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VISA SWOT & PESTLE Analysis

ID : 52377153| Jul 2018

COMPANY PROFILE -VISA Inc.

Business Sector :Payments, Banking and Financial Services

Operating Geography :United States, North America, Global

About VISA Inc. :

Visa incorporated on May 25, 2017, is an American multi-national financial services corporation. An established leader in payment and verification technologies, the company connects consumers, merchants, financial institutions, businesses and government entities to electronic payments. In 1958, Bank of America (BofA) had launched its BankAmericard credit card program. In 1976, BankAmeriCard became Visa, the global payments technology company. It started its journey with the first credit card program for the middle-class consumers and merchants in the US and gradually began expanding its global foot in 1974 and in 2007 regional businesses merged to form Visa Inc. In 2016 Visa acquired Visa Europe and today with more than 2 billion Visa cards in use, it is uniting people all around the world. One of the most recognized brands in the world, it has presence across all continents except in Antarctica. Visa's footprint extends to 3.1 billion account holders partnering with 44 million merchants, 16,600 financial institution clients, operating in 160 currencies across 200 countries and territories, it is a global payments technology company and undoubtedly Visa Incis amongst the world’s largest card payment organizations. Headquartered in Foster City, California, United States, it enables global commerce through the transfer of value and information among the participants. Its core products are credit, debit and gift cards, prepaid and commercial. In 2018 Visa featured in the 100 Best Corporate Citizens List ranking39 and was placed at #161 in Global Fortune 500 list in 2017.

Visa's USP or unique selling proposition lies in its strong global presence being the world's largest retail electronic payments network. Its vision statement reads “To be the best way to pay and be paid for everyone, everywhere. We know that every Visa transaction is a promise.” Visa's mission statement reads "To connect the world through the most innovative, reliable and secure digital payment network that enables individuals, businesses and economies to thrive."

VISA Inc. Revenue :


US $18,358 million- FY ending 30th Sep 2017 (y-o-y positive 21.7%)
US $15,082 million- FY ending 30th Sep 2016

Ownership / Major shareholders :

Visa Inc. is a publicly held company since its IPO went live in 2008, in one of the largest public offerings in history and it is now owned by thousands of institutions, primarily banks. Institutional ownership accounts for almost 95.24% stake of Visa as Dec 2017.
Top shareholders and investors of the company are:
Top Institutional Holders
Vanguard Group, Inc. (7.17%)
Blackrock Inc. (6.67%)
FMR, LLC (4.69%)
Price (T.Rowe) Associates Inc (4.58%)
State Street Corporation (4.40%)
Top Mutual Fund Holders
Vanguard Total Stock Market Index Fund (2.36%)
Vanguard 500 Index Fund (1.62%)
Fidelity ContrafundInc (1.50%)
SPDR S&P 500 ETF Trust (1.28%)
Vanguard Institutional Index Fund (1.12%)

Competitive Analysis of VISA Inc.

SWOT
PESTLE

SWOT/ TOWS analysis of Visa is a framework to evaluate the factors that create an impact on the financial service industry at large and wield its influence on Visa Inc. The SWOT analysis gives insights into the internal and external factors, namely, strength, weakness, opportunity, and threats of Visa Inc. Visa is a brand with strong global presence and is accepted in more than 200 countries and territories worldwide. Visa’s partnership with companies like Google, Microsoft, Apple, Samsung, Vodafone etc allows the company to globally support financial institutions.

The strategic analysis of Visa’s internal factors demonstrates that strengths like strong brand equity, large and diversified client network, financial position, market share leadership, creative marketing strategy, global presence, strategic partnerships and unique products are creating a great competitive advantage for Visa over its competitors. The internal analysis gives insight into some of Visa’s potential weaknesses which are high risk operations, exposure to cheating and fraud, weak management team and unvarying range of products. Growth through strategic acquisitions, expanding the current the range of products and services coupled with increasing demand for online transactions and use of digital currency and mobile payments are all big opportunities for Visa as a finance corporation. The competitive analysis shows that Master Card is one of the biggest competitors to Visa and poses a major threat to the company in terms of brand positioning. The highly competitive environment in payments technology poses a major challenge for Visa; Simultaneously factors like cheaper technology, risks from hackers and fluctuations in exchange rates are some of the other threats in the macro environment of Visa Inc. Some of Visa’s core competencies are its global presence, excellent brand reputation and being a leading player in the financial service industry .The SWOT analysis of this American multinational financial services corporation- Visa Inc, is essayed below in a matrix followed by the detailed competitive analysis:

Strengths
Weaknesses
1. Leading operator for digital transactions and a segment leader
2. Largest market share in US
3. Home to best talent in the industry
4. Engaging in strategic partnerships
5. Strong cash flow stream
6. Low credit risk due to open loop network
1. Surging operating expenditure
2. Heavy dependency on contractual relationship with the largest clients.
3. Merchants continuing to push lower acceptance costs and challenge industry practices.
Opportunities
Threats
1. World shifting from cash to digital transactions
2. Expansion of cross-border volume with integration of Visa Europe
3. Undertake varied initiatives to expand access in different geographies
4. Connected devices gaining popularity by the day
5. Eye expansion in China
1. Security breaches and cyber-attacks
2. Fraudulent activities during card usage
3. Exponential rise of government backed digital payment platforms
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Detailed SWOT Analysis of VISA Inc.

 

Strength

1. Leading operator for digital transactions and a segment leader: In the U.S., research has shown that the majority of debit and credit card holders prefer Visa over other brands. Visa Inc. has been persistent in building preference for their brand through digital marketing, best in class customer understandings with their partners and sponsorships.In the past few decades, Visa has woven a network that includes 44 million merchants and 2.2 billion cardholders.There are in total $30.5 billion transactions including cards in circulation and number of transactions, which has grown up 12% from last year.It’s revenue for the quarter 4 (Q4) ended on Dec’17 rose 9% from the year before to $4.86 billion from $4.85 billion.Visa is the mediator between 14,100 financial institutions, 2.2 billion visa cards and tens of millions of merchants, with its network, VisaNet capable of processing 56,000 transactions per second. In U.S., Visa’s research studies have demonstrated that consumers are more likely to return for a repeat purchase to a merchant that accepts Visa. Thus, it shows that Visa is leader among all its competitors. It has built a brand of trust, as the Company has done quite well to safeguard its customers against any security breaches or data compromises.

2. Largest market share in US: In Quarter 2(Q2) 2017, Visa’s credit card industry in the U.S had a market share of 52.8%, highest among all the competitors. This dominant market share gives it a great competitive advantage. Its credit card purchases rose 10% from $769 billion in Q2 2016 and Q1 2017 to $844 billion in Q2 2017.Visa holds a 58% market share in digital transactions globally according to a Nilson study. As the payment industry is seasonal, with purchase volumes escalating in the Quarter 4(Q4) 2016 i.e. $430 billion due to the impact of holiday season shopping, and later fell down in the Quarter1 (Q1) 2017 i.e. $404 billion and then increases steadily over the second and third quarters. With continuing surge in cashless transactions, towards the closing of Q1 2018, Visa circulates over 3.2 billion cards and has an enormous network of over 44 million participating merchants worldwide. This formidable network lends it a great competitive advantage; Merchants that do not hook to the VISA network, risk losing their business to 3.2 billion cardholders, whereas consumers like to pocket a visa card because they would be able to shop at 44 million locations. Visa processes more credit cards than each of its 3 competitors (MasterCard, American Express, Discover).Visa's payments volume hit $2 trillion in payments volume in Q4 2017 and has a 10% yoy growth on total transactions.

3. Home to best talent in the industry: According to annual report 2017, it had 15000+ employees. Its employees plays a vital role to Visa’s success, the management team has a significant industry experience. The company unveiled a new leadership initiative during the fiscal year 2016-17, to further empower its market leaders around the world. Visa has also expanded Visa University to help the Company recognize, attract and educate exceptional talent. It has also established a remote learning capability to facilitate in-house training on a varied range of payment-related subjects.

4. Engaging in strategic partnerships: In the U.S., Visa has achieved major milestones with the conversions of the Costco and USAA portfolios. It also actively partnered with Fintech companies with exciting capabilities believing that it’ll add value to their payment system. In June 2016, it partnered with Klarna, which offers online acceptance and consumer lending in Europe. In July 2016, they signed an agreement with PayPal in U.S. to make it easier for Visa cardholders to choose Visa as a preferred payment method within PayPal experiences. Later in July 2017, it had extended its existing partnership agreement with PayPal to Asia Pacific and Europe, where they’ll work together to accelerate the adoption of secure and convenient online, in-app and in-store payments.

