Visa owns the world’s largest payments network. About 3.1 billion Visa credit and debit cards have been issued by 17,100 financial institutions. More than US$630 trillion in payments flow over Visa cards annually, while the cards are accepted at more than 40 million merchant locations as well as eight million other (mobile) points worldwide.
Visa, which traces its history to 1958 when Bank of America came up with the concept though the name Visa only appeared in 1976, provides a network that ‘switches’ payment information between cardholders’ banks and merchants’ banks around the globe. It charges the banks fees, being small percentages of the value of transactions, and earned $15.1 billion in revenue in fiscal 2016. Importantly, Visa does not extend credit to cardholders – people go to their banks for that.
Visa is a privileged member of a select group of global payment networks, alongside MasterCard, American Express and PayPal. That PayPal is the only new successful global payment network since the launch of MasterCard in the 1960s shows how hard it is to establish a payments network because a newcomer needs simultaneous acceptance by consumers and merchants. This requires mass awareness, simplicity of payment, technology ubiquity, meeting regulatory requirements and fulfilling arduous customer and merchant servicing needs.
Even the fresh competition in the payments sector helps Visa. Apple Pay, Samsung Pay and Android Pay are among those offering mobile and in-app payment facilities via their mobile handsets and through over 1,000 applications. But these companies do not have direct payments relationships with consumers and merchants. Instead, they piggyback the existing infrastructure. That means that the growth of mobile payments increases payments traffic on Visa’s network.
Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 (‘Magellan’) and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision. A copy of the relevant PDS relating to a Magellan financial product or service may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.
Past performance is not necessarily indicative of future results and no person guarantees the future performance of any strategy, the amount or timing of any return from it, that asset allocations will be met, that it will be able to be implemented and its investment strategy or that its investment objectives will be achieved. This material may contain ‘forward-looking statements’. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.
This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material. Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.
Any trademarks, logos, and service marks contained herein may be the registered and unregistered trademarks of their respective owners. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan.