Visa Inc. felt the effects of the global economic recession in 2009, as U.S. consumers transacted less on credit. But strong gains in Visa’s U.S. debit card volume during the year helped to offset the slowdown in credit card use, and the company’s overall profits soared.
The continued rise in debit card use partly was a result of cash-strapped consumers seeking to gain control over their finances by shifting everyday purchases from credit cards to cards that avoid borrowing, analysts say.
Total purchase volume on U.S. signature-debit Visa check cards and Interlink PIN-debit cards for 2009 was $883 billion, up 7.9% from $818 billion the previous year. Some 280 million Visa debit accounts were open at the end of 2009, up 22.3% from 229 million a year earlier, PaymentsSource estimates. An estimated 395 million Visa debit cards were in circulation at the end of last year, up 18.6% from 333 million in December 2008 (Visa reports its account totals and cards in circulation during the following quarter).
Total purchase volume on U.S. Visa credit cards for 2009 was $764 billion, down 7.3% from $824 billion. Some 228 million Visa credit card accounts were open at the end of 2009, down 11.6% from 258 million, PaymentsSource estimates. An estimated 296 million Visa credit cards were in circulation, down 11.6% from 335 million (see chart).
For its fiscal year ended Sept. 30, Visa posted net income of $2.4 billion, up 198.5% from $804 million in 2008, helped by the sale in June of its 10% ownership interest in the Brazilian affiliate of its VisaNet processing operation. Net operating revenues were $6.9 billion, up 9.5% from $6.3 billion a year earlier. Visa’s operating expenses in fiscal 2009 also declined sharply, by 32%, to $3.4 billion compared with $5 billion in 2008, helped by the completion of certain payouts from antitrust-litigation settlements.
Joseph W. Saunders, Visa CEO, told analysts when announcing fiscal 2009 earnings that it remains to be seen whether credit card volume will accelerate when the economy improves. “Until that happens, it’s going to be hard to measure the balance between (credit and debit),” he said.
Visa last year also spent time ramping up its product offerings. In June it took a minority stake in Monitise PLC, a specialist in person-to-person funds transfers. Visa also forged a strategic alliance with the firm to enhance global mobile-payment transmissions. In November, Visa extended its Visa Money Transfer service to China and the United Arab Emirates, bringing the international reach of its funds-transfer service to 14 countries and territories worldwide.
To enhance its business-to-business payments capabilities, Visa in July announced a joint venture with U.S. Bancorp called Syncada, enabling corporations and governments to process and track invoices and to make and receive payments globally. Visa took an undisclosed stake in Syncada, which it plans to help build into a “multibank network.”
Continuing its efforts to further mobile payments, Visa in November announced the availability of instant alerts, enabling consumers to receive text-message notifications on their mobile devices of specified types of transactions some three seconds after authorization. Issuers testing the service included Wells, Fargo & Co., which earlier this year rolled out the service to its credit cardholders.
“Visa is well-positioned with its thriving debit network, and at the same time it is working on broadening its payments offerings in new channels, including mobile and funds-transfer services,” says Beth Robertson, director of payments research at Javelin Strategy & Research. PS
Thoughts on this article? We'd appreciate your feedback. Please click here.