Friday, May 6, 2011

More on "Visa Invests in Square to Tap into Twitter"...

Last week I wrote my Analysis on why Visa Made an Investment in Square and I received several emails regarding my assertion that Visa was more interested in Jack Dorsey's 200 million Twitter users than an unencrypted plastic swiper. After all, there are myriad POS swipers which connect to a mobile phone and only one doesn't encrypt the card detals at the maghead.  So why would Visa choose THAT one? I may be wrong about Visa having their eyes on a Twitter P2P platform, but I'm just sayin'...

New Theory About Visa’s Investment In Square: Visa Really Is After Twitter

Written by Evan Schuman - Editor: 

May 4th 2011Square simultaneously accepted a hefty Visa investment and then reversed course to match Visa’s position last week, many observers were trying to make sense of the move. What made Square so attractive to Visa? One industry observer—longtime payments power-player, John B. Frank—has an interesting, albeit non-traditional, take.  He argues that Visa’s affection for Square has little to do with Square and everything to do with Twitter.  Indeed, Frank’s argument is that it was all about Jack Dorsey (Twitter Founder/Executive Chairman and Square Founder/CEO) and his ability to make Twitter deals happen.    
“Shout out to Verifone: If it makes you feel any better, I’ve got a feeling, that Visa isn’t as interested in Square as they are in Twitter’s 200 million base,” Frank penned. 
“If Goliath was going to invest in David, why not a David with a PCI-certified personal POS? It’s because David isn’t really David after all. David is Goliath. Square is Jack Dorsey and Jack Dorsey is again Twitter. It’s all about P2P (person-to-person money movement) and this is Visa making a brilliant P2P investment/move.” 
Not so sure I buy into this very original theory, because I don’t see Visa connecting the dots with Twitter that aggressively—yet.  Still, if it’s wacky and conspiratorial and it involves Silicon Valley today, well, it’s hardly wise to rule it out.

Editors Note:  I find it interesting that Evan doesn't see Visa connecting the dots, (yet) but don't count Jack Dorsey out.  He can connect dots with the best of them.  He's in the payments space now, and he has a captive 200 million audience.  Person to Person money transfer is big business, and if you could "Tweet" $25 to your babysitter or $15 bucks to your buddy for the beer and burger you had last night at the local eatery/pub (one Visa card to another Visa card) then why on earth wouldn't you make it available to your 200 million base?   A better question would be "Why not"?  

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Visa Inc. Posts 24% Jump on Strong Fiscal Second Quarter 2011 Earnings Results and Authorizes New $1 Billion Share Repurchase Program

SAN FRANCISCO, May 5, 2011 /PRNewswire via COMTEX/ --
  • GAAP quarterly net income of $881 million or $1.23 per diluted class A common share
  • The Company authorized a new $1 billion share repurchase program
Visa Inc. (NYSE: V) today announced financial results for the Company's fiscal second quarter 2011 ended March 31, 2011. GAAP net income for the quarter was $881 million, or $1.23 per diluted class A common share. The weighted-average number of diluted class A common shares outstanding was approximately 714 million.

GAAP net operating revenue in the fiscal second quarter of 2011 was $2.2 billion, an increase of 15% over the prior year and driven by strong double-digit growth in service revenues, data processing revenues and international transaction revenues. Currency fluctuations contributed a positive 2% towards quarterly net operating revenues.

"Visa delivered a solid financial performance in our fiscal second quarter with double-digit growth in payments volume, cross border volume and Visa-processed transactions from across the globe," said Joseph Saunders, Chairman and Chief Executive Officer of Visa Inc. "With a strong first half of our fiscal 2011 year behind us, we remain focused on driving continued transaction growth, maintaining strong financial performance and expense control discipline, and delivering value to our shareholders through share repurchase programs and dividend payments."
"In addition to working with our financial institutions and merchant clients to expand card issuance and acceptance for our core products, we are investing in new platforms, channels and technologies that will deliver value to our clients and consumers for years to come," continued Saunders. "The global adoption of mobile and internet technology presents an enormous opportunity for Visa to leverage our network and proven track record of delivering electronic payments worldwide."

Fiscal Second Quarter 2011 Financial Highlights:
  • Payments volume growth, on a constant dollar basis, for the three months ended December 31, 2010, on which fiscal second quarter service revenue is recognized, was a positive 15% over the prior year at $897 billion.
  • Payments volume growth, on a constant dollar basis, for the three months ended March 31, 2011, was a positive 13% over the prior year at $861 billion.
  • Cross border volume growth, on a constant dollar basis, was a positive 13% for the three months ended March 31, 2011.
  • Total processed transactions, which represent transactions processed by VisaNet, for the three months ended March 31, 2011, were 12 billion, a positive 13% increase over the prior year.
  • For the fiscal second quarter 2011, service revenues were $1.1 billion, an increase of 24% versus the prior year, and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues rose 13% over the prior year to $823 million. International transaction revenues, which are driven by cross border payments volume, grew 14% over the prior year to $624 million. Other revenues, which include the Visa Europe licensing fee, were $156 million, a 10% decrease over the prior year. Client incentives, which are a contra revenue item, were $451 million and represents 17% of gross revenues.
  • Total operating expenses on a GAAP basis were $862 million for the quarter, a 3% increase over the prior year.
  • Cash, cash equivalents, restricted cash, and available-for-sale investment securities were $6.6 billion at March 31, 2011.
  • Visa's GAAP effective tax rate was 36% for quarter ended March 31, 2011.

Notable Events:

  • During the three months ended March 31, 2011, the Company effectively repurchased approximately 8.7 million class A shares on an as-converted basis, at an average price of $72.58 per share, for a total cost of $630 million. Of the $630 million$400 million of class B shares were effectively repurchased through the March funding of the litigation escrow account previously established under the Company's retrospective responsibility plan, representing 5.4 million class A shares on an as-converted basis at an average price of $73.81 per share. The remaining $230 million in repurchases of class A common stock were executed in the open market, representing 3.3 million shares at an average price of $70.53per share. At March 31, 2011, the October 27, 2010 share repurchase program had remaining authorized funds of $64 million.
  • As announced on April 25, 2011, the Board of Directors declared a quarterly dividend in the aggregate amount of $0.15 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis) payable on June 7, 2011, to all holders of record of the Company's class A, class B and class C common stock as of May 20, 2011.
  • Today, the Company announces that its Board of Directors has authorized a new $1 billion class A share repurchase program. The authorization will be in place through April 20, 2012, and is subject to further change at the discretion of the Board.

Financial Outlook:
Visa Inc. affirms its financial outlook for the following metrics through 2011:
  • Annual net revenue growth: 11% to 15% range;
  • Client incentives as a percent of gross revenues: 16% to 16.5% range*;
  • Marketing expenses: Less than $900 million;
  • Annual operating margin: About 60%;
  • GAAP tax rate: 36.5% to 37% range;
  • Annual diluted class A common stock earnings per share growth of greater than 20%;
  • Capital expenditures: Between $250-$275 million; and
  • Annual free cash flow in excess of $3 billion.
*This range may change based on future developments regarding pending federal debit regulations.
Fiscal Second Quarter 2011 Earnings Results Conference Call Details:
Visa's executive management team will host a live audio webcast beginning at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) today to discuss the financial results and business highlights. All interested parties are invited to listen to the live webcast at A replay of the webcast will be available on the Visa Investor Relations website for 30 days. Investor information, including supplemental financial information, is available on Visa Inc.'s Investor Relations website at
About Visa
Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable digital currency. Underpinning digital currency is one of the world's most advanced processing networks--VisaNet--that is capable of handling more than 20,000 transaction messages a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit
Forward Looking Statements:
This press release contains forward--looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by the terms "expect," "will," "continue" and similar references to the future. Examples of such forward--looking statements include, but are not limited to, statements we make about gross and net revenue, incentive payments, expenses, operating margin, tax rate, earnings per share, capital expenditures, free cash flow and the growth of those items.
By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are neither statements of historical fact nor guarantees of future performance and (iii) are subject to risks, uncertainties, assumptions and changes in circumstances that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements because of a variety of factors, including the following:
  • the impact of timing and new laws, regulations and marketplace barriers, particularly the Wall Street Reform and Consumer Protection Act, including those affecting:
    • issuers' and retailers' choice among debit payment networks;
    • debit interchange rates;
    • the spread of regulation of debit payments to credit and other product categories;
    • the spread of U.S. regulations to other countries;
    • consumer privacy and data use and security; and
    • designation as a systemically important payment system;
  • developments in current or future disputes and our ability to absorb their impact, including: interchange; currency conversion; and tax;
  • macroeconomic factors such as:
    • global economic, political, health environmental and other conditions;
    • cross border activity and currency exchange rates; and
    • material changes in our clients' performance compared to our estimates;
  • industry and systemic developments, such as:
    • competitive pressure on client pricing and in the payments industry generally;
    • bank and merchant consolidation and their increased focus on payment card costs;
    • disintermediation from the payments value stream through government actions or bilateral agreements;
    • adverse changes in our relationships and reputation;
    • our clients' failure to fund settlement obligations we have guaranteed;
    • disruption of our transaction processing systems or the inability to process transactions efficiently;
    • rapid technological developments;
    • account data breaches and increased fraudulent and other illegal activity involving our cards; and
    • issues arising at Visa Europe, including failure to maintain interoperability between our systems;
  • costs arising if Visa Europe were to exercise its right to require us to acquire all of its outstanding stock;
  • loss of organizational effectiveness or key employees;
  • failure to integrate successfully CyberSource, PlaySpan or other acquisitions;
  • changes in accounting principles or treatment; and
the other factors discussed in our most recent Annual Report on Form 10--K and our most recent Quarterly Reports on Form 10--Q for the first and second quarters of our 2011 fiscal year on file with the U.S. Securities and Exchange Commission. You should not place undue reliance on such statements. Unless required to do so by law, we do not intend to update or revise any forward--looking statement, because of new information or future developments or otherwise.

Contacts: Investor Relations: Jack Carsky or Victoria Hyde-Dunn, 415-932-2213, Media Relations: Will Valentine, 415-932-2564,

Javelin Strategy & Research: Small Business Owner Alert—The Impact of Online Security Breaches and the High Cost of Fraud

How Banks and Vendors can Protect SMBOs from Identity Theft and Fraud
SAN FRANCISCO--(BUSINESS WIRE)--A new Javelin Strategy & Research report issued today —2011 Small Business Owners (SMBO) Identity Fraud Report: How SMBO Fraud Rates Impact FI Revenues and Retention describes the higher rates of fraud faced by small business owners (SMBOs) today, including unique online security challenges. By sharing effective anti-fraud solutions with SMBOs, FIs and credit card issuers can also create revenue opportunities and reduce client churn. The report outlines the steps SMBOs can take in partnership with financial institutions (FIs) and credit card issuers to combat and prevent online fraud.
“SMBOs face significant financial losses as well as other issues as a result of fraud”
SMBOs are an attractive target for fraudsters because they conduct a myriad of transactions that often span both business and personal accounts. As small businesses, they are vulnerable in areas that fraudsters can exploit, namely, the lack of a dedicated IT staff to monitor and protect online operations and less formalized processes around security practices and credit card transactions. This creates opportunities for security breaches and risks for inadvertently releasing personal data.
The Javelin report outlines how SMBOs may also be affected by the recent Epsilon and State of Texas security breaches that exposed such personal data as names, email addresses, mailing addresses, dates of birth, social security numbers, driver license numbers, and – in some cases – awards points balances and other information. The release of such information and newer and more sophisticated attacks, such as phishing and spear-phishing where fraudsters use personalized data to commit identity fraud, will continue to pose threats to SMBOs, who do not necessarily have the resources in place to combat these threats.
Javelin discovered that SMBO fraud totaled an astonishing $8 billion in 2010. Banks, merchants and other providers absorbed at least $5.43 billion of that loss, while the cost to victims was $2.61 billion. Javelin also found that SMBOs sustain greater losses than their online consumer counterparts. The estimated fraud rate for SMBOs is significantly higher than that for the general consumer population. The average SMBO victim cost of fraud is more than double the consumer victim cost of $631.
“SMBOs face significant financial losses as well as other issues as a result of fraud,” said Philip Blank, Senior Analyst, Risk, Fraud, and Security at Javelin. “SMBOs have higher legal costs and longer timeframes for resolution of fraud than consumers. Also, SMBOs do not have the same zero liability fraud guarantees that online banking consumers receive from their FIs.”
SMBOs are not the only ones affected by online security breaches. Their partners – FIs and credit card issuers – not only absorb billions of dollars of financial losses, but also lose SMBOs as clients. Javelin research shows that more than 1 in 5 of SMBO fraud victims switched credit card issuers and nearly the same proportion switched banks as a direct result of fraud. These changes create a significant amount of churn and lost revenues for FIs and issuers, as SMBOs tend to have a higher transaction rate than the general consumer and often generate significantly more fees and charges for the FI or issuer.
“FIs and issuers have a vested interest in maintaining their client relationships with SMBOs,” said James Van Dyke, President and Founder of Javelin. “Toward that end, Javelin recommends that FIs and issuers partner with SMBOs to reduce and stop fraud. FIs and issuers can offer more real-time and comprehensive alerts for SMBO credit, debit and demand deposit accounts (DDA), as well as fraud avoidance software, identity theft protection, and credit monitoring services. Selling anti-fraud and security services not only helps SMBOs prevent fraud, but also generates revenue for the FIs and issuers.”
The 2011 Small Business Owners (SMBO) Identity Fraud Report, based on data collected through standardized telephone interviews by Javelin in November 2010 from a random sample panel of 5,004 consumers and data from previous annual identity fraud surveys, reviews the costs of online fraud and its impact on SMBOs, FIs, and issuers, and proposes strategies SMBOs can use and the tools FIs and issuers can provide to protect SMBOs from the next wave of online security attacks.
Selected Key Report Findings – 2011 Small Business Owners (SMBO) Identity Fraud Report
  • The online security challenges facing small business owners and the ways in which small businesses – unknowingly – put themselves at risk.
  • The real costs of fraud to small business owners – and FIs and issuers.
  • The most common types of identity fraud for small businesses and the number one item lost during data breaches.
  • The steps small business owners can take to protect themselves and their businesses from online fraud.
  • How FIs and issuers can partner with SMBOs to prevent fraud – and create revenue opportunities.
For more information about this or other Javelin reports, please contact Crystal Mendoza at (925) 225-9100 ext. 35 or or visit
To arrange an interview with a research analyst and/or view available research (available to qualified members of the media), please contact Crystal Mendoza at (925) 225-9100 ext. 35
About Javelin Strategy & Research
Javelin Strategy & Research is the leading provider of quantitative and qualitative research focused on the global financial services industry. Our extensive quantitative data and deep analyst experience enable us to forecast the direction of the financial services market and make recommendations that empower you and your business to succeed.
Javelin provides superior direction on key facts and forces that materially determine the success of customer-facing financial services, payments and security initiatives. Our advantages are rigorous process, independent position and expert people.


Javelin Strategy & Research
Crystal Mendoza, 925-225-9100 ext. 35

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