Revenue and macroeconomic conditions have a very strong positive co-relation for credit services companies. Any improvement in the macroeconomic conditions gets reflected in the revenue of credit services companies. Recent reports from various agencies have indicated that the macroeconomic conditions in the developed countries have shown signs of improvement, which augurs well for this industry. This will help the major players in the industry like MasterCard and Visa improve their revenue.
Visa Inc (NYSE:V)‘s share price has gained 50% in the last year, significantly outperforming the S&P500. The company has been expanding its business in the international market and has made heavy investment in mobile and e-commerce. I believe the company will continue to give better returns than the market in the coming quarter as these strategies will help it increase its revenue and profit margin
Expansion in the emerging economies in Asia and Latin America
About 65 % of the company’s total revenue comes from the US alone. The company has plans to reduce this to 50% by 2015. In order to achieve this, the company has plans to expand in the emerging economies in Asia and Latin America. The company has been increasing its tie ups with the local financial operators in these countries to increase Visa Inc (NYSE:V) card usage. It is expected that, with rising PPP in these countries, the usage of the electronic card will increase. Also the mobile penetration in these countries is higher than the bank penetration, which will help increase its revenue.
Shift from cash payment to electronic payment will help Visa increase its customer base
According to estimates, payments through cash and checks are still prevalent in both developed and developing countries. According to the company, worldwide $11 trillion of personal consumption expenditure is still operated by checks and cash. If only even 0.1% of this comes to Visa Inc (NYSE:V), it will make $10 billion of revenue for the company. As more and more people are moving to online, mobile and card payment, this is achievable in the long term.
e-Commerce and mobile expansion will help penetrate in customer bases that don’t have banking facilities
According to eMarketer, the e-commerce business in 2012 surpassed $1 trillion. The e-commerce sales are growing by 21.1% per year. Visa Inc (NYSE:V) has a presence in 50% of the market in some way or another. To increase its e-commerce offerings, the company has made many acquisitions in recent years. These acquisitions include CyberSource, Fundamo, and PlaySapn. These acquisitions will be helpful for the company to increase its revenue in the coming years. The company has also planned to incorporate these technologies into its mobile strategy.
The mobile penetration is estimated be around 85% worldwide. The expansion of financial services via mobile technology is useful for the customers who do not have any bank accessibility. To leverage the penetration of the mobile segment, Visa Inc (NYSE:V) started V.me.