Visa (V -1.56%) is a market leader in electronic payments and fund-transfer services, used by thousands of merchants around the world. The credit- and debit-card behemoth has grown significantly since its initial public offering back in 2008 -- its almost 12-fold rise in share price is a testament to its dominance.
In the second quarter of its fiscal 2008 -- its first earnings report as a public company -- Visa handled payments volume of $681 billion. Fast forward to the most recent quarter, and payments volume has more than tripled to $2.14 trillion. Over the past year, the number of transactions has risen 7% to hit more than 50 billion.
If there was only one stock I could buy, Visa would have to be it. Even after a dozen years on the public markets, it still has many catalysts that can drive it to greater heights.
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Strong growth tailwinds
The coronavirus pandemic has forced most of the world to restrict movement and shut down daily life. With the near-stoppage of air travel, tourism, and the hospitality industry, Visa's payments volume in the U.S. dipped by 18% year over year in April, and processed transactions fell by 24%. That improved a bit in May as lockdowns eased.
At the same time, all those people cooped up at home have helped to accelerate the trend toward cashless payments and e-commerce. And this change is happening all around the world -- for instance, Visa reported that around 13 million cardholders in Latin America had made e-commerce transactions for the first time in March.
The tailwind of higher and more frequent e-commerce transactions is here to stay, as more and more people discover the convenience associated with cashless payment. As more countries upgrade their payment infrastructure, Visa should see the total e-commerce payments pie grow ever larger.
Acquisitions to boost capabilities
Visa has a history of making acquisitions to bolster its technological capabilities. For instance, in October 2019, the company completed its acquisition of the token services and ticketing business from Rambus. This acquisition will make use of tokenization technology to reach more retailers, financial institutions, and transport operators via Visa Token Service. The ultimate goal is to deliver more convenient and seamless transit-ticketing experiences to consumers, thereby enhancing Visa's mobility solutions.
The company's $5.3 billion acquisition of Plaid this year represents both an entry into a new business and a complement to Visa's existing business. New market opportunities will open up for Visa both in the U.S. and internationally through Plaid's fintech network while allowing the company to deliver enhanced payment capabilities.
Based on these two acquisitions alone, it's obvious that Visa is active in seeking out ways to enhance and grow its business. Its fintech ventures also put the company at the forefront of technological evolution and allow it to stay ahead in this fast-moving industry.
Boosting payment and transaction volume
Just this week, Visa announced a partnership with Facebook to help to power a new payments feature on WhatsApp in Brazil. Visa is layering over its payment technology to enable WhatsApp users to quickly and securely send and receive money to and from family and friends, as well as make purchases from small businesses.
Payments on WhatsApp tap into the capabilities of Visa Direct, a real-time push-payments technology, which has seen global transactions grow around 70% throughout the coronavirus pandemic, according to VisaNet data. The potential for this technology to enable payments in many more countries is immense, as WhatsApp is a popular chat program used by 2 billion people worldwide. Visa is tapping into this partnership to increase digital-payment adoption and help to grow the overall digital ecosystem.
The partnership is still early in its days, but Visa's move could be just the catalyst to push many more people to adopt digital payments. There could be other such collaborations in the works, representing the vast untapped potential for multiyear growth for Visa. The company's ultimate goal is to continue to boost its already large ecosystem of payments and payment vendors. The network effect will lead to a virtuous cycle that makes Visa's suite of services all the more compelling.
What's next?
Visa has a lot going for it -- accelerated e-commerce adoption tailwinds, acquisitions that boost the company's strengths, and partnerships and collaborations to help to build and sustain its market-leading ecosystem of electronic payments. These factors, coupled with Visa's dominance and excellent track record, make for an attractive investment thesis with a long growth runway.
