By: Tom Jeffcoate
Visa: the infrastructure of global payments - Head of Equity Funds, Tom Jeffcoate, shares his insights in this short video
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Visa is the world's leading payment Network.
It provides the rails that connect transactions between consumers
Banks merchants and Enterprises all over
the world today. There are 3.8 billion Visa
cards in issuance from 16,000 Banks
and 200 countries that are accepted at over 80 million
merchants in 2021. It processed
165 billion transactions for
a total value of 10 trillion dollars.
This is tremendous scale and it gives Visa a remarkable Competitive
Edge over other networks.
But also gives Visa a Competitive Edge is the security and trust
that there is in its Network.
It's really important that payments get to the right destination
as fast and a security as possible without any
data being open to exploitation.
Given it scale. It's unsurprising that Visa are invest more in
technology to provide the security than any
other network.
Historically most of visas growth
has come from cash to card conversion and certainly
over the last decade. We've all seen the seismic change
in consumer Behavior switching to card
and digital and e-commerce transactions. In
fact some societies today are even said to be totally cashless.
It may come as a surprise to some investors
that in some markets cash in dollar terms
is still growing countries, like Germany and the US love to
make payments with cash and there is
still a big opportunity for the payment networks including visa to
convert much of this cash transactions to card or digital
transactions that being said in recent years.
There hasn't doubtedly been a revolution in technology in payments
every day a new fintech starts that aims
to disrupt the establishment.
The challenge that many of these fintechs face is a
lack of scale and therefore an inability to become profitable in
many cases regulations and dealing with so
many parties in the payments infrastructure. It's just too
much for them to cope with and this is where Visa has come in
with its network of network strategies.
Visa is successfully partnering with many of these fintech firms
in a win-win strategy that allows them to benefit from
Visa scale and relationships with
merchants and retailers and Banks all
around the world.
Plus Visa itself can ensure that these fintechs remain
part of the established ecosystem and on
the Visa network, if Visa can manage perceptions of
market dominance, then this strategy can help maintain its
position at the heart of Global Payments.
This is a very common question and we spend a lot of time thinking about it.
They're both great businesses and have many similarities but there
are some key differences Visa is actually materially bigger
company and network than MasterCard. They have
a different debit and credit exposure and different cross Board of
volumes. There are times when one is a buy over the other the timing
those transactions is not always easy right now.
We don't see reasons to switch that we're testing and questioning that
all the time Visa has been in the Stony Fleming
Global best ideas Equity Fund since it's Inception in 2013
and whilst pass performance isn't indicative
of any future returns.
We know that it is delivered a remarkable 21% total
shareholder return per annum since then. It's a
super high quality business. Thanks to the scale advantages
that are unreplicated elsewhere.
The profitability and the cash generation of this business has been
fantastic and we see every reason for that to continue going
forward.