The development of next-generation payments, using a smartphone or going online, is the cornerstone of Visa Inc’s (NYSE:V) strategy. Visa stock is trading at its highest price range ever, benefitting from first-quarter earnings that beat analysts’ estimates. Consumers are spending more and choosing to do so using cards. It’s not just credit cards any more. Debit cards are also helping Visa grow. Europe may be the market of greatest growth opportunity for Visa in the next few years.
Visa wants to create more incentives for people to choose electronic transactions, even for low amounts. This means expanding the payment options and going well beyond the point of sale (POS) or even mobile devices. To continue thriving and leading the sector, Visa must be creative and suggest payment solutions that break new ground.
Cash may not disappear next year, but the world is already moving towards a greater virtualization of personal assets. In this sense, Visa can make strong headways in future growth and profitability by targeting the European market. POS debit and credit transactions grew 7.7%, reaching $1.58 trillion, in Europe and contactless transactions exceeded one billion operations in 2015. (Source: “Visa Europe revenues soar as ‘contactless’ card use takes off,” Reuters, January 25, 2016.)
This Could Be the Next Big Market for Visa
The way to win customers away from cash is through convenience and life simplification. Visa is constantly studying new ways to capitalize on the market. Visa Europe has expanded its “Tokenization Payment Service.” Tokenization replaces sensitive data with unique identification symbols, keeping all the basics, while avoiding those that might compromise security.
Security improvements must precede the new payments. For example, contactless technology, while growing, is still controversial. This is because consumers fear the ease with which scammers can gain access to your bank accounts in less than a minute.
Consumers, in a difficult moment from an economic point of view, tend to seek safety and control expenses, thanks to programs built with our partners. Contactless solutions, after the increased security, are the other development contributing to Visa’s growth. These allow very fast payouts and can therefore encourage more lower-amount transactions.
So far, contactless payments have implied paying via smartphone. However, Visa’s growth and the success of V stock will rely on more innovation. Contactless payment technology could make it into the textile fibers of our clothes, suggests Visa.
Indeed, Visa is on the cusp of future electronic payment solutions. To do this, it is focusing on three major themes:
One is developing new modes of payment with mobile devices using Visa and “mVisa Checkout,” and with connected devices enabling contactless payments.
Then there is the Visa-connected car. Since 2015, the automotive market has seen a surge of wireless technology and connectivity features. Even an entry-level sub-compact car can be turned into an Internet hotspot. Visa wants to take this one step further, already working on prototype applications allowing Visa users to pay for gas while sitting in their car.
Visa’s third theme and its potentially ultimate technology breakthrough is biometric authentication. Visa customers will be able to pay with a simple hand gesture. Visa is also studying facial recognition and fingerprint features on mobile devices.
The company has become well established, but to maintain or expand e market share, it must constantly develop new types of payment methods.
Visa must—and can—take advantage of the fact that the very idea of abolishing the physical representation of money—that is actual banknotes and coins—is circulating.
Finally, wallets will not ruin the line of your sport jacket with an unsightly bulge. And for those concerned with security over style, transactions will be less convenient for the black market and traceable.
The number of occasions when we want to use actual paper dollars and metal cents are decreasing. In restaurants and bars, servers can easily split bills to the desired penny if needed, whether you use cash, debit, or credit. Perhaps the one occasion where cash is more desirable is on the street. When you want to give some money to entertainers, street vendors, or, more often, down-on-their-luck folks. These fast transactions consist of small amounts.
We may answer that technology will evolve to meet these specific cases. Perhaps that’s true, but technology always requires infrastructure changes.
Still, banks like the virtualization of money. Plastic transactions generate revenue in the form of fees. The full virtualization of money can only fuel frivolous spending and, by extension, increase our personal debt amounts. That’s a something the banks can get on board with.
The Bottom Line on Visa Stock
The virtualization of money is not something new. Visa does not need to invest in a completely new technology with all the risk it entails. Visa stock does not have to take any hits, because the transition toward more electronic payment systems has already begun. Sweden, Denmark, and Finland have already adopted electronic payment systems via mobile phone. All Visa has to do is push that evolution further to accelerate the transition globally.
Why? Because the market demands it.