June 3, 2009
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News: Visa Speaks Out on CC Bill
Visa's CEO, Joseph Saunders spoke on the potential effects on the country's credit structure resulting from the new credit card act signed into law in April by President Obama. Saunders believes the new legislation will change how the entire industry thinks and will ultimately reduce the amount of credit available to consumers. Lenders have realized large profits and good times prior to the recession. However, in the midst of a rising cost of living, high unemployment, and a weak economy many consumers have defaulted on their credit card debt. Lenders are now losing billions of dollars due to the defaults and consumers are searching for reliable methods to reduce spending. Two months ago, Americans held over $945 billion in credit card debt which has slowly declined each month during the past year as they turn to alternate payment methods.
Although statistics have shown that consumers have curbed credit card spending, debit card usage has significantly increased. Saunders stated that this crossover is an indication of a major focus for the company going forward. He also stated that there are signs of some modest economic improvements; however, does not expect a speedy recovery. Further, he believes the first half of 2010 will deliver a stronger economy. Of course, Visa will realize earnings whether it's debit or credit because they earn profits off the interchange fee charged for each transaction. Therefore, the company has no plans to adjust earnings or revenue forecasts at this time due to the new credit card bill. Visa has forecasted an 11 to 15% net revenue growth for 2010 and for its common stock earnings to realize a 20% growth.
Although Visa performed better than expected in to date this year, Saunders stated the company will most likely experience pressure from its decrease in overseas transactions and a stronger dollar. They believe the anticipated Washington Mutual MasterCard network switch to the Visa credit card network planned by its parent JPMorgan Chase, will help to offset some of the lost revenue. Saunders expects Visa's earnings should begin trending upward by the end of 2009.