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The card giant will devote more than a quarter of its marketing budget this fiscal year to its sponsorship of the London games and related activities and company officials insist it is worth every penny.
July 25
Visa's international business is taking on increasing importance as the card network confronts legal and regulatory threats at home.
The company, which reported its fiscal
Visa's domestic debit card business has also taken a
But analysts point to the company's "resilience," saying that Visa's growing presence in a number of developing markets has been helping to offset these domestic pressures.
"Right now, particularly, most of the growth is coming from their international business because of the shift in the U.S. driven by Durbin," says Gil Luria, an analyst at Wedbush Securities.
And there appears to be plenty of room to grow. Card penetration in emerging markets remains relatively low, analysts say, meaning that Visa and rival MasterCard have their pick of the low-hanging fruit.
"In very few countries do they have the same penetration rates and usage rates that they have in the U.S.," Luria adds. "In most countries there's still a way for them to go to get people to use cash and checks less and cards more."
Payments volume grew 41% in Central and Eastern Europe, the Middle East and Africa in the third quarter from a year earlier on a constant currency basis, Visa reported. It also grew 20% in Latin America and 8% in the Asia Pacific region, while in the U.S. it declined 1%, largely due to the impact of the new debit rules. (The card network separated itself from its Europe unit in 2007.)
Analysts at Jefferies said in a February note that Visa would likely generate half of its revenue from international markets by 2014, as much as a year ahead of a target the company announced in 2010.
"They continue to sign up card issuers and merchants to essentially lay the groundwork to capture market share in these emerging economies," says Jason Kupferberg, an analyst at Jefferies.
There's even room to grow in countries that already have some debit card penetration, according to Kupferberg.
For example, Brazil had 250 million debit cards in circulation in 2011, which generated $529 billion in total volume. But just $95 million, or less than 20% of that volume, originated from point of sale purchases, he says.
"There's an opportunity for the card networks along with merchants and banks to educate consumers and shape their behavior," Kupferberg says. "Why go to the ATM and take out cash and then go to the store, when you could go straight to the store?"
On a Wednesday evening call with analysts Wednesday evening, Visa executives continued to draw attention to opportunities abroad.
"You've heard this before, but it's worth repeating. The shift from cash and checks to digital currency is a global trend that we expect to continue well into the future," said Joseph Saunders, Visa's chairman and chief executive. "Today more than 30% of global consumer spending, almost $10 trillion, remains on cash and checks worldwide."
Saunders said Russia and the Middle East are potential growth markets as well.
"To drive future growth, Visa is intensely focused on expanding usage in everyday spend merchant categories, including supermarkets" in Russia, he said. He noted that the company had secured new business with the Bank of Kuwait and recently opened offices in Doha and Abu Dhabi.
In all, Visa swung to a loss of $1.8 billion in the quarter that ended June 30, as it paid its portion of a $6 billion settlement agreement with retailers.
Excluding a litigation provision of $4.1 billion and a related tax benefit, the company reported that earnings rose to $1.1 billion, or $1.56 per diluted share, up 25% from a year earlier.
Net operating revenue rose 10%, to $2.6 billion, from the previous year, driven by growth in services and data processing.
