Visa Inc global payment platform connects businesses, consumers, governments and financial institutions in more than 200 countries worldwide. The company’s revenues consist primarily of data processing revenues, service revenues, and international transaction revenues.

Service revenue is earned from providing financial institution clients with support service for the delivery of Visa-branded products and solutions and are generated from payment volumes from Visa cards used for the payment of goods and services. Data processing revenues are earned from the authorisation, clearing, settlement, network access and other support and maintenance services that help in the global processing of information and transactions among the company’s financial institution clients.

Revenues from cross-border transaction processing and currency conversion activities constitute the bulk of the company’s international transaction revenues. Visa’s cross-border transactions occur when the card-issuing country is different from the country in which the transaction is being done.

The explosion of Internet activity, specifically online purchases and the introduction of mobile payment platforms and digital wallets, has been a significant revenue opportunity for Visa. The recent introduction of Apple’s mobile payment facility that allows consumers to use their iPhones to make payments at retail outlets without a physical card provides a significant security feature for credit card users.

This increased sense of security in light of recent credit card security breaches at retailers like Target could mean an increased customer base for Visa.

Visa targets the mass market unlike their competitor American Express that has a much more selective positioning. Although Visa is the number one credit and debit network worldwide, they are not as flashy as American Express that offer a large range of cards, tailored to the needs of its clients in the “high end market”.

A recent regulatory issue in the USA and some countries in Europe is seeking to reduce the transaction fees that can be charged as well as the emerging popularity of online payment facilities such as PayPal, which, incidentally, is one of Visa’s clients and could pose a significant threat to revenues.

On an adjusted basis, Visa reported a net income in the fiscal fourth quarter of US$1.4 billion or US$2.18 per share, an increase of 14 per cent and 17 per cent respectively over prior year. Net income on an adjusted basis for the full year 2014 was US$5.7 billion with earnings per share of US$9.07, an increase of 15 per cent and 19 per cent respectively over prior year.

The company saw increases in its data processing revenues, up 11 per cent over prior year to US$5.2 billion, service revenues up eight per cent to US$5.8 billion and cross-border revenues up five per cent to US$3.6 billion.

For the new financial year, Visa should benefit from deals signed with the new Apple Pay platform for electronic payments at retail outlets across the United States. Despite regulatory challenges, Visa is expected to follow its competitor Mastercard’s lead with a fee increase in the US in April 2015.

Since Visa released its financial results on October 29, 2014, there has been a 16 per cent increase in the price of the stock. The board of directors of Visa declared a quarterly dividend of US$.48 per share payable on December 2, 2014 to shareholders on record as of November 14, 2014.

In addition, the directors authorised a share buyback programme to the tune of US$5.0 billion; this should have additional positive impact on the share price. Visa has been a long-standing buy recommendation for SSL. Feel free to contact an advisor for further details on Visa and how it may benefit your portfolio today.

— Noel Harty is Stocks & Securities Ltd’s Montego Bay branch manager