For years, Visa Inc. (V, Financial) has stood tall as a pioneer in the global payments ecosystem. With a focus on innovation, strategic partnerships and value-added services, the company has consistently pushed for a higher market valuation. Following the recent earnings beat, there are several long-term bullish catalysts for the stock, including the expansion into new markets and strategic collaborations with fintech giants.
Expansion of the consumer payment business
Visa has been actively expanding its consumer payment business and gaining ground against local, regional and global competitors.
First and foremost, the company has played a crucial role in building solid partnerships with clients. Its efforts have resulted in an impressive net promoter score of 73 in the latest global survey. In the U.S., Visa continues to serve eight of the top 10 credit unions, exemplified by its successful renewal with the Pentagon Federal Credit Union.
This can be attributed to its people-centric approach and effective local market relationship model, which has led to the renewal of over 350 U.S. community bank and credit union partnerships this year. Investing in local markets has been a priority for Visa and has yielded significant benefits. In Eastern Europe, Visa will issue debit cards in several countries through a partnership with Intesa Sanpaolo, encompassing over three million credentials.
Source: Investor presentation
Visa's innovative payment products and solutions have also been instrumental in winning over clients. The company consistently delivers leading-edge payment solutions that meet the needs of its clients' customers. For instance, the partnership with Hyundai Card in Korea has been renewed, and Hyundai plans to leverage Visa's digital payment solutions, data analytics and services to introduce innovations and increase their share of Visa cards in the consumer and business segments.
The third key factor behind Visa's growth is its value-added services, which differentiate it in consumer payments. Services such as consulting, artificial intelligence-driven data solutions, risk management and processing have helped clients innovate and grow without the burden of investing heavily in technology and engineering. Rakuten Card in Japan, a subsidiary of Rakuten Group, signed a new credit deal with the company, leveraging its processing capabilities and dedicated consulting, data science and analytics teams to achieve strategic objectives.
Co-brand partnerships and new flow capabilities
Moreover, Visa's strong presence in co-brand partnerships has further contributed to its growth. The company remains a preferred partner for major airline co-brands globally, recently renewing agreements with Korean Air and signing new agreements with Breeze Airways and Allegiant Travel Co. (ALGT, Financial). In Latin America, the company expanded its relationship with Avianca's (BOG:PFAVH, Financial) frequent flyer program, LifeMiles, to four additional countries in the Caribbean region. Additionally, a co-brand agreement with Indian conglomerate Adani (BOM:512599, Financial) opens up opportunities to serve a vast customer base through retail, airports and online travel services.
The company has identified new flow capabilities, particularly Visa Direct, as a key differentiator for its clients in making consumer payment decisions. Cash App, with 53 million monthly transacting users, serves as an excellent example of this success. Visa renewed and expanded its agreement with Cash App globally, providing services such as card issuance, Visa Direct and value-added services.
Strategic partnerships and future plans
Looking ahead, Visa aims to effectively deliver on its priorities and capitalize on new flows of revenue. In the third quarter, total new flow revenue increased by an impressive 20% in constant currency. The company has also seen a 9% increase in commercial volumes, totaling $405 billion. To further enhance its market presence, it is focused on adding commercial products to its existing consumer relationships.
Visa has been forging strategic partnerships to drive its growth and expand its product offerings in consumer and commercial spaces. It has renewed and strengthened relationships with key clients in the consumer space. For example, KBank in Thailand has not only renewed its partnership for debit and co-brand services, but has also entered into a new deal to introduce a business debit card targeting small and mid-sized enterprises and micro businesses. Similarly, PagSeguro (PAGS, Financial), a Brazilian fintech company, is expanding its collaboration in the commercial space by launching Visa business credit for its base of 28 million clients.
Collaborations and acquisitions
Furthermore, Visa actively engages with commercial clients as a strategic partner to develop innovative solutions. A notable example is the partnership with SAP (SAP, Financial), a global leader in enterprise application software. This agreement will integrate Visa's virtual card and business solutions payment provider capabilities into SAP's business technology platform across many countries in the Asia-Pacific region. This collaboration aims to create an embedded finance solution, facilitating business-to-business payments, improving working capital positions and enhancing supply chains for SAP's vast regional customer base.
Another critical strategic move for Visa is the definitive agreement to acquire Pismo, a cloud-native issuer, processing and core banking platform. The acquisition is expected to provide the company with additional capabilities, an expanded geographical presence in Latin America, Asia Pacific and Europe, a wider range of products, such as credit, debit, prepaid and commercial cards, and connections to local networks. The move into issuer processing and core banking is seen as strategically important, supporting issuers, activating card credentials and facilitating the distribution of value-added services.
Takeaway
With an array of innovative payment products, Visa effectively caters to its clients' needs and its value-added services provide a competitive edge in the consumer payments space. Additionally, Visa Direct has emerged as a game-changing flow capability, driving consumer payment decisions and bolstering revenue growth.
Moreover, its strategic collaborations with fintech giants and its ambitious acquisition of Pismo reinforce its commitment to driving growth and expanding product offerings in both consumer and commercial markets. As Visa navigates new opportunities and markets, it remains well-positioned for sustained growth and continued success in the evolving payments landscape.
