Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

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Visa Keeps Growing and Growing

The fastest growing payment solution around these days may not be Apple Pay. Instead it could be Visa (NYSE: V), even though Mr. Market has paid it scant attention the credit card giant’s revenue has been growing at an astounding rate.

Visa reported a TTM revenue of $13.88 billion on September 30, 2015, an increase of $1.18 billion over September 2015. Interestingly enough Visa’s revenue has been increasing by around $1 billion a year for the last few years. It reported revenues of $11.78 billion in September 2013, $10.42 billion in September 2012, and $9.188 billion in September 2011.

This is in contrast to MasterCard (NYSE: MA) where revenue has been flat. MasterCard reported a TTM revenue of $9.155 billion in September 2014 and $9.59 billion in September 2015. Meanwhile American Express (NYSE: AXP) saw its revenues decline slightly for the first time in years. Amex reported a TTM revenue of $33.65 billion in September 2014 that fell to $33.61 billion in September 2015.

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So why Does Visa Keep Growing and Growing?

Okay so what is going on here? Why does Visa’s revenue keep growing and growing while its competitors’ revenues are not.

My guess is that changing patterns of consumer behavior are benefiting Visa over competitors. These trends include falling use of credit cards in the United States, in 2014, a Gallup survey found that 29% or nearly one third of Americans had no credit cards up from 22% in 2008, reported. The number of credit cards Americans carry is also falling, only 18% of Americans carried more than two credit cards in 2014, compared to 25% in 2004.

This benefits Visa because it is far more widely accepted. A person with just one or two cards wants to carry a card he or she can use almost anywhere namely Visa. Visa is accepted at almost all retailers in the United States and it is widely accepted overseas. Another trend that helps Visa is the growing popularity of credit card alternatives including debit cards, checking account debit cards, gift cards and preloaded debit cards many of which carry the Visa brand name.

These trends help Visa because the volume of electronic payments is increasing even though the number of credit cards is falling. Visa actually processes more payments and issues fewer cards.


Another trend that benefits Visa is the growing move away from traditional credit cards in retail. American Express took a big hit over the past year when Costco Wholesale (NASDAQ: COST), America’s third largest retailer dumped its cards in favor of Citigroup (NYSE: C) bank Visa cards. One reason why Costco did this was to expand its customer base beyond just Amex card holders.

Other retailers are experimenting with Apple Pay and the Merchant Customers Exchange or MCX, a consortium of big retailers that includes Walmart Stores Inc. (NYSE: WMT) is trying to develop its own payment solution CurrentC with help from JPMorgan Chase (NYSE: JPM). A big reason for this is that retailers do not like paying out fees to credit cards.

My prediction is that these trends will continue which will benefit Visa. Visa’s business and its revenues will continue to grow for the foreseeable future even as those at the other credit card issuers stay flat.

Expect Visa to remain the dominant payment solution for the foreseeable future and its revenues to grow because of new options such as Apple Pay and Android Pay. There is little to stop Visa’s growth and much to propel it forward today’s credit card market.






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