A Closer Look at Visa's Assessment Fees

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Assessment fee revenue is the second most important source of value for Visa after transaction fee revenues and accounts for around 28% of the $85.03 Trefis price estimate for Visa, which is around 12% above the current market price. Visa's ( V ) assessment for customers is charged to banks and financial institutions for participating in the card programs that carry the Visa brand. Assessments are one of primary sources of revenue for card companies like Visa, MasterCard ( MA ) and American Express ( AXP ).

Banks and other financial institutions find it useful to associate with Visa brand and attract customers by providing them with a large network of Visa merchants and ATMs. In turn, Visa charges these banks an assessment fees based on the total payment volume of business generated for them through Visa branded products.

Key Drivers of Assessments


1. Assessment Fee Percentage

Assessment fees charged by Visa were stable at 0.0925% over the last five year, but looking forward, we expect this to decline gradually to nearly 0.078%  because of the increasing payments volume and the financial services reforms which restricts interchange fee.

2. Payment Volumes

Payment volume on Visa branded products increased from nearly $2.1 trillion in 2006 to $3.1 trillion in 2010 driven by increased purchases made on debit and credit cards. Going forward, we expect an annual increase of around 10% in the payments volume driven by a rapid rise in the number of Visa branded cards in circulation.

Card issuance is growing at mid to high single digit rates globally demonstrating the continuing growth opportunities for Visa as a result of the shift towards electronic payments from traditional cash. The number of mobile payments users is also growing steadily which will further boost the payment volume for Visa.

Drag the trend lines above to see how these factors impact the stock price, or you can see how they impact the overall model by visiting our site.

See our full analysis of Visa



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 , COF , MA , V , WFC

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