5. Strong cash flow stream: The cash stream for Visa is quite healthy. In the first quarter of FY 2018, the company generated about $2.8 billion of operating cash flow. This demonstrates a strong growth rate of approximately 10.1% per year basis. Its quarterly capital expenditure of $141 million is quite low (it oscillated between $140 million to $195 million per quarter for FY 2017). Hence, the Company was able to generate about $2.6 billion of free cash flow in the past quarter. Its free cash flow component constitutes around 53.9% of its revenue in Q1 2018.

6. Low credit risk due to open loop network: Visa does not issue cards, charge fees or interest rates or gives credits to cardholders nor does it interact directly with retailers, merchants or consumers. The above are responsibilities are shouldered by the issuing financial institution. Unlike its competitors, American Express and Discover which are closed loop, Visa is an open-loop payments network. These are multi-party and operate through a system that links two financial institutions—the issuer and the acquirer—and manages information and the flow of value between them.

Weakness

This section is available only in the 'Complete Report' on purchase.

Opportunity

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Threat

This section is available only in the 'Complete Report' on purchase.

Major Competitors :

Major Brands :

  • Visa Net
  • Credit Cards
  • Debit Cards
  • Payment systems
  • Mobile App and Wallet

Key Business Segments / Diversification :

VISA Inc.
Digital Banking - Financial Transactions Processing settlement Billing
Reserve – Financial Reserve Clearinghouse Activities like payment

Recent Acquisition / Mergers / Alliance / Joint Ventures / Divestitures :

Name
Business Segment
Year
Type
Objective/Synergy Achieved
FraedomBanking and Finance 2018AcquisitionFaredom, acquired for $195 helped Visa Increase global footprint, get lot of clients on board, get more businesses (170000+ organizations)
CybersourceBanking and Finance 2010AcquisitionCybersource, acquired for -$2.0 billion, helped VISA in better fraud detection and credit card management and enabled more payment security.
CardinalCommerceBanking and Finance, Online/Mobile Payment2016AcquisitionCardinal Commerce, acquired for $300 million helped in better authentication control and improve mobile payment security.
Source: Company website and other reliable sources. The detailed table is available in the Complete Report.
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WHY BUY THIS REPORT?
TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
The SWOT and PESTEL analysis report of Visa Company, comprises of the following:
  • A brief overview about visa companyhistory, its corporate headquarters, owners & stakeholders and revenue jumps.
  • Comprehensive company analysis to gain knowledge about company information, company profile, business model, business plans and marketing strategy
  • A glimpse into Visa’s USP or unique selling proposition, mission statement and vision statement
  • Identifying and examining key information and factors about Visa Inc
  • Intelligence on Visa’s mergers and acquisition, Visa’s subsidiaries, capital raising and equity, partnership and alliances
  • Utilizing the strategic tools like SWOT and PESTLE to evaluate the performance of Visa company in both the micro and macro environment
  • A comprehensive SWOT analysis providing strategic intelligence on strength, weakness, opportunity and threats of Visa Inc
  • Gain understanding about challenges and threats posed by majorcompetitors
  • In depth analysis of external factors like political, economical, social, technological, legal and environmental and highlighting their impact on operation of Visa company.
  • An in-depth view of the business model of Visa Inc. along with further breakdown and examination of key business segments and business case study
  • Identifying the global and regional market position of visa
  • Insights into Visa’s business operation,major services and products, markets, locations and number of employees
  • A peek into the Visa’s key performance indicators, success factors, value proposition and core competencies
References used in VISA Inc. Analysis Report

1. visa annual report 2016: https://s1.q4cdn.com/050606653/files/doc_financials/annual/Visa-2016-Annual-Report.pdf

2. https://usa.visa.com/visa-everywhere/global-impact/visa-foundation.html

3. https://www.businesswire.com/news/home/20171023006560/en/Visa-Launches-Foundation-Inaugural-Grant-Women’s-World

4. https://usa.visa.com/visa-everywhere/security/biometric-payment-card.html

5. https://www.businesswire.com/news/home/20180114005063/en/Press-Here%21-Visa-Begins-Pilots-New-Biometric

6. https://usa.visa.com/dam/VCOM/download/corporate-responsibility/visa-2016-corporate-responsibility-report.pdf

7. http://www.sustainablebrands.com/press/visa_named_top_10110_us_green_company

Copyrights and Disclaimer

VISA Inc. SWOT and PESTLE analysis has been conducted by Samridhi Khanuja and reviewed by senior analysts from Barakaat Consulting.

Copyright of VISA Inc. SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.

VISA SWOT & PESTLE Analysis
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