Visa Investors Surprised by Earnings Miss

Visa Inc. (V), the world’s largest payment processing company by revenues, reported its fourth quarter (4Q) earnings for fiscal year (FY) 2013 on October 30. The results were modest and failed to capture the interest of investors, who were expecting a stellar performance, given that card service companies have performed quite well in recent quarters. The share price of Visa fell 2% following its earnings release.

For the latest quarter, Visa reported a net income of $1.2 billion, up 15% from the same quarter last year. Diluted EPS (earnings per share) were $1.85, a 20% better result than $1.54 in 4QFY12. Net income for the fiscal year ending September 30, 2013 increased 18% to $5 billion, which translated to per share earnings of $7.59. EPS was 23% higher than it was in FY12 but missed analyst estimates by a minute 0.07%. V.

Mobile Payments: Plastic is so Passé

Mobile payments refer to payment services that are made through mobile devices. This may become the next disruptive technology, based on the growth in the number of mobile wallet apps globally and the adoption of mobile payment methods by large businesses like Starbucks Corporation (SBUX) which has been an early adopter of this technology.

 

The mobile payments arena is experiencing massive growth, but the industry is still quite fragmented, with numerous players competing for a dominant position. Plus, there are impending security and privacy concerns over the mobile payment technologies used.

The industry is likely to see consolidation as large payment service and card companies buy out smaller online networks in order to increase market share and revenues. Internet retailers like eBay and Amazon.com, Inc. (AMZN) are also expected to acquire companies and new technologies to expand. read more Mobile Payments.

Visa: License to Buy

Visa Inc. (V) is the world’s largest global payments company, with a proprietary network that interlinks banks, retail merchants and payment houses around the world. It is part of a unique league of financial services companies that do not issue cards or extend credit to customers, but instead offer payments products and services in partnership with banks and merchants to facilitate the transfer of money.

The company, headquartered in Foster City, California, was recently added as a component of the Dow Jones Industrial Index (Dow 30), along with the Goldman Sachs Group, Inc. (GS) and Nike, Inc. (NKE). With Visa’s purchase volumes making up a substantial chunk of total US retail sales, the company’s financial performance is a primary indicator of the level of consumer spending in the American economy. read more Visa.

American Express – Experience Some Express Growth

American Express Company (AXP), also known as AmEx, has traditionally been associated with wealth and big spenders. While it is classified as a diversified financial services company, it is considered part of the consumer finance sub-industry as its principal businesses involve charge and credit card payment products, and travel-related services to consumers and businesses worldwide.

The company has certain core advantages and growth drivers that differentiate it from other card companies. Whereas other card companies either issue cards or process transactions, American Express issues its own proprietary cards and processes online and merchant transactions on its own network.

We think AmEx is a solid play with potential to grow, based on the following data on its major sources of income. read more American Express Company.

Africa: The Next Great Growth Story for Visa and MasterCard?

Africa's role in the global economy is visibly changing. It is no longer the world's tip jar, but rather a formidable growth pillar.

Kenyan telecom company Safaricom, for instance, is the world leader in mobile payments. More than 17 million of Kenya's 40 million citizens use Safaricom's mobile payment service, M-PESA. In addition, close to 25% of Kenya's Gross National Product flows through the service.

Interestingly, the success of mobile money is not an exclusive Kenyan affair. Africa as a whole is embracing mobile money as a way to enhance convenience and security as well to step up efforts in financial inclusion for the unbanked. read more.

Card Services Industry – Plastic Money Plays

The US card services industry comprises companies that process credit and debit card transactions on behalf of merchants and card issuing companies (such as banks). These companies also facilitate global fund transfers through their payment networks and merchants and financial insitutions pay them a fee for these services.

The industry is dominated by four major companies that process payments and offer value-added services to their clients. read more.

Debit Cards Set to Take Over Credit Cards

The first modern credit and charge cards were introduced in the 1950s, and that allowed consumers a cashless luxury to buy now and pay later. Since then, credit cards have also been a source of debate because of rumors and lawsuits centered on unethical and predatory practices by financial institutions. While the shift from cash based transactions to non-cash methods of payment has been a highly visible trend, there are more intricate trends in the global payments industry that are growing at a high rate.

Credit cards are being increasingly viewed with skepticism, mainly due to their high annual percentage rates (APRs) and often vague contract terms, many of which the average consumer fails to understand. It’s no wonder then that the average credit card debt for US households stands at $7,100 as of August 2013, down 1.08% from last year. It is also not surprising that after the 2008 financial crisis, as a result of tightening credit policies, the average number of credit cards held by Americans declined to 1.96, as of July 2013. The average number of cards held by Americans stood at 3.7 in 2009. Read more.