Why bother with cash and a lifetime focused on acquiring things versus the ease of swiping cards with the Visa (NYSE:V) logo and the fulfillment of collecting experiences? The sentiment is based on Visa's global ad campaign, which focuses on people who are on the go. Let's look at how Visa and its chief competitor, MasterCard (NYSE:MA), may fit into your portfolio as they endeavor to move individuals and businesses from cash to electronic payment transactions.

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Emerging Markets Increasing Volume
Visa generated $1.7 billion in net operating revenue for its fiscal first quarter of 2009, which ended December 2008. The operating revenue tally represents a 17% increase over the same period a year ago, driven by transaction volume in international and emerging markets including Central Europe, Asia Pacific, the Middle East, Africa, Latin America and the Caribbean. (Be sure to read Analyzing Operating Margins to learn more about operating revenue and what it means for a company's profitability.)

Competition
MasterCard had an equally successful Q4 2008, reporting operating revenues of $1.2 billion, representing a 14.2% increase over the same period a year ago. MasterCard credited pricing changes and a 6% increase in transactions as reasons for the revenue increase. Much like Visa, MasterCard's fastest-growing regions, in terms of purchase volumes, are South Asia, the Middle East, Africa, Asia Pacific and Latin America.

Credit And Debit Card Issuers
Major U.S. banks including Bank of America (NYSE:BAC), Citigroup (NYSE:C), Capital One (NYSE:COF) and Wachovia, now a part of Wells Fargo (NYSE:WFC), are major issuers of debit and credit cards. The banks rely on the capabilities and identity theft protection services offered by these leading electronic payment processing companies.

Challenging Economic Environment
Both Visa and MasterCard have embraced the challenging economic environment. Let's focus on the operating income margins of each to better understand how earnings have increased in relation to each dollar earned. Visa's operating income margin has increased from 46% in 2007 to 56% for the quarter ended December 2008, while MasterCard's also increased from 16% to 38%. Operating income margin is calculated by dividing operating income by total sales. An increasing number from one year to the next typically means earnings are improving.

Final Thoughts
Look in your own wallet, purse/handbag or fanny pack, and total the number of plastic credit or debit cards you are carrying. Then count how many have the Visa or MasterCard logo emblazoned in the bottom right-hand corner. If you have one or more, consider for a moment how many others have them or will have them in the future. It's presumptuous to assume that cash will ever go away entirely, but it is safe to say that as industrialization spreads, more people are likely to replace their cash with plastic.

To learn more about credit cards, read Credit Cards: Birth Of A Plastic Empire.)

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