Visa’s Double-Digit Growth Contines With Global Shift To Cashless Payments

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Visa (NYSE:V) continued to show impressive growth helped by global adoption of credit and debit cards that raised net revenues for the first fiscal quarter of 2013 by 12% year-on-year, taking the calendar year growth to 13%. The company maintained momentum in transaction growth as Visa processed transactions increased by 4% year-on-year, the payments volume also increased by a similar percentage. Rebates given to banking clients remained around 16% through the three months ending December, in line with the historical trend.

Our $151 price estimate for Visa is in line with the current market price.

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CyberSource Impresses

In July 2010, Visa acquired CyberSource, a data center operator. Billable transactions through the online payment gateway have grown rapidly since the acquisition with a 28% year-on-year growth reported in the last quarter.

The Dodd-Frank bill, which requires banks with more than $10 billion in assets to use separate payment processing networks for signature authorized and PIN authorized debit card transactions, [1] continued to affect Visa’s debit transaction volumes, although the effect was less pronounced in the last quarter than previous quarters. The debit payment volume in the U.S. declined 4% in the December quarter, an improvement over the 6% decline observed in the September quarter. We expect the effect to wear off in the long term as the market adapts to the new regulations.

Credit card volumes continued to grow with an 11% year-on-year increase in the U.S. and 7% growth rate outside the U.S. We expect this trend to continue over the next few years with increased penetration in developing economies. Please read our article: Will Visa And MasterCard Be Able To Capitalize On Mobile Wallet Technology?

Cross-Border Activity

International fees account for a quarter of revenues and have maintained a double-digit growth rate over the last few years. Visa charges its banking clients around 1% of the gross dollar volume of an international transaction, where the acquirer’s and the issuer’s country is different. The global cross-border volume increased by 11% in the December quarter, with 9% growth in the U.S. and 11% outside the U.S.

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Notes:
  1. The Durbin Amendment Explained []