Visa USA's introduction of an independent advisory board and its shift to a more for-profit focus in 2005 had analysts debating whether the association is simmering its own plans to go public. Whether Visa was working toward such a goal last year in the midst of rival MasterCard International's plans for an initial public offering, it certainly generated more transactions for both high- and low-end spending.
The network has grabbed a greater share of credit and debit card spending than any other card network the past two years, notes Credit Suisse analyst Moshe Orenbuch. "In terms of total plastic spending, Visa's still taking share in a significant way," he says.
Much of Visa's growth came from debit last year. "Debit is on fire for them," says Ed Groshans, vice president of Fox-Pitt, Kelton, a financial brokerage firm in New York. "They're doing very well in getting penetration and increasing usage of their debit programs."
The number of signature-based, or offline, Visa check cards issued in the United States by the end of 2005 was 185.6 million, up 17.1% from 158.5 million in 2004. Consumers purchased $410.5 billion worth of goods and services using check cards in 2005, up 18.7% from $345.8 billion in 2004. Cardholders made 10.7 billion check card purchases in 2005, up 17.6% from 9.1 billion in 2004.
The total number of Visa consumer credit cards issued in the U.S. by the end of 2005 was 298.4 million, up 8.5% from 275 million in 2004.
Consumers initiated 7.1 billion purchases using Visa credit cards in 2005, up 7.6% from 6.6 billion in 2004. U.S. purchases on Visa credit cards totaled $563.5 billion in 2005, up 8.6% from $518.8 billion in 2004. Commercial cards totaled 26.8 million in 2005, up 16.5% from 23 million in 2004. Commercial card sales rose 23.7%, to $142.3 billion from $115 billion in 2004.
Visa's $327.6 billion in U.S. receivables on consumer and commercial cards in 2005 represented an 8.4% growth over $302.1 billion in 2004.
Visa continued to push rewards programs as a way to increase consumer use of its branded cards for a greater number of everyday payments, such as utilities and other bills. But that strategy only works if cardholders can pay in more locations, notes Elizabeth Buse, Visa executive vice president of product development and management.
"The only thing impeding growth is merchant acceptance," she says. Visa is now accepted at 24 million locations worldwide, 6.1 million of which are in the U.S. That's up 7% from 5.7 million U.S. locations in 2004.
After another year of merchant grumbling and pending lawsuits over rising interchange, Visa recently announced it will keep most interchange rates flat this year. Buse points to those 400,000 new U.S. merchant locations despite retailer unrest in 2005.
Visa's net income in fiscal 2005, which ended Sept. 30, was $265 million, up 19.9% from $221 million from the previous fiscal year. Toss in Visa's 38% stake in Visa International, and Visa's net income was $360.4 million, up 71.9% from $209.7 million in fiscal 2004.
As with all networks, Visa faces the growing power of consolidated issuing banks and merchants alike. But analysts note that Visa's deep pockets give it more power than its competitors as it weathers the challenges and looks for more growth.
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