Visa Partners With ATM Provider To Target Canadian Tourists

Visa (NYSE:V) is ready to expand its operations in Canada, with a strategic alliance with DirectCash, a Canadian white label ATM provider. ^[1] Under the agreement, 7,600 ATMS operated by DirectCard across the country will display the Visa logo and will allow customers easy, convenient and secure access to funds. The partnership aims to target Canada’s strong tourist industry. An annual influx of approximately 37 million tourists contributing an average of $24 billion to the Canadian economy provides a vast customer base for Visa. ^[2]

See our full analysis of Visa here

Focus On Tourists

Recent research by Visa indicates that a majority of international travelers are dependent primarily on ATMs as they to withdraw cash once they arrive rather than carry around large sums of money. The partnership with DirectCard is one of the initiatives by the company to capitalize on the recent surge in travel spend. Increased tourism has a direct impact on cross border transactions, which account for a quarter of our price estimate for Visa’s stock.

Although spending by international visitors to Canada fell by 12.8% in 2009, following the financial crisis and the Western Hemisphere Travel Initiative rules, ^[3] the 2010 Winter Olympics and Paralympics held in Vancouver helped revive the country’s tourism industry, with a 4.3% increase in tourist spending.

Visa’s international transaction volumes are expected to increase as the summer Olympics, to be held this summer in London, will have a similar effect on cross-border spend across the world. (See Visa Expects Mobile Payments Surge At Olympics) Despite limits on cross-border fees imposed by the authorities, the increased transaction volumes will reap benefits for both Visa and competitor MasterCard (NYSE:MA). (See Europe Says Fair Play Is The Order of the Day for MasterCard)

We believe that Visa’s stock is fairly valued, as our $126 price estimate is in-line with the current market price. You can gauge the effect of a change in the forecast on our price estimate by modifying the chart above.

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1. Direct Cash Payments Inc. (TSX:DCI) (“DirectCash”) announces initiative with Visa Canada to help make ATM transactions more accessible for visitors to Canada, PR Newswire, 25^th June, 2012 [↩]
2. Travel and tourism, Statistics Canada [↩]
3. Western Hemisphere Travel Initiative, Travel.Stave.Gov [↩]