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Visa: Can India Adopt Cashless Transactions?


Dec. 7 2017, Updated 10:31 a.m. ET


In November 2016, the Indian government’s demonetization initiative had a significant effect on the country. Visa (V) saw a significant uptrend in its transactions following this move, as consumers had no other option but to make payments through credit or debit cards.

As India’s economy has normalized, Visa is expected to post slower growth in fiscal 1Q18 compared to fiscal 1Q17.

Visa considers India a good opportunity for growth. Visa has been working to help make India a digital economy with the help of its partners and the country’s government.

Visa has a free cash flow (or FCF) yield of ~2.0% on an LTM (last-12-months) basis. The company’s peers (XLF) Vantiv (VNTV), Fidelity National Information Services (FIS), and Total System Services (TSS) reported free cash flow yields of ~3.8%, ~2.9%, and 4.3%, respectively, on an LTM basis.

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Cost of acceptance

Visa has a positive outlook on a lower cost of acceptance, as it believes that scan-and-pay technology could help customers make payments faster. This trend could depend on consumers’ willingness to adopt these new habits, especially in a cash-focused society like India.

During the demonetization initiative, customers preferred using other modes of payments, but that shift was temporary. Ample cash is currently available, and consumers are increasingly moving toward cash transactions.

In the near term, Visa’s management expects that it could determine whether consumers in India would support cashless transactions.


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