Visa Credit Card Network to Enjoy Record Selling Numbers
Visa credit card applications have seen a growing number of consumers demand lately as paying with this network's cards is becoming more popular. Visa's profits have increased for yet another reason. The company successfully sold out 406 million shares at $44 each, against the forecast $42 for each share, and the raised $17.9bn is being now allocated for particular purposes.
The shares issuance which took place in March 2008 was claimed to be the biggest stock offering at the time and the gain is expected to cover some of the company's due costs.
The major part of the proceeds will go to pay to the banks and financial organizations that work with the Visa card payment system. Another part was directed to cover expenses stemming from a number of litigated cases, the American Express's case being one of the most celebrated ones.
Last year Visa was accused of abusing credit cards in Antitrust Rule, namely of blocking banks from issuing products of the rival networks, American Express and Discover Card.
American Express then claimed that it was suffering from the lost business totaling to perhaps billions of dollars and after the US Supreme Court resolved the case in favor of American Express, the company determined the exact amount of the compensation which equaled to $2.1bn.
So, Visa after the profitable sale of its shares has made up for the loss. Visa financial services company, being the world's giant card payment network and issuing both, debit and credit cards, has always enjoyed the major part of the market, outrunning such significant issuers as American Express and Discover.
Today, consumers and businesses still prefer Visa cards to AMEX and Discover plastics basically for the reason of the global acceptance and services the company provides. Research shows that in 2008 Visa, together with MasterCard, is still enjoying greater trust and respect among cardholders.
We may see a different situation in a while, however, as Discover card has made a significant move towards expanding its business to the worldwide stage. Its purchase of Diners Club International, previously belonging to Citigroup may change the alignment of forces, putting Discover credit card business on equal footing with Visa.
For now, Visa admits there may be some additional demand for its shares and if there is, the total revenue may come up to $19.7bn.
Visa pushes its way forward despite the not so favorable developments on the credit card market. And while its initial public offering campaign won't probably have any direct and notably positive effect on cardholders, the banks selling Visa cards will see great revenues and it might keep them from withdrawing credit lines and raising interest rates.