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Visa’s profits have risen from $716 million to $1 billion for the quarter ending June 30th. This is a gain of 40 percent for the world’s largest payment processor as compared to the same period last year. The gain in share price of $1.43 outpaced the increase of 97 cents during the same timeframe last year. Analysts originally predicted that the share price would rise by $1.23. As a result, Visa has surpassed analysts’ estimates for a fourteenth consecutive period.
Reasons For Visa’s Success
All of this is a result of increased consumer spending via Visa cards. The amount of transactions that were processed rose by 2 billion to 13 billion as compared to a year ago. When adjusted for currency fluctuations, worldwide spending via Visa cards rose by 13 percent to $941 billion. In the US, consumer purchases via Visa cards rose 9.8 percent as compared to 5.9 percent in the same period last year.
Current and Future Outlook
During the past year, Visa has received 59 percent of it’s revenues in the United States. However, as US limits on the swipe fees that can be charged to merchants may hinder it’s revenues in the future, Visa hopes to obtain over 50 percent of it’s revenues from foreign markets by 2015.
Despite the mentioned regulatory changes, Visa currently dominates the payment processing industry by a large margin.
It handled 66 percent of the worldwide payment transactions last year. This amounts to nearly 79.5 billion transactions. At a distant second was MasterCard with 25 percent of the market.
At a even more distant third was UnionPay Co., a payment processor based in Shanghai, China with 4 percent. Closely behind UnionPay Co. was American Express at 3.9 percent.
As far as the stock market is concerned, Visa’s shares climbed 34 cents on news of the profit. Their stock price is expected to rise even further as investors become more accustomed to the modern regulatory structure. However, this may be mitigated by the fact that Visa’s revenues will not be as high as they could be with the recent regulatory changes. Overall, it does not appear that Visa is a bad bet to invest on for the foreseeable future.