As long as the global economy doesn’t crash, Visa (V), the world’s largest payment processing network, is sitting pretty. That’s because transaction payments continue to migrate away from paper — cash and checks — to credit, debit, and prepaid cards as well as electronic payments systems.
Paperless payments will account for 64 percent of the total money exchanged in transactions by 2013, according to the Nilson Report, a payment systems newsletter. It says cards will be used to pay for 50 percent of the total amount of transactions, up from the mid-40 percent range now, Morningstar reports.
Certainly, the Dodd-Frank financial reform law limits card fees for Visa and its competitors, such as MasterCard (MA), the world’s second-largest payment network. The legislation makes 2012 a “low point” for Visa in terms of debit-card processing fees, CEO Joseph Saunders said in a conference call discussing the company’s most recent earnings report. “We won’t do as well as we have,” he said.
The company seeks to counteract that effect by expanding overseas. In the last fiscal year ended Sept. 30, 2010 Visa garnered 41 percent of its revenue abroad. The company aims to boost that figure to above 50 percent by fiscal 2015.
Visa already showed improvement in this area for the quarter ended June 30, with 44 percent of its sales coming from overseas.
The company’s profit soared 40 percent in the latest quarter, to $1 billion from $716 million a year earlier. Revenue climbed 14 percent to $2.3 billion.
That success enabled Visa to authorize a new $1 billion share buyback program following its $1.1 billion worth of repurchases in the June 30 quarter.
After the earnings report, Standard & Poor’s analyst Scott Kessler raised his estimates for Visa’s earnings for this year and next. He also boosted his 12-month share price target to $95 from $90. The stock recently traded at $85. Visa next reports around Oct. 27.
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