the domestic processing of payments to the new National Payment Card System of Russia in April. International processed transaction growth came in at 13% when normalized for the transfer of domestic processing in Russia, which started at the end of April.

Visa expects the negative impact on process transaction growth to continue during the next quarter. In October, its process transaction growth rate was 8%. The US growth rate was 11%, and the international growth rate remained flat.

Visa achieved operating profit margins of 65% in the last fiscal year, which ended September 30, 2015. Here’s how some of Visa’s peers in the payment-processing industry fared with their operating margins in the last fiscal year:

  • MasterCard (MA)—54%
  • American Express (AXP)—25%
  • Discover Financial Services (DFS)—43.6%

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