Among the doom and gloom in capital markets across the world, the only stray streak of silver lining appears to be the impending IPO of Visa Inc. Much has been written by analysts on whether Visa can replicate the 'Priceless' act of MasterCard. Certainly,
the success of the IPO will mean bring some much needed cash for the member banks. About 10 Billion USD would bring relief to member banks.
The Form 10-K filed by Visa makes fascinating reading -
http://sec.gov/Archives/edgar/data/1403161/000119312508036840/0001193125-08-036840-index.htm
Since Visa doesn't lend directly to cardmembers (like Amex and Discover), it remains unaffected by the 'toxic' tsunami of unpaid debt. But Visa's biggest bugbear is its potential legal liabilities. Before launching the IPO, Visa settled the anti-trust suit
with Amex for USD 2.1 Billion. But the biggest sore point is the dreaded Interchange issue. Both Visa and MasterCard are battling Merchant Groups and Regulators on Interchange. The Bill introduced in the US Congress promises to shake up Visa and MasterCard;
if it goes through. See
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h5546ih.txt.pdf
Needless to say, the retailers have welcomed this legislation and must be holding their breath in anticipation, see press release -
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/03-06-2008/0004769502&EDATE=
Despite the obvious stumbling blocks, Visa (if correctly priced) remains a very attractive proposition for a very basic reason - the overwhelming entry barrier to setting up another card/payment scheme. It will be a formidable (or even impossible) task
to set up another payment scheme that spans across the globe. Even with more than a billion cards and trillion dollars of transactions flowing through, cash is still king. The sheer breadth of opportunity in consumer spending, emerging markets, the online
world makes Visa look to have a sound future.
So, the recipe for market succour ; pick a card - Visa Card........