) is the largest global electronic payment solutions company in the
world and has the largest network of credit and debit cards in
circulation. The company makes money by providing transaction
information and resources between the customer, merchant and their
respective banks, collecting a fee based on the number
and dollar value of transactions that it processes. Visa
competes with other card networks like MasterCard (
), Discover (
Our price estimate for Visa stands at $92.20
, which is about 35% above the market price.
Visa Positioned to Benefit from Mobile Payment
Mobile payments is the new and rapidly growing mode of
transaction which could potentially increase revenues for Visa.
Instead of paying with cash, check or credit card, a consumer can
use a mobile phone to pay for a wide range of goods and services.
Mobile payments are still a nascent development, but with more than
4.8 billion mobile phones worldwide, the opportunity is
Visa has recently announced the commercial availability of its
mobile contactless payment solution. Visa has partnered with
DeviceFidelity and by using its In2Pay technology, Visa issuers can
load the Visa mobile payment application to microSD cards,
providing account holders with the convenience and security of
mobile contactless payments.
Several smart phone models such as BlackBerry Bold 9650 , the
iPhone 4, and the Samsung Galaxy S are now compatible for use
with this technology. As the demand for mobile payment
services accelerates in global markets, Visa is positioned to
benefit from this trend.
Higher Transaction Volumes Could Generate Stock
Visa earns revenues by charging fees for its transaction
processing service, which involves routing payment information to
facilitate the authorization, clearing and settlement of
transactions. These revenues depend heavily on the number of
transactions that are processed by Visa.
With the rapid rise in use of debit and credit card as a
preferred mode of payment over cash and check, the number of
transactions processed by Visa has grown steadily by 10% in the
last couple of years, except 2008 when the economic downturn caused
transaction volumes to drop by almost 11%.
The number of mobile payment users worldwide increased to 73.4
million in 2009, roughly a 70% increase over 2008, and could breach
190 million by 2012.
The amount of transaction through mobile payments could reach
$110 billion by 2013, at an annual growth rate of over 100%. Due to
the tremendous rise in mobile payment users, we forecast the number
of transactions processed by Visa to grow to 82 million by
However, the sharp rise in mobile payment users, coupled with
Visa's strong market position, could trigger a more substantial
increase in Visa's transaction volumes. If Visa's volumes reach 100
million by the end of our forecast period (vs. the 82 million that
we project in our base case), there could be an additional 6%
upside to our price estimate, which already stands about 35% ahead
of market price.
Drag the trend-line in the chart above to see the impact of
trends in Visa's total transactions processed on the company's
See our full analysis of Visa here