SWOT analysis for Visa Inc. Essay
Visa Inc. Operates as the world’s largest consumer payment system and boasts more than 2 billion credit and other payment cards. Besides, it also offers the services such as debit cards, Internet payment systems, value-storing smart cards, and traveler’s check. It had been known as the network which connects thousands of financial institutions worldwide. Generally, Visa act as a global market leader which brings a lot of benefits over many companies. For instance, they possess good brand names, higher margins, income level and other significant benefits.
They tend to use their ability to raise debt at lower cost.
In conclusion, they generally have a constant and stable business than their competitors and are more likely to acquire other business opportunity comes about. On the other perspective, Visa Inc which act as a market dominance tend to build a strong and good brand names. For instance, when we think about the credit or debit card we think of Visa or Master card. We usually won’t think about the name of other banks which provided us with the card.
Furthermore, strong brand name will bring some advantages to the company such as enhance product recognition, helps o build customer loyalty, helps in product positioning, builds
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There are sometimes natural barrier, such has high capital expenditure costs that prohibit competitors from entering the system. For instance, they use the oligopoly market. Last but not least, Visa Inc Credit Card Business is lucrative. Lucrative means that the company can produce a great deal of profit. The credit card business is very lucrative for many companies. For example, those who issue the cards tend to make a huge profit off the spread between card rates (up to 25%) and the rates they pay to borrow money, which can be as low as 1%.
The wider this spread, the better for credit card issuing companies. Therefore, their goal is to issue the cards as many as possible.
Weaknesses Visa Inc has issued many cards to their customers and some of the customers may to satisfied with the services that the company has provided. Thus, the problems occur as the business model susceptible to litigation. For instance, since 2005, approximately 55 class action and individual complaints have been filed on behalf of merchants against Visa Inc, including certain Visa U. S. A. Member financial damages to Visa and its related parties.
Furthermore, Visa’s open loop system suffers from low control over cardholder service. Operators of open-loop networks such as Visa soot analysis By Alaska and many other card features. In addition, such networks generally do not solicit recreants directly or establish the fees that merchants are charged for card acceptance, which including the merchant discount rate. Both of these functions are generally the responsibility of acquires. However, some of its major competitors, including American Express and Discover, operate closed-loop systems.
This system can benefit from direct access to customer and merchant information, and they tend to have greater control over cardholder service than do operators of open-loop payments networks like Visa Inc, which depend on their financial institution customers to provide products and services directly to the cardholder. Visa currently does not have a major presence within China, one of the largest and fastest growing markets for payment cards. China Unhappy dominates the market, and at approximately 3 billion, actually has the most credit and debit cards in circulation of any payment firm in the world.
China Unhappy has gained its dominance through a government-mandated monopoly. In July 2012, the WTFO noted this protectionism and ruled that China has to allow foreign providers to issue payment cards within China. However, the Chinese government still prohibits all companies except China Unhappy from processing any transactions denoted in the Yuan, which essentially prevents all foreign providers from competing. Apart from that, following the recession the credit card market has not been growing at it once was. Consumers are shying away from credit and moving to debit cards.
Additionally, debit cards are Visa’s largest source of revenue, and it processes more debit card transaction than credit. The Dodd-Frank Act has hurt Visa’s position in the U. S. Debit card market by eliminating exclusivity agreements between Visa and large banks. As a result, Visa still controls more than half the U. S. Market, but in a period of debit card usage growth, Visa moved in the opposite direction. Opportunities One of the opportunities for Visa Inc is huge opportunity in global small business spending still untapped.
As per industry estimates, for the vast majority of global small-business spending, only cash and checks are used instead of credit cards. In fact, the US small businesses use credit/charge cards for only about 15% of their spending and that amount is likely to be even lower internationally. Moreover, the midsized companies worldwide use cards for less than 10% of their major purchases such as travel and entertainment and office supplies. As a matter of fact, out of the total global consumer spending of $28 trillion each year, only 14% is carried out on charge, credit and debit cards.
The overall spending pattern, however, has been witnessing a continuous shift from cash to cards, which presents a significant opportunity for the company. Considering the fact that the company has more than a billion credit and other payment cards in circulation worldwide, it is well poised to exploit this opportunity. As the world tends to move to a more technological environment, people are using bile payments. Increasing demand for mobile payments is another opportunity that the Visa Inc possess. Mobile commerce is a much more lucrative short-term market for banks than contactable payment technology, according to Ovum. T 17. 4% of all internet traffic, up from 11 in 2012 and 4% in 2010. Keeping the increasing demand for mobile payments services in view, Visa launched a number of mobile payment services and solutions. For instance, in 2011, Visa acquired Founded, a platform provider of mobile financial services for mobile network operators and financial institutions. In February 2012, Visa and Intel Corporation announced a strategic agreement to develop mobile commerce solutions tailored to consumers. During February 2013, Visa and Samsung signed a global alliance agreement to accelerate mobile payments.
In the same month, the company signed an agreement with mobile commerce provider ROAM, an Monogenic company, to enable merchants of all sizes to accept electronic payments using mobile technology. In June 2013, Visa signed agreements with three leading mobile point-of-sale (moos) providers to enable merchants of all sizes to accept Visa payments using mobile technology. Launch of new mobile payment services and solutions could help Visa benefit from the growing demand for mobile payments. Significant acquisition and partnership may help the company in extending service capabilities.
Visa has been an active acquirer in the recent years. For instance, in 2011, the company acquired Plays Inc. , a privately held company whose payments platform handles transactions for digital goods in online games, digital media and social networks around the world. Visa’s innovation-related investments – namely the acquisitions of Cyberspace, Plays and Founded – rate value and help partners offer leading payment products and services. During February 2012, Visa and Noontime launched Moving, a 50/50 Joint venture that establishes mobile handsets as the core device for making electronic payments.
In February 2013, Visa and Joanna Chase & Co. Agreed to a letter of intent for a new and expanded 10-year renewable partnership agreement. The partnership is designed to accelerate the growth of electronic payments, deliver added value to merchants and provide a better experience for cardholders. During October 2013, the company signed an agreement with the banking company Group Bimbo S. A. B De C. V. And Blue Label Telecoms Limited, a provider of prepaid airtime, to expand electronic payments in Mexico.
These acquisitions and partnerships could help in extending Visa’s capabilities in digital, commerce and moocher in order to expand the scope of payment services available to clients and consumers. These acquisitions and partnerships could also help in broadening Visa’s suite of commerce offerings to include a full-service payment management platform for commerce merchants, combining global payment connectivity and processing with fraud management and secure payment data hosting. Threats Although Visa Inc. Has many opportunities which has been discussed above there are some threats too.
First of all, regulatory changes could limit profit expansion. As the volume of card-based payments has increased in the recent years, interchange reimbursement fees, including Visa’s default interchange rates, have become subject to increased regulatory scrutiny worldwide. It is widely believed that regulators are increasingly adopting a similar approach to interchange reimbursement fees, and, as in other Jurisdictions. Visa’s core business also adapted to significant market changes n PAYOFF and PAYOFF, as the company faced debit regulation in the US.
During PAYOFF, in accordance with the Reform Act, the Federal Reserve capped the maximum US debit interchange fee assessed for cards issued by large financial institutions at twenty-one cents plus five basis points, before applying an interim fraud adjustment up to an additional one cent. This amounted to a significant reduction from the average system-wide fees charged previously. The Federal Reserve has also promulgated regulations requiring issuers to make at least two unaffiliated networks available for processing debit transactions on each debit card.
The rules also prohibited the company and issuers from restricting a merchant’s ability to direct the routing of electronic debit transactions over any of the networks that an issuer has enabled to process those transactions. These regulations have negatively impacted the company’s debit business in the US and associated revenues by creating negative pressure on its pricing, reduced the volume and number of the US debit payments processed, and diminished associated revenues.
Such contemplated and likely legislative changes regarding interchange fees and related practices could have significant impact on the company’s profitability. Also, increasing security breaches likely to affect card acceptance. Visa and its customers, merchants and other third parties store cardholder account information in connection with Visa payment cards. In addition, Visa customers may use third- party processors to process transactions generated by cards carrying Visa brands.
Breach of the systems on which sensitive cardholder data and account information are stored could lead to fraudulent activity involving Visa cards, reputation damage and claims against Visa. If Visa is sued in connection with any data security breach, the company could be involved in protracted litigation. If unsuccessful in defending such lawsuits, Visa may be forced to pay damages and/or change its business practices or pricing structure, any of which could have a material adverse effect on the company’s revenues and profitability.
In addition, any reputation damage resulting from an account data breach at one or more of Visa customers, merchants or other third parties could decrease the use and acceptance of Visa cards, which could have a material adverse impact on the company’s payments volume, revenues and future growth prospects. Moreover, any data security breach could result in additional regulation, which could materially increase Visa’s compliance costs.
Finally, Visa competes in the global payment marketplace against all forms of payment, including paper-based forms (principally cash and checks), card-based payments (including credit, charge, debit, ATM, prepaid, private-label and other types of general purpose and limited use cards) and other electronic payments (including wire transfers, electronic benefits transfers, ACH payments and electronic data interchange). Within the general purpose payment card industry, the company faces substantial and intense competition worldwide.
In certain countries, Visa’s competitors have leading positions, such as JOB in Japan and China Unhappy, which is the sole domestic payment processor and operates the sole domestic acceptance mark in China due to local regulation. The company also competes against private- label cards, which can generally be used to make purchases solely at the sponsoring the company’s Interlink and Visa Electron brands compete with Maestro, owned by Mastered, and various regional and country-specific debit network brands, such as STAR, owned by First Data Corporation, PULSE, owned by Discover, NICE, owned by
Manatee Corporation, and others in the US, Interact in Canada, and EFFETE in Australia. In the primary cash access card market, Visa’s PLUS brand competes with Cirrus, owned by Mastered, and many online debit network brands. In many countries, local debit brands are the primary brands, and Visa’s brands are used primarily to enable cross-border transactions, which typically constitute a small portion of overall transaction volume.
In addition, Visa competes against companies that are developing and implementing alternative payments networks. Among other things, these competitors provide Internet currencies, which can be used to buy and ell goods online, virtual checking programs, which permit the direct debit of consumer checking accounts for both online and point-of-sale transactions and services that support payments to and from proprietary accounts for internet, mobile commerce and other applications.
A number of these new entrants rely principally on the internet to support their services and may enjoy lower costs than Visa does. On one hand, increasing competition could limit the company’s growth opportunities and on the other hand, it also raises selling and general administration expenses. Conclusion As a conclusion, Visa Inc.