Tickers in this Article: V, MA, VZ, AAPL, GOOG, EBAY, PAY
It probably seems ludicrous to even challenge the idea that Visa (NYSE:V) is going to face any sort of relevant existential threat. After all, about 60% of the credit cards in this country have Visa's name on them and the cost of building up a rival network of thousands of banks and thousands more merchants is prohibitive.

And yet, maybe there are still threats investors should consider. Dinosaurs once ruled the world, too, but circumstances changed and they were not able to keep up with that change. The question for Visa is whether it can embrace and embed itself into the next generation of payment technologies.

Tutorial: What To Know About Credit Cards

A Second Quarter That Fits the Profile
Visa has generally been a dependable grower and this fiscal second quarter was no exception. Net operating revenue rose almost 15% from the year-ago level, as card servicing fees climbed nearly 24%. Sequential revenue growth was less impressive (just 0.3%), though, as data processing and international transaction fees skidded on a sequential basis.

Profitability was again no problem and the company expanded its already impressive margins even further. Operating expense growth was limited to just a bit over 3%, as marketing expenses declined and personnel expense growth was basically on par with revenue expansion. That ultimately led to 23% operating income growth. (For more, see Operating Cash Flow: Better Than Net Income?)

Good Volumes and Moderate Legislative Risk
For the quarter, Visa reported that U.S. payment volume grew more than 11%, while cross-border and processed transaction volume growth were both up about 13%.

On the legislation front, there are still questions remaining about the exact details and timing of regulations that could curb some of the fees that Visa charges. While an unwelcome complication to business, neither MasterCard (NYSE:MA) nor Visa is going to see major risk here - about 10% of Visa's revenue base appears to be at risk as a result of changes in debit card fees proposed by the Durbin Amendment, a last-minute addition to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. (For related reading, check out 6 New Credit Card Regulations That Benefit You.)

The Next Generation Of Payment
The much bigger risk to Visa comes from the evolution of the payment environment. If mobile payments (that is, using smartphones to pay instead of plastic) take off, will Visa still enjoy the same central role and the same rich economics? After all, it's not hard at all to imagine that a mobile service provider like Verizon (NYSE:VZ) is going to want its cut, to say nothing of a company like Apple (Nasdaq:AAPL) or Google (Nasdaq:GOOG).

In fact, is it out of line to imagine that a company like Google or eBay (Nasdaq:EBAY) might have aspirations of setting up some sort of rival network based on mobile e-payments? Likewise, a company like VeriFone (NYSE:PAY) could play a different, larger, role in such a system and demand a bigger piece of the pie.

Visa clearly has a valuable network and the company is going to leverage that to stay relevant no matter what the future of mobile payment looks like. But as it does so, are major issuers like Citigroup (NYSE:C), Capital One (NYSE:COF), or U.S. Bancorp (NYSE:USB) going to feel emboldened to push back and demand better economics? The same goes for major retailers like Wal-Mart (NYSE:WMT) - if any of these players see a weakness or viable alternative to Visa, they'll push hard on it.

The Bottom Line
I highlight the negative side of the Visa story not because I think the company is doomed, but because there is so much positivity out there already - there are only three "Hold" ratings and one "Underperform" rating on this stock. What's more, investors would do well to remember that titans are sometimes more vulnerable than people think - Microsoft (Nasdaq:MSFT) was also once seen as untouchable, before Java, cloud and mobile computing eroded that image.

For a company with great margins, solid returns on capital, and sizable market share, Visa's stock does not seem overpriced. Whether it is legislation or competitive risk keeping a lid on things, Visa does not sport the multiple that would seem to fit its margin structure. Although investors should not underestimate the possibility of change in Visa's core market, this could be a good idea for a GARP portfolio. (For more, see 7 Ways To Outsmart Your Credit Card Company.)

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