How Increased Credit Card Usage Can Impact Visa’s Stock Price
As cash usage declines across the developed world and mobile payments become more and more prominent, Visa (NYSE: V) has a massive opportunity to grow its business. One of the biggest revenue streams for the payments company is the revenue it generates from transaction fees. A transaction fee is the fee that Visa charges for each transaction on its payment network. This includes the sum of the fee paid to the issuing bank, a settlement fee paid to the acquiring bank, and a maintenance fee for accessing Visa’s databases and servers. As more and more of payments are paid online, Visa has the potential of generating significant revenue growth from this segment.
The table below shows three scenarios in which the number of transactions made on each Visa issued credit card has been changed. The first scenario keeps the average number of transactions on each Visa issued card constant at 28.5. The second assumes a 3% annual growth and the third a 3% decline. As one can see from the table, a modest 3% growth can result in a 10.3% increase in the Trefis price estimate for the company. Similarly, a 3% decline can result in a 9.2% reduction in our price estimate for the company.
Have more questions about Visa? See the links below:
- How Much Did Visa’s Revenue & Gross Profit Grow In The Last Five Years?
- How Much Can Visa’s Revenue Grow In The Next Five Years?
- What Is Visa’s Fundamental Value Based On Expected 2016 Results?
- How Has Visa’s Revenue Composition Changed In The Last Five Years?
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