May 03, 2010
-
News: Visa Performs Better Than Expected
It appears that Visa Inc's customers are feeling more comfortable with the economy as credit card spending increased. Profits for the company grew as earnings reached nearly $2 billion, a 19 percent increase at the end of the fiscal second quarter. Thomas Reuter analysts had previously predicted that the credit card giant would increase revenue to $1.93 billion. Visa's Chairman and CEO, Joseph Saunders stated that "Our performance was fueled by higher-than-expected payments-volume growth." He also noted that the company believed the economy would continue to improve as the credit card situation with high delinquencies and defaults continues a downward trend.
Visa reported that the company's credit card payment volume increased to $756 million, a 13 percent from same time last year. The total number of credit card transactions during the company's second fiscal quarter grew to 10.6, a 14 percent increase from same period last year. Like MasterCard, Visa only processes card payments and does not have the same risks as banks who loan money to cardholders, therefore, the companies do not deal with defaults and delinquencies. Therefore, as the economy continues to grow and customers increase spending, Visa predicts net revenue to grow to nearly 15 percent during 2010.
In addition to Visa's card business, the company captures the largest market share in debit card usage which has increased over recent months. Debit cards are gowning at a much faster rate than credit card usage. The increase is attributed to Americans concerns on paying high interest rates and unfair fees. Many Americans have committed to improving their financial health and reducing debt. As banks depend on the interest and fees earned from loaning credit, Visa and MasterCard depend on the amount and number of transactions thereby making debit card payment just as valuable to them as processing credit. We expect to hear more results tomorrow as MasterCard is expected to also release fiscal second quarter results.