Thursday, December 16, 2010

Visa Inc

Visa Inc’s shares dropped 12.67% today on news that the Federal Reserve proposed a 12 cent cap on the fees banks would be allowed to charge merchants for debit card transactions. This would be a drastic change considering the average 2009 fee was 44 cents. The cap is only proposed for debit card and has no affect on credit cards. This is not good for Visa because their business is growing much faster in the debit card segment versus the credit card segment. Also in the proposed regulation merchants would be allowed to choose which network processed their transactions, no matter what brand the card is. This means a visa card transaction can be processed by master card or another competitor. This will create more competition and could lead to a price war between companies, cutting deeper into profits. I will do more research into the affects this will have on Visa and make a recommendation to the group shortly.

-Joe Doran

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