Visa Inc. (V) is one of the dominant digital payments brands globally, providing services in more than 200 countries to individual consumers, merchants, financial institutions, and governments. The company provides a broad range of services, which include authorization, clearing, and settlement services for financial institutions and merchants. Additionally, while Visa does not issue credit or debit cards, the company does provide credit, debit, and prepaid card services to consumers and businesses. It's Visa's clients that issue the actual cards.
Visa makes its profits by selling services as a middleman between financial institutions and merchants. The company does not profit from the interest charged on Visa-branded card payments, which instead goes to the card-issuing financial institution. Visa so dominates the market that it has only a handful of big rivals, including Mastercard Inc. (MA), as well as digital payments companies such as PayPal Holdings Inc. (PYPL).
- Visa is a digital payments company providing transactions between financial institutions, consumers, merchants, and banks.
- The company's data processing operations generate the largest portion of revenue.
- Visa's strategy is to aggressively expand its presence in contactless payments, e-commerce, and other digital vehicles.
- Visa recently acquired fintech company YellowPepper.
- The DOJ recently filed an antitrust lawsuit against Visa in order to block the company's acquisition of Plaid Inc.
Visa's business was adversely impacted by the COVID-19 pandemic during its 2020 fiscal year (FY), which ended September 30, 2020. The company reported net income of $10.9 billion on $21.8 billion of net revenue. Net income declined 10.0% while net revenue fell 4.9% compared FY 2019. Visa said that revenue in the latter half of its FY 2020 were affected by declines in volumes and transactions due to the pandemic, but noted that it started to see improved results in the final quarter of the year.
Net revenue from Visa's U.S. business, which comprises about 46% of total net revenue, fell 1.5% compared to FY 2019. Net revenue from international sources, which accounts for the remaining 54% of total net revenue, fell 7.7%. Visa indicated that these annual revenue declines were mostly due to year-over-year (YOY) changes in payments volume, cross-border volume, and processed transactions, all of which were impacted by COVID-19.
Visa's Business Segments
Visa reports as a single segment, which is Payment Services. But it routinely divides its revenue into four subsegments, which are the major generators of revenue for the company. These segments are: Service Revenue, Data Processing Revenue, International Transaction Revenue, and Other Revenue. Visa describes these subsegments as "components" of net revenue, but they are reported gross of client incentives. The sum of the revenue totals for each segment equals gross revenue of about $28.5 billion for FY 2020. Visa's net revenue of $21.8 billion for the year is equal to that gross revenue figure minus client incentives.
Visa's service subsegment consists of revenue from services provided to support client usage of Visa's payment services. This is separate from the authorization, clearing, and settlement related to the company's payment services, which is included elsewhere. In FY 2020, Visa's service revenue was $9.8 billion, or about 34% of the company's total gross revenue. This is up 1.1% compared to FY 2019.
Data Processing Revenue
Visa's data processing revenue includes all revenue generated as a result of the company's clearing, settlement, authorization, value added, network access, and other similar services. In FY 2020, data processing revenue accounted for the largest portion of the company's gross revenue: $11.0 billion or about 38%. This figure is up 6.2% compared to FY 2019.
International Transaction Revenue
Visa is heavily involved in cross-border transaction processing and currency conversion, and these activities generate revenue in the subsegment of international transaction revenue. In FY 2020, international transaction revenue was $6.3 billion, or about 22% of gross revenue. Revenue for this component was down 19.3% compared to FY 2019.
Visa also earns revenue from license fees, value-added services, account holder services, and more. These sources are grouped together as Other. At $1.4 billion or 5% of Visa's FY 2020 gross revenue, the Other component accounts for the smallest portion of revenue. Other revenue rose 9.1% compared to FY 2019.
Visa's Recent Developments
On November 20, 2020, Visa announced the completion of its acquisition of YellowPepper, a fintech company that supports leading financial institutions and startups in Latin America and the Caribbean. It marks Visa's first acquisition of this kind in the region and will help to accelerate the company's "network of networks" strategy. Visa said it will now be able to offer a single point of access for initiating different types of transactions and enabling the secure transfer of money.
On November 5, 2020, the U.S. Department of Justice (DOJ) filed an antitrust lawsuit that aims to block Visa's planned acquisition of Plaid Inc., another fintech company. The deal is valued at $5.3 billion and the DOJ alleges that the deal would eliminate a significant competitive threat to Visa in the online debit market. Visa issued a statement contesting the decision by the DOJ, indicating that it plans to vigorously defend the transaction.
How Visa Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Visa and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Visa releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Visa discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Visa breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
|Visa Diversity & Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
|General Management||✔ (U.S. Only)||✔|
|Employees||✔ (U.S. Only)||✔|
Visa Inc. "Form 10-K for the fiscal year ended September 30, 2020," Page 4. Accessed Nov. 21, 2020.
Visa Inc. "Form 10-K for the fiscal year ended September 30, 2020," Page 7. Accessed Nov. 21, 2020.
Visa Inc. "Form 10-K for the fiscal year ended September 30, 2020," Page 36. Accessed Nov. 21, 2020.
Visa Inc. "Form 10-K for the fiscal year ended September 30, 2020," Page 37. Accessed Nov. 21, 2020.
Visa Inc. "Form 10-K for the fiscal year ended September 30, 2020," Page 43. Accessed Nov. 21, 2020.
Visa Inc. "Form 10-K for the fiscal year ended September 30, 2020," Page 6. Accessed Nov. 21, 2020.
Visa Inc. "Form 10-K for the fiscal year ended September 30, 2020," Page 44. Accessed Nov. 21, 2020.
Visa Inc. "Form 10-K for the fiscal year ended September 30, 2020," Page 42. Accessed Nov. 21, 2020.
Visa Inc. "Visa Completes Acquisition of YellowPepper." Accessed Nov. 21, 2020.
The Wall Street Journal. "Justice Department Files Antitrust Lawsuit Challenging Visa’s Planned Acquisition of Plaid." Accessed Nov. 21, 2020.
Visa Inc. "Visa Statement on Planned Acquisition of Plaid." Accessed Nov. 21, 2020.