Visa Credit Card Profits

Visa Credit Card Benefits from Unbelievably High Demand

After the initial public offering which Visa performed on March, 19, its stock has increased more than 70% and its overall profit had risen 28% by May 2008. Such a steep increase in Visa profits is not only the result of the public offering where a share was sold at $44, but also the logical consequence of its growing activity outside the United States.

Previously always accepted at millions of locations worldwide, Visa is never going to slack its credit business grip and continues to report about its customer base increasing rather than otherwise. So, what is Visa' closest customer target?

Despite the credit card crisis and weakened economy, US customers are still choosing bankcards as a source for everyday spending and the percentage of Visa card usage is gradually rising. However, the greatest boost was recorded outside the USA, in developing countries, whose economy is yet on the rise and expects to see a large and competitive credit card market in the nearest future.

Spending with US-based Visa cards is also reported to be growing, just like it is with Visa's rival credit and debt card processors, but it does not seem to promise the same great revenues as developing markets do.

Credit card industry trends analyzed by TransUnion credit reporting agency do prevent Visa from building castles in the sky concerning the USA's sick economy. But, as Byron Pollitt, chief financial officer, assumed, Visa business will inevitably be impacted by the softened developments in the American economy, and this is only a matter of time.

In as soon as three years Visa credit card company expects to achieve an annual net revenue increase of up to 15%, annual adjusted growth of a share price by 20% and annual free cash flow of $1billion or more.

Interesting to note, even if economy remains on the same level and lending companies continue suffering from the credit-crunch-related developments, Visa will still stay on the safe side.

Being actually a transaction-processing company, Visa does not extend credit to customers. It is done by its member banks such as Chase, Capital One, Citibank and others.

Visa will still continue collecting fees from the banks, based on the dollar amount of the transaction processed, being only indirectly exposed to credit crisis and revenue loss.

For this reason the company does not threaten its business operating in developing countries. The sad truth is that their people have not got accustomed to the proper credit card management and still end up with gross debts at exorbitant rates.

But it makes no difference to Visa. It just operates and earns great revenues doing it.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.