Card networks such as Visa (NYSE:V) and MasterCard (NYSE:MA) have witnessed lost revenues due to declining fees charged per transaction after the Fed's proposal in December last year to limit the debit card swipe fee at 12 cents per transaction. Prepaid cards can help Visa and MasterCard recover lost revenues as the Fed did not limit the swipe fees for most prepaid cards. Visa is the largest global electronic payment solutions company in the world and has the largest network of credit and debit cards in circulation. It competes with other card networks like MasterCard (NYSE:MA), Discover ( DFS ) and American Express ( AXP ).
We have a price estimate of $86.09 on Visa's stock , implying a premium to market price.
The exemption of prepaid cards is encouraging and many banks are pushing the sale of prepaid cards, resulting in a 35% increase in dollar volume of prepaid card transactions to $65 billion in 2010 from $48 billion in 2009.. Government benefit programs such as unemployment compensation, disability benefit and employers' payrolls form the growth opportunity for prepaid cards.
Sustained growth in the prepaid cards market could help increase the number of transactions processed by Visa from 47.6 billion in 2010 to our projected 87 billion by the end of our forecast period, an annual growth rate of 9%.