Despite facing an economic downturn, Visa (NYSE:V), the globally recognized credit card processing platform, has exhibited a promising performance. The company has seen a 36% rise from bear-market lows since late September 2022 and is gearing up for further gains. This Friday, Visa reported that it processed 54 billion transactions in the past quarter, generating $3.8 trillion in commerce and yielding $8.1 billion in revenue, marking a 12% increase year over year.
Visa's business model, which operates as a payment intermediary rather than a lender, shields it from potential pitfalls such as rising prices and record-high credit card balances. It manages a network of merchants and cardholders, retaining a small percentage of every transaction. Consequently, Visa remains unaffected by delinquencies and charge-offs which are absorbed by the issuing banks.
However, it is important to note that Visa is not entirely immune to economic downturns. Weak economies can impact card-based spending by consumers and corporations. This risk is relatively minor due to the shift from cash to card payments. According to data from the Federal Reserve, last year only 18% of payments within the United States were cash-based compared to 60% completed with credit or debit cards. This significant change from 2014's figures demonstrates an ongoing shift towards card usage.
In its effort to remain competitive and innovative, Visa has established Innovation Centers worldwide to foster industry advancements tailored to local markets. For instance, its Africa Innovation Center has successfully launched a small business card-acceptance solution and a digital wallet compatible with any bank.
Furthermore, Visa is venturing into cryptocurrency partnerships to facilitate digital currency spending. The company recently launched a new platform through its Currencycloud arm to simplify cross-border payments - an area projected by the Bank of England to grow from $150 trillion in 2017 to $250 trillion by 2027.
Visa's stock has shown resilience, bouncing back from occasional setbacks to even higher highs. The stock has seen consistent rallies that have driven gains past 36% since October 2022.
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