Visa is Tapping Huge Growth in Mobile Banking Volumes in Africa
Earlier this year, Visa (NYSE:V) acquired Fundamo, a leading provider of mobile services for financial institutions and mobile network providers in developing countries mostly in Africa and the Middle East (See Visa Furthers Mobile Banking Push by Acquiring Fundamo). Leveraging its investment in Fundamo, Visa is creating prepaid accounts linked to mobile phones across Africa and the Middle East as the company aims to capture transactions from a majority of people in these regions who are still unbanked or under-banked. [1] Visa, the largest payments network in the world, is aggressively pushing mobile banking as it faces stiff competition from MasterCard (NYSE:MA), American Express (NYSE:AXP), Capital One (NYSE:COF) and Discover Financial (NYSE:DFS).
We have a price estimate of $90 on Visa’s stock, about the same as the current market price.
See our full analysis of Visa here
Mobile Payments to Boost Transaction Volumes
In developing countries a large number of people don’t have a bank account but do have a cellphone. Visa’s latest offering will utilize MTN Group Ltd.’s cellular network to tap 5.7 million customers in a dozen countries and enable them to buy goods, receive payments or withdraw money from ATMs without a plastic card.
The potential for mobile payments is huge. According to Juniper Research, a leader in mobile statistics services, about 100 million people have gained access to previously unavailable banking services through mobile devices in the past decade. Additionally, the total value of mobile payments transactions – including payments for digital and physical goods, money transfers and Near Field Communication – will reach $670 billion by 2015, almost three times the current size. [2]
The rapid increase in mobile payments should fuel Visa’s transaction volume over the next several years; there could be a 10% upside to our price estimate if Visa’s transaction volume reaches 140 billion transactions by 2018 instead of our current estimate of about 100 billion.
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Notes:- Visa Going Mobile in Africa as Phones Link to Payments Network, Nov 17, 2011, Bloomberg [↩]
- Press Release: Mobile Payments Market to Almost Triple in value by 2015 reaching $670bn, according to new Juniper report, July 5, 2011, Juniper Research [↩]