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Products: Visa Inc. (V)

Transaction Fees(Transaction Fees)
Assessment Fees(Assessment Fees)
International Fees(International Fees)
Service Fee(Service Fee)

Transaction Fees

What is being offered?

Visa's transaction processing services involve the routing of payment information and related data to facilitate the authorization, clearing and settlement of transactions between Visa issuers (financial institutions that issue Visa cards to cardholders) and acquirers (financial institutions that offer Visa network connectivity and payments acceptance services to merchants).

Authorization is the process of approving or declining a transaction before a purchase is finalized or cash is disbursed.

Clearing is the process of delivering the final transaction data from an acquirer to the issuer for posting to the card holder’s account and the calculation of certain fees and charges that apply to the issuer and acquirer involved in the transaction,. It also includes the conversion of transaction amounts to the appropriate settlement currencies.

Settlement is the process of calculating, determining, reporting and transferring the net financial position of the issuers and acquirers for all transactions that are cleared.

For the above services, Visa charges its card holders authorization fee.

Who is buying?

Small and Large scale banks and other financial institutions

Competitors

MasterCard, American Express, JCB, Diners Club, Discover

What customers care about?

1. Secure and reliable network

2. Transaction fee charged

3. Merchants network where Visa cards can be used

Sources of income

Visa earns data processing revenues from the authorization, clearing, settlement, transaction processing services and other maintenance and support services that facilitate transaction and information processing among customers globally and Visa Europe. Data processing revenues are based on information accumulated from VisaNet, the company's secure and centralized, global processing platform, which provides transaction processing services by linking issuers and acquirers.

Visa's Strengths

  1. Three synchronized processing centers
  • Visa owns and operates VisaNet, which consists of three synchronized processing centers, including a new data center on the east coast of the United States that replaced an existing data center in March 2009. In addition, Visa Europe operates one processing center in the United Kingdom. These centers are linked by a global telecommunications network and are engineered for redundancy. Intelligent access points around the world complete Visa's global processing infrastructure and enable merchants and financial institutions worldwide to access its core transaction processing and value-added services. These centers allow Visa to process virtually all Visa transactions occurring in the United States and also process virtually all Visa cross-border transactions (that is, transactions where the issuer and the merchant are located in different countries). Visa owned centers helps Visa to keep costs low and also provide customers with a reliable and secure service.
  1. Strong merchant base
  • Visa has a presence in over 200 countries currently serving a customer base of 15,900 financial institutions. In addition Visa cards are accepted at 1.7 million ATM's (as of March 31, 2010)

Total Visa Cards in Circulation

This represents the total number of Visa cards in circulation or the total number of Visa payment accounts.

Total Visa Cards in Circulation have been growing steadily with global expansion, from 2.2 billion in 2013 to 3.14 billion in 2017.

Chart: Total Visa Cards in Circulation

Authorization and Settlement Fee per Transaction

Authorization is the process of approving or declining a transaction before a purchase is finalized or cash is disbursed. Authorization fees are charged to issuers and acquirers for the authorization process that Visa performs for each transactions.

Clearing is the process of delivering final transaction data from an acquirer to an issuer for posting to the card holder's account, the calculation of certain fees and charges that apply to the issuer and acquirer involved in the transaction, and the conversion of transaction amounts to the appropriate settlement currencies.

Settlement is the process of calculating, determining, reporting and transferring the net financial position of Visa's issuers and acquirers for all transactions that are cleared. Settlement fees are charged to provide for an exchange of financial information between the acquiring bank and the issuing bank.

Price negotiations with certain clients in 2010 ensured that Visa was not able to increase prices by a significant amount in 2010 and 2011 and the average fees remained around $0.069. However, the fee increased to $0.075 per transaction in 2012. The figure has increased continuously since then and stood at $0.078 in 2015. In 2016 and 2017, the figure declined marginally to $0.07.

Chart: Authorization and Settlement Fee per Transaction

Chart: Transactions per Visa Card

Assessment Fees

What is being offered?

Assessments are charged to customers (banks and financial institutions) for their participation in card programs carrying marks of the Visa brand. An association with Visa brand helps a customer (bank and other financial institution) to attract consumers by providing them with a large network of Visa merchants and ATMs. Thus participation in Visa card programs is beneficial for banks and other financial customers.

Assessments are Visa's primary source of revenue for financing marketing and operations. Sometimes the company may introduce assessments for specific purposes such as market development programs etc.

Who is buying?

Small and Large scale banks and other financial institutions

Competitors

MasterCard, American Express, JCB, Diners Club, Discover

What the customers care about?

1. Visa's merchant and ATM network

2. Assessment fees charged

Sources of Income

Assessment revenues are calculated on the prior quarter's payments volume generated by a customer on Visa branded cards. Payments volume includes the aggregated dollar amount of usage (purchases, cash disbursements, balance transfers and convenience checks) on Visa branded cards.

Visa's Strengths

  1. Strong merchant base
  • Visa has a presence in over 200 countries currently serving a customer base of 15,900 financial institutions. In addition Visa cards are accepted at 1.7 million ATM's (as of March 31, 2010).

Visa's Payments Volume

Visa's Payments Volume represents the total global dollar volume of card purchases made by Visa cards worldwide. It includes purchases made on all Visa branded credit and debit cards.

Visa's Payments Volume on Visa branded products increased from nearly $2.4 trillion in 2007 to $3.9 trillion in 2012, largely driven by increased debit and credit card penetration and use in international markets in addition to a growing shift to cashless payments.

Chart: Visa's Payments Volume

Visa's Average Assessment Fee

The Visa's Assessment Fee (%) represents the fee charged by Visa to its customers (banks) based on the total payment volume of business generated for customers through Visa branded products. This is expressed as a percentage of the Gross Dollar Volume (GDV) of the business generated from Visa branded cards.

Visa's Average Assessment Fee (%) was flat at around 0.13% between 2013 to 2016. In 2017, the figure declined to 0.11%.

Chart: Visa's Average Assessment Fee

International Fees

What is being offered?

Visa with its worldwide network, provides its cardholders the facility to swipe its debit or credit card for shopping or cash-advance at any visa merchant anywhere in the world. However for this service Visa charges the customers a fee based on the value of the transaction. The fee charged for any international transaction (where the card-holder's country and merchant's country are different) is included in the International Fee revenues. International transaction revenues are generally driven by cross-border payments volume, which includes single currency transactions, and currency conversion activities for transactions involving more than one currency.

Who is buying?

Small and Large scale banks and other financial institutions.

Competitors

MasterCard, American Express, JCB, Diners Club, Discover

Sources of Income

The main source of income for this division is the fee that Visa charges its card holders for an international transaction. Two types of fee - Cross-border fee and Currency conversion fee are levied by Visa. Cross border fee is charged for every international transaction, i.e. a transaction where card holder's country and merchant's country are different. Currency conversion fee is charged when the currency of transaction is not USD.

What customers care about?

1. Cross-border fee

2. Currency conversion fee

Visa's Strengths

  1. Strong presence in Asia
  • In 2009, Visa formed Visa Processing Services Pte. Ltd., or VPS, a joint venture with Yalamanchili International Pte. Ltd., a payments processor and software company with operations in Asia. VPS extends multi-currency and multi-language debit, credit and prepaid processing capabilities to financial institutions, processors and payment companies outside of the United States.

International Transaction Revenue

This is the revenue that Visa earns from International transactions.

The International Transaction revenue increased from $454 million in 2007 to $6.3 billion in 2017.

Chart: International Transaction Revenue

Service Fee

What is being offered?

Services offered by Visa consists primarily of optional services such as extended cardholder protection and concierge services, cardholder services and fees for licensing and certification.

Card protection: If any of Visa's card-holder's account are compromised, the company's cardholder protection policy requires all financial institutions issuing Visa products to extend provisional credit for losses from unauthorized card use within 5 business days of notification of the loss.

Concierge services: Visa provides it Signature cardholders concierge services like:

  • Restaurant recommendations and reservations
  • Travel arrangements
  • Entertainment planning, including ticketing
  • Business-related assistance such as conference and hospitality services

Dispute Management Services: Visa Resolve Online, an automated web-based service allows customers’ back-office analysts and customer service representatives to manage and resolve Visa transaction disputes more efficiently than with paper-based processes.

Who is buying?

Small and Large scale banks and other financial institutions

Competitors

MasterCard, American Express, JCB, Diners Club, Discover

Sources of Income

Service fee is charged when cardholders use Visa's value added services. Service fee revenues also include revenues earned from Visa Europe in connection with the Visa Europe Framework Agreement.

Other Long Term Liabilities As % of Revenues

Other Long Term Liabilities as % of Revenue refers to other long-term liabilities reported in Visa's balance sheet expressed as a percentage of its overall revenues.

Other Long Term Liabilities As A % of Revenues has ranged between 5% to 7% in 2013-2017.

Other Current Liabilities As % of Revenue

Other current liabilities include Customer collateral, Accrued compensation and benefits, Volume and support (client) incentives and Accrued liabilities items from Visa's balance sheet.

Other Current Liabilities As A % of Revenue have remained in the range of 20% to 25% in the past 5 years.

Chart: Other Long Term Liabilities As % of Revenues

Chart: Other Current Liabilities As % of Revenue

Payable days

Payable Days refer to the number of days it takes Visa to clear off its outstanding accounts and settlements payable. We use this metric to forecast the company's current accounts payable.

Payable days went down from 221 in 2013 to 115 in 2015. In 2016, the figure increased to 245 days before declining to 174 days in 2016.

Chart: Payable days