2 Factors Driving Payments Volume for Visa

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Visa ( V ) recently reported its fiscal Q2 2011 earnings and posted net operating revenues of $2.2 billion, an increase of 14% from $1.9 billion in the same period last year. Revenue growth is primarily  payment volumes, international transaction volumes and the number of processed transactions. Below we look at the factors behind the five consecutive quarters of year-over-year growth in payments volume. Visa competes with other card networks like MasterCard ( MA ), Discover ( DFS ) and American Express ( AXP ).

We have price estimate of $86.09 on Visa's stock which is about 8-9% above the current market price.

Payments volume is essentially the total global dollar volume of card purchases made by Visa cards worldwide. It includes purchases made on all Visa branded credit and debit cards. Visa's total payments volume increased by 13% in Q2 2011 compared to same period last year. Payment volumes in Q1 rose around 15%, and in the U.S., payment volumes grew 12% in Q2 2011 and 15% in the rest of the world.

Factors Behind Growth in Payments Volume

There are two major forces driving growth in payments volume:

  1. The continued shift from paper based transactions to electronic payments because of the dramatic change in the way people connect and transact across the globe.
  2. The widespread adoption of mobile and internet technology fueling the growth in mobile payment users. We believe that globally mobile payment users will rise to 204 million in 2013 and the number of Global Mobile Payments transactions occurring will rise to $110.0 billion in 2013, an annual growth rate of 105%.

The combined effect of these two factors will push Visa's payments volume to $4.9 trillion by the end of our forecast period from $3.1 trillion in 2010 at an annual growth rate of about 7%.

See our full analysis of Visa here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: AXP , BAC , DFS , MA , V

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