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Visa (NASDAQ: V) is a financial services company that is most well known for its credit cards, debit cards, and prepaid cards. With a system capable of processing over 65,000 transactions a second worldwide, Visa has become an integral part of our everyday financial lives. As a company that has been around for decades, Visa has been consistently repositioning itself to ensure that they remain relevant in the fast-moving financial space. As of late, the company has become increasingly involved in digital currency adoption and has charted a clear pathway forward for incorporating this technology into their ecosystem.
What is Visa (V)?
The iconic Visa card as it is today began through a project that the Bank of America started in the 1950s. At the time, there was a lack of a unified, all purpose credit card in the financial sector. Even though individual merchants had their own charge cards, customers were forced to carry around several different cards that were tied to only one merchant. The BankAmericard released by the Bank of America solved this problem, creating a card that was accepted by over 20,000 merchants in the bank's home state of California. The bank ultimately gave up control of the BankAmericard program due to regulatory issues, creating an independent corporation that would handle the management of their credit cards. The company began licensing the Visa name to other financial institutions across the world, with 15 countries having access to a Visa branded card in 1972. As a result of this proliferation, Visa was established as a series of separate companies around the world. After a few decades, the company amalgamated their Visa Canada, Visa America, and Visa International divisions in 2006, which allowed them to IPO as a single entity in 2008. At the time, the IPO was the largest in U.S. history. The company later merged with Visa Europe in 2016, returning itself to a single global company.
Through their business model, Visa does not directly provide credit to consumers. Rather, the company works with financial institutions to offer Visa-branded products. When excluding China, whose domestic payment processing sector is dominated by UnionPay, Visa accounts for over 50 percent of the world's total card transactions. Worldwide, Visa-branded products accounted for a total of 185.5 billion transactions in 2019. These transactions totalled $11 trillion in volume and involved over 46 million merchants across the globe.
Why does Visa (V) Matter?
Visa has laid the groundwork to allow for system adoption anywhere in the world. Currently, Visa cards are used in over 200 countries and accept over 160 currencies. As the world becomes more interconnected and demand for financial services in developing countries continues to grow, Visa's global reach means that they are the first choice of merchants, business owners, and customers around the world. One of the main reasons for this global appeal is their wide range of products and services to meet a variety of needs. Alongside their main card offerings, Visa has also branched and created a number of additional products and services to make transactions across the globe easier, safer, and faster. For example, the Visa payWave system, which allows users to wave their card over the machine to pay, is a perfect example of a simple solution that saves time and effort without sacrificing security. Another example of enhanced security features is the “neural network” system, which detects unusual activity on your card and alerts your financial institution.
Visa (V) Prospects
While Visa invests heavily into innovation internally, the company also actively looks externally for ways to strengthen their position through the acquisition of promising products. In 2020, Visa made a bid to acquire Plaid, a company that products a financial technology that allows popular applications like Venmo to interface with user bank accounts. Ultimately, the $5.3 billion deal fell through due to regulatory hurdles.
Looking forward within the financial sector, digital currency adoption is likely to be the next big avenue for growth. On Visa's part, the company made major headlines in February of 2021 when they announced major steps they were taking towards digital currency adoption. Alongside neobank First Boulevard, Visa piloted a suite of crypto APIs that would allow the bank's clients to purchase and trade digital assets. The pilot was a part of Visa's broader “digital currency strategy”, which was released in July 2020 and laid out the approach to digital currency adoption into their Visa ecosystem. Later in March of 2021, the company also announced support for payments through the USD stablecoin. Prior to this announcement, Visa had partnered with the website Crypto.com to offer a crypto debit card. However, transactions could only be made after exchanging the cryptocurrency back to fiat currencies. With this new announcement, Visa is allowing settlements to be completed using USD Coin. While this is the only cryptocurrency currently accepted, there are plans to include other stablecoins as accepted payment options in the future.
Where to Buy Visa (V)?
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Visa has stood at the top of the financial sector for almost half a century. Billions of transactions worldwide depend on their fast, secure, and easy-to-use system. The products and services offered by Visa will continue to play a huge role in facilitating commerce in economies around the world. Looking forward, the company is positioning itself well to fully embrace the next frontier of financial transactions. Despite increased competition from new fintech companies, the solid groundwork Visa has laid means that the company is likely to maintain a solid position in the ever changing financial sector.
Baggio has been an investor in the technology space for over half a decade. He uses the perspectives gained from his work experience in the private, public, and non-profit sectors to guide his investment strategy, with a specific interest in the potential of emerging disruptive technologies.