In Q4 2024, Visa reported net revenues of $9.6 billion, up 12% y-o-y. This growth was driven by a year-over-year increase in payment volume, cross-border volume, and the number of processed transactions.
Note: Visa's FY'24 ended on September 30, 2024.
Below we look at the key drivers for Visa, which present upside or downside to our price estimate for the company's stock.
Visa is the largest global electronic payment solutions company in the world. It provides a wide range of products and services to support credit, debit, and related card solutions for institutions in over 200 countries. The company generates revenue by charging fees on transactions and payment volume. Visa processed more than $13 trillion of payments volume in 2024.
Visa charges its customers for providing transaction processing and other services, generally on a per-transaction or percentage-of-transaction basis. Accordingly, the company's revenues are primarily impacted by the number of transactions it processes and the gross dollar volume purchases made using its cards.
Visa's revenues primarily come from the following sources:
Data processing revenues are earned for authorizing, clearing, settling, processing transactions, and other maintenance and support services that facilitate transactions between Visa's customers. Data processing revenues are based on information gathered from VisaNet, its global processing platform, which provides transaction processing services by linking issuers and acquirers.
International transaction fees are assessed to customers on transactions where the cardholder's country differs from the merchant's. International transaction revenues are generally driven by cross-border payment volumes, which include single-currency transactions and currency conversion activities for transactions involving more than one currency.
Assessment revenues are earned from customers for their participation in card programs carrying the Visa brand. Service revenues are assessed based on a pricing methodology applied to the payment volume.
Other revenues consist primarily of optional services or product enhancements, such as extended cardholder protection, concierge services, cardholder services, and fees for licensing.
The global market for cashless payment solutions, such as credit and debit card transactions, has grown rapidly, particularly in emerging markets. Africa has the largest percentage of people using mobile banking. Similarly, Americans have the highest number of non-cash users. This indicates that consumers spend a significant amount through cards rather than cash or checks. The trend is only expected to continue. Outside of the U.S., non-cash penetration is much lower, but the use of cards is expected to increase at a higher rate in emerging markets than in mature markets.
Visa has begun offering more services that will enable the payment of bills from mobile devices. Mobile phone payments are gaining rapid popularity, coinciding with the surge in smartphone sales. An increasing number of smartphones manufactured now utilize near-field communication (NFC) chips, which facilitate mobile payments.